Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Mar. 31, 2012
Notes to Financial Statements  
INCOME TAXES

NOTE 12 – INCOME TAXES

 

Pre-tax losses from continuing operations, comprised of Almaty and Salt Lake City operations were $23,968,164 and $16,500,728, for the years ended March 31, 2012 and 2011, respectively. Prior to the Sale of Emir Oil, the Company’s consolidated pre-tax income was comprised primarily from operations in the Republic of Kazakhstan.

 

With the completion of the Sale of Emir Oil, the Company does not have either current or accumulated earnings and profits in order to cause the distributions made after the Sale to be treated as dividends for U.S. federal tax purposes.

 

Net operating losses of the Company in its U.S. tax jurisdiction for the year ended March 31, 2012 totalled $23,968,164. This loss has been offset with the recognized intercompany loan interest income of $29,587,028 which resulted in an adjusted net operating income of $5,618,864.

 

Losses before income taxes derived from United States operations are for the year ended March 31, 2012 and 2011 amounted $23,968,164 and $16,500,728, respectively.

 

The income tax benefit in the Consolidated Statements of Operations is comprised of:

 

 

Year ended

March 31, 2012

  

Year ended

March 31, 2011
       
Current tax expense $                    -   $                     -
Deferred tax benefit                                     -   (1,366,631)
       
  $                    -   $   (1,366,631)

 

The difference between the income tax benefits reported and amounts computed by applying the U.S. Federal rate to pretax income consisted of the following:

 

 

Year ended

March 31, 2012

   Year ended
March 31, 2011
       
Tax at federal statutory rate (34%) $ (4,171,791)   $ (1,850,382)
Effect of lower foreign tax rates -   57,382
Non-deductible expenses -   426,369
Valuation allowance 4,171,791   -
  $                    -   $ (1,366,631)

 

As of March 31, 2012, the Company had net operating loss carry forwards for income tax purposes of $12,269,974, which if unused, will begin to expire in years 2024 through 2032. A valuation allowance is recorded against the deferred tax assets resulting from Net Operating Loss.

 

Deferred taxes reflect the estimated tax effect of temporary differences between assets and liabilities for financial reporting purposes and those measured by tax laws and regulations. The components of deferred tax assets and deferred tax liabilities are as follows:

 

  March 31, 2012   March 31, 2011
       
Deferred tax assets:      
Tax losses carried forward   $   4,171,791     $     6,082,205
                Valuation allowance  (4,171,791)   -
    -                      6,082,205
Deferred tax liabilities:      
Accrued interest income -   10,059,590
  -   10,059,590
       
Net deferred tax liability $                   -   $     3,977,385

 

The Company has deferred income taxes only in US jurisdiction.

 

Accounting for Uncertainty in Income Taxes  - In accordance with generally accepted accounting principles, the Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns. The Company’s U.S. federal income tax returns for the fiscal years ended March 31, 2007 through 2011 remain subject to examination. The Company currently believes that all significant filing positions are highly certain and that all of its significant income tax filing positions and deductions would be sustained upon an audit. Therefore, the Company has no reserves for uncertain tax positions. No interest or penalties have been levied against the Company and none are anticipated, therefore no interest or penalties have been included in the provision for income taxes.