The Company’s subsidiaries are governed by the Income Tax Law of the People’s Republic of China. Their income is taxed at the 25% statutory rate.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate:

		Nine months Ended June 30
	2015			2014
US statutory income tax rate		35	%		35%
Non-taxable item in US		0	%		0%
Change in valuation allowance - US		-35	%		-35%
China income tax statutory statutory rate		25	%		25%
Change in valuation allowance - China		-25	%		-25%
Effective rate		-			-

As of June 30, 2015, net operating loss carry forwards for United States and China income tax purposes amounted to $2.5 million and $20 million, which may be available to reduce future years' taxable income. These carry forwards will expire, if not utilized, beginning in 2029 through 2035 for U.S tax purpose and 2019 to 2020 for China income tax purposes. Management believes that the realization of the benefits arising from the losses recognized in the US is uncertain due to the Company's business operations being primarily conducted in China and foreign income not being recognized in the United States for federal income tax purposes. It is also uncertain that the China business operations will generate taxable income in the future. Accordingly, the Company has provided a 100% valuation allowance as of the balance sheet dates, for the temporary differences related to the loss carry-forwards.

The following table reconciles the changes in deferred tax asset for the nine months ended June 30, 2015 and 2014:

	June 30, 2015			June 30, 2014
United States:
Deferred tax asset-beginning	$	872,859		$	855,293
Addition: loss carry-forward		14,261			13,052
Valuation allowance-beginning		(872,859	)		(855,293)
Addition: valuation allowance		(14,261	)		(13,052)
Deferred tax asset net	$	-		$	-

	June 30, 2015			June 30, 2014
China:
Deferred tax asset -beginning	$	3,663,881		$	2,084,623
Addition: loss carry-forward		1,209,391			1,100,756
Valuation allowance-beginning		(3,663,881	)		(2,084,623	)
Addition: valuation allowance		(1,209,391	)		(1,100,756	)
Deferred tax asset- net	$	-		$	-

The Company’s open tax years for its federal and state income tax returns are for the tax years after 2011. These tax returns are subject to examination by the tax authorities.