Income Taxes

3 Months Ended

Jun. 30, 2011

Income Taxes

Income Tax Disclosure [Text Block]

NOTE 10 – INCOME TAXES

The Company’s subsidiaries are governed by the Income Tax Law of the People’s Republic of China. Chunfei Chemical is a foreign invested entity located in the western of China, which enjoyed a tax holiday of 10% deduction from 2001 to 2011. Nanchong Chunfei was taxed at 12.5%, which was approved by local tax authority. Hedi Medicines was taxed at 25% statutory rate.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the nine months ended June 30, 2011 and 2010: 

	For the nine months ended June 30
	2011			2010
US statutory income tax rate		35.00	%		35.00	%
Foreign income not taxed in US		-35.00	%		-35.00	%
China Income tax statutory rate		25.00	%		25.00	%
Income tax exemption		-7.6	%		-3	%
Non deductible item		-9.5	%		-30.4	%
Other Item		1.3	%
Effective rate		9.2	%		-8.4	%

Other item represents the net income that could not be offset by loss incurred by other subsidiaries.

The Company incurred a net operating loss for U.S. income tax purposes for the nine months ended June 30, 2011. The net operating loss carry forwards, including share-based compensation, for United States income tax purposes amounted to $1,434,543 and $ 1,192,866 as of June 30, 2011 and September 30, 2010, respectively, which may be available to reduce future years' taxable income. These carry forwards will expire, if not utilized, beginning in 2028 through 2030. Management believes that the realization of the benefits arising from these losses appear to be uncertain due to the Company's business operations being primarily conducted in China and foreign income not recognized in the US for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance as of June 30, 2011 and September 30, 2010, respectively for the temporary difference related to the loss carry-forwards.

The following table reconciles the changes of deferred tax assets for the nine months ended June 30, 2011 and 2010:

	As of June 30, 2011		As of June 30, 2010
Deferred tax asset-Beginning	$	417,503	$	178,007
Addition: loss carry-forward		84,587		188,084
Valuation allowance-Beginning		(417,503)		(178,007)
Addition: Valuation allowance		(84,587)		(188,084)
Deferred tax assets-net	$	-	$	-