Note 14 - Income Taxes

3 Months Ended

Nov. 30, 2012

Notes

Note 14 - Income Taxes

NOTE 14 - INCOME TAXES

For the six months ended November 30, 2012 and 2011, Changzhou Huayue Electronics Co., Ltd recorded income tax provisions of $349,272 and $11,928 respectively.

(i) The components of income (loss) before income tax expense are as follows:

	For the six months ended November 30,
	2012		2011
P.R.China		2,378,565		47,713

(ii) The components of the income tax benefit (expense) are as follows:

	For the six months ended November 30,
	2012			2011
Current		(388,845	)		(11,928	)
Deferred:		39,573			-
Total Income tax benefit (expense)		(349,272	)		(11,928	)

(iii) The following table summarizes deferred taxes resulting from differences between financial accounting basis and tax basis of assets and liabilities:

	For the six months ended November 30,
	2012		2011
Current assets and liabilities
Accounts receivable allowances		39,573		-
Deferred tax assets, net, current		39,573		-

Changzhou Huayue Electronics Co., Ltd is subject to the Enterprise Income Tax (“EIT”) at a statutory rate of 25%.  However, according to P.R. China tax law, the effective tax rate for the bad debt expense deduction is only 15%.  The Company recognized $39,573 current deferred tax assets at enacted 15% tax deduction rate for the temporary differences between the financial reporting bases and the tax bases of its allowance for accounts receivable.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.