INCOME TAXES

3 Months Ended

12 Months Ended

Oct. 31, 2016

Jul. 31, 2016

INCOME TAXES [Text Block]

NOTE 11 - INCOME TAXES

United States

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The cumulative tax effect at the expected rate of 34% of significant items comprising the net deferred tax amount is at October 31, 2016 and July 31, 2016 as follows:

		October 31, 2016			July 31, 2016
		(Unaudited)
Deferred tax assets:
Net operating losses	$	76,320		$	228,278
Total deferred tax assets		76,320			228,278
Less: valuation allowance		(76,320	)		(228,278	)
Deferred tax assets, net	$	-		$	-

As of October 31, 2016, for U.S. federal income tax reporting purposes, the Company has approximately $956,323 of unused net operating losses (“NOLs”) available for carry forward to future years. The benefit from the carry forward of such NOLs will begin expiring during the year ended July 31, 2029. Because United States tax laws limit the time during which NOL carry forwards may be applied against future taxable income, the Company may be unable to take full advantage of its NOLs for federal income tax purposes should the Company generate taxable income. Further, the benefit from utilization of NOL carry forwards could be subject to limitations due to material ownership changes that could occur in the Company as it continues to raise additional capital. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain.

Hong Kong

The Company’s subsidiaries established in HKSAR are subject to Hong Kong Profits Tax. However, these subsidiaries did not earn any income derived in Hong Kong from its date of incorporation to October 31, 2016, and therefore were not subject to Hong Kong Profits Tax.

PRC

The Company’s subsidiaries established in PRC are subject to income tax rate of 25%.

1)  Luck Sky Shenzhen

For the three months ended October 31, 2016 and 2015, Luck Sky Shenzhen had $1,111 in net profit and $27,098 in net loss,$278 income tax was accrued in 2016 accordingly.

2)  Sanhe

For the three months ended October 31, 2016, Sanhe had $427,653 in net loss. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The cumulative tax effect at the expected rate of 25% of significant items comprising the net deferred tax amount is at October 31, 2016 and July 31, 2016 as follows:

		October 31, 2016		July 31, 2016
		(Unaudited)
Deferred tax assets:		-		-
Net operating losses	$	-	$	-
Total deferred tax assets
Less: valuation allowance		-		-
Deferred tax assets, net	$	-	$	-
Deferred tax liabilities:
Timing differences of revenue recognition	$	72,946	$	107,609
Total deferred tax liabilities		72,946		107,609

Significant components of income tax expense for the three months ended October 31, 2015 and

		For the three months			For the three months
		Ended			ended
		October 31, 2016			October 31, 2015
		(Unaudited)			(Unaudited)
Current tax expense	$	(235	)	$	48,386
Deferred tax expense		(32,948	)		(81,238	)
Tax expense (benefit)	$	(33,183	)	$	(32,852	)

Reconciliation of Effective Income Tax Rate

	For the three months		For the three months
	ended		ended
	October 31, 2016		October 31, 2015
	(Unaudited)		(Unaudited)
Statutory U.S. tax rate	34.00%		34.00%
PRC Statutory Tax Rate	25.00%		25.00%
HK Statutory Tax Rate	15.00%		15.00%
Less: Valuation Allowance	( 73.96%	)	( 27.47%	)
Deferred Tax	4.81%		( 33.13%	)
Tax expense (benefit)	4.85%		13.40%

NOTE 11 - INCOME TAXES

United States

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The cumulative tax effect at the expected rate of 34% of significant items comprising the net deferred tax amount is at July 31, 2016, 2015 and 2014 as follows:

		2016			2015			2014
Deferred tax assets:
Net operating losses	$	228,278		$	78,278		$	170,552
Total deferred tax assets		228,278			78,278			170,552
Less: valuation allowance		(228,278	)		(78,278	)		(170,552	)
Deferred tax assets, net	$	-		$	-		$	-

As of July 31, 2016, for U.S. federal income tax reporting purposes, the Company has approximately $1,403,259 of unused net operating losses (“NOLs”) available for carry forward to future years. The benefit from the carry forward of such NOLs will begin expiring during the year ended July 31, 2029. Because United States tax laws limit the time during which NOL carry forwards may be applied against future taxable income, the Company may be unable to take full advantage of its NOLs for federal income tax purposes should the Company generate taxable income. Further, the benefit from utilization of NOL carry forwards could be subject to limitations due to material ownership changes that could occur in the Company as it continues to raise additional capital. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain.

Hong Kong

The Company’s subsidiaries established in HKSAR are subject to Hong Kong Profits Tax. However, these subsidiaries did not earn any income derived in Hong Kong from its date of incorporation to July 31, 2016, and therefore were not subject to Hong Kong Profits Tax.

PRC

The Company’s subsidiaries established in PRC are subject to income tax rate of 25%.

1) Luck Sky Shenzhen

For the years ended July 31, 2016, 2015 and 2014, Luck Sky Shenzhen had $432,088, $963,727 in net income before tax and $6,283 in net operating loss, respectively. Income tax expense were $108,022 and $239,383 income tax expenses were 2016 and 2015, respectively.

2) Sanhe

For the year ended July 31, 2016, Sanhe had $145,136 net loss before tax. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The cumulative tax effect at the expected rate of 25% of significant items comprising the net deferred tax amount is at July 31, 2016, 2015 and 2014 as follows:

		2016		2015		2014
Deferred tax assets:
Net operating losses	$	-	$	-	$	111,844
Total deferred tax assets		-		-		111,844
Less: valuation allowance		-		-		-
Deferred tax assets, net	$	-	$	-	$	111,844
Deferred tax liabilities:
Timing differences of revenue recognition	$	107,609	$	83,101	$	-
Total deferred tax liabilities		107,609		83,101		-

Significant components of income tax expense for the years ended July 31, 2016, 2015 and 2014 are as follows

						For the
		For the		For the		year
		year		year		ended
						July 31,
		ended		ended		2014
		July 31,		July 31,
		2016		2015
Current tax expense	$	196,099	$	833,452	$	-
Deferred tax expense		30,583		83,388		-
Benefits of operating loss carryforwards		-		-		(113,932	)
Tax expense (benefit)	$	226,682	$	916,840	$	(113,932	)

Reconciliation of Effective Income Tax Rate

					For the
	For the year		For the year		year
	ended		ended		ended
	July 31,		July 31,		July 31,
	2016		2015		2014
Statutory U.S. tax rate	34.00%		34.00%		34.00%
PRC Statutory Tax Rate	25.00%		25.00%		25.00%
HK Statutory Tax Rate	15.00%		15.00%		15.00%
Less: Valuation Allowance	(92.85%	)	(45.44%	)	(59.67%	)
Nondeductible/nontaxable items	(40.57%	)	29.40%		-
Tax expense (benefit)	(59.42%	)	57.96%		14.33%

Reconciliation of Effective Income Tax Expense

								For the
		For the year			For the year			year
		ended			ended			ended
		July 31,			July 31,			July 31,
		2016			2015			2014
Statutory U.S. tax rate	$	(228,278	)	$	(78,278	)	$	(170,552	)
PRC Statutory Tax Rate		71,923			451,874			(113,932	)
HK Statutory Tax Rate		(185	)		(252	)		(675	)
Less: Valuation Allowance		228,463			464,966			171,227
Nondeductible/nontaxable items		154,759			75,530			-
Tax expense (benefit)	$	226,682		$	916,840		$	(113,932	)