Note 6 - INCOME TAXES

The Company operates in more than one jurisdiction, with its main operations conducted in PRC and virtually no activities in USA, with complex regulatory environments subject to different interpretations by the taxpayer and the respective governmental taxing authorities. The Company evaluates its tax positions and establishes liabilities, if required.

The reconciliation of the U.S. statutory income tax rate to the Company’s effective income tax rate is as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Income tax at U.S. statutory rate (34%)	$	238,878		$	398,866		$	1,214,785		$	1,017,133
State tax, net of federal effect		-			-			-			-
Foreign rate differential		(63,232	)		(140,776	)		(321,561	)		(358,988	)
Expenses not deductible for tax		31,676			-			75,546			-
Others		(74,935	)		-			(102,876	)		(17,049	)
Provision for income tax	$	132,387		$	258,090		$	865,894		$	641,096

Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) through December 31, 2007 is at a statutory rate of 33%, which is comprised of 30% national income tax and 3% local income tax. As from January 1, 2008 onwards, the EIT is at a statutory rate of 25%.

Provision for income taxes for each of the three months and nine months ended June 30, 2011 and June 30, 2010 consists entirely of current taxes for the operations in PRC. There were no deferred tax differences in both periods.

Deferred U.S. income taxes have not been provided on the undistributed income of the Company’s foreign subsidiaries because the Company does not plan to initiate any action that would require the payment of U.S. income taxes.

Uncertain Tax Positions

Interest associated with unrecognized tax benefits is classified as interest expense and penalties in selling, general and administrative expenses in the statements of income and comprehensive income.

For the three months and nine months ended June 30, 2011 and 2010, the Company had no unrecognized tax benefits and related interest and penalties expenses. Currently, the Company has not received any notice of examination by any tax authority in major tax jurisdictions, but the tax authority in PRC has the right to examine the Company’s tax positions in all past years.

Income tax payable in the Consolidated Balance Sheets is comprised as follows:

	06/30/2011			09/30/2010
Balance brought forward	$	(425,458	)	$	(155,010	)
Current tax provision for the period/year		(865,894	)		(1,060,149	)
Tax paid during the period/year		1,158,363			789,701

Balance carried forward	$	(132,989	)	$	(425,458	)