INCOME TAXES

9 Months Ended

Dec. 31, 2011

INCOME TAXES

INCOME TAXES

NOTE 9 – INCOME TAXES

For the three and nine month ended December 31, 2011, the Company recorded an income tax benefit of $92,682 and income tax expense of $142,871, respectively.  At the end of each interim period, the Company makes an estimate of its annual U.S. and China expected effective tax rates and applies these rates to its respective year-to-date taxable income or loss.  The income tax expense of $142,871 for the nine months ended December 31, 2011 is comprised of $157,703 of expense related to China’s year to date income and $14,832 of U.S. federal and state income tax benefit.  The difference between the provision for income tax expense and the income tax determined by applying the U.S. federal income tax and state income tax rates and the China Enterprise tax rate was due primarily to differences in the book and tax basis of property and equipment and share based compensation.  Accrued taxes at December 31, 2011 represent taxes payable related to year to date China results.  Prepaid taxes recorded at December 31, 2011 of $991,560 represent current year tax payments in excess of expected tax and prior year amounts to be refunded.  At December 31, 2011, the Company recorded a current deferred tax asset of $641,458, and a noncurrent deferred tax liability of $106,021.

As of December 31, 2011, the Company’s federal net operating loss carry-forward was approximately $1.8 million.  If not utilized, the federal net operating loss carry-forward of Ranor and TechPrecision will expire in 2025 and 2027, respectively. Under Section 382 of the Internal Revenue Code, we are substantially limited with regard to the amount of certain net operating loss carry forward that we may use in any given year in the future due to prior changes in our ownership.

The valuation allowance for deferred tax assets of $279,754 and $354,008 at December 31, 2011 and March 31, 2011, respectively, relates principally to the uncertainty of the utilization of certain non-current deferred tax assets, primarily tax loss carry forwards.  The valuation allowance was calculated in accordance with accounting standards, which requires that a valuation allowance be established and maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized.