2.17 Income Tax a.

Current Income Tax Provision for current income tax is made in accordance with the provisions of the prevailing Income Tax Act, 2058 and Rules as amended. b. Deferred Tax Deferred tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. The principal temporary differences arise from depreciation of fixed assets, provision for diminution in the value of investment in shares, provisions for gratuity, performance bonus and premium on development bonds. Deferred tax assets are recognised where it is probable that future taxable profit willbe available against which the temporary differences can b utilized/ 3.Tax Settlement Outstanding Self assessment return filed by the Bank for the financial year 2005-06 (2062-63 BS) has been opened by the Large Tax Payer Office (LTPO) and an assessment order has been issued for Rs. 2,605,277 as additional tax. The Bank had contested the assessment order and had applied for an Administrative Review at the Office of the Director General of Inland Revenue Department, who upheld the decision of the LTPO. Bank has now filed an Appeal at Revenue Tribunal for the settlement of the case. Pending resolution of the matter, a contingent liability has been raised for the additional tax amount. Self assessment returns for the financial years 2006-07 (2063-64 BS), 2007-08 (2064-65 BS) and 2008-09 (2065-66 Bs are pending for assessment at the large tax payer office.