Income Taxes

12 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

15 INCOME TAXES

	Year ended March 31, 2019		Year ended March 31, 2018			Year ended March 31, 2017
United States	$	129	$	(12,049	)	$	(1,508	)
Foreign		10,407		9,103			683
Income/(Loss) before provision for income taxes	$	10,536	$	(2,946	)	$	(825	)

The Group’s (provision)/benefit for income taxes consists of the following:

	Year ended March 31, 2019			Year ended March 31, 2018			Year ended March 31, 2017
Current:
U.S. Federal and state	$	1,200		$	109		$	28
Foreign		2,942			3,188			270
Total current	$	4,142		$	3,297		$	298
Prior Period – Current Tax:
U.S. Federal and state	$	72		$	109		$	86
Foreign	$	(45	)	$	—		$	27
Total Prior Period – Current Tax	$	27		$	109		$	113
Deferred:
U.S. Federal and state	$	(402	)	$	(1,321	)	$	(366	)
Foreign		(156	)		(30	)		52
Total deferred	$	(558	)	$	(1,351	)	$	(314	)
Provision for income taxes recognized in Statement of Operations	$	3,611		$	2,055		$	97

The total income tax expense differs from the amounts computed by applying the effective federal and state income tax rate of 27.32% as follows:

	Year ended			Year ended			Year ended
	March 31,			March 31,			March 31,
	2019			2018			2017
Net income/(loss) before taxes		10,536			(2,946	)		(825	)
Computed tax expense		2,879			(1,157	)		(324	)
Non-deductible expenses
– Stock based compensation and Meals & Entertainment		1,011			1,625			697
– Others		219			70			66
Valuation allowance		—			—			(228	)
Tax charge/(credit) of earlier year assessed in current year		28			108			113
Loss on effective tax rate reduction from 39.3% to 27.3%		—			2,399			—
Net tax credit on R&D and Sec 199 deduction		(368	)		(361	)		(306	)
Tax exemption		(168	)		(246	)
Difference arising from different tax jurisdiction		125			(427	)		(140	)
Others		(115	)		44			219
Total taxes recognized in Statement of Operations		3,611			2,055			97

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The Tax Act establishes new tax laws that affect 2018 and future years, including a reduction in the U.S. federal corporate income tax rate to 21 percent effective April 1, 2018. The blended statutory federal rate, taking into account the 21% rate under the new law, is 30.75%. For certain deferred tax assets and deferred tax liabilities, the Company has reduced the carrying value of the deferred tax assets and liabilities as a result of the Tax Act. In fiscal year ended March 31, 2018 the Company made an adjustment of $2.40 million to write down the Company’s deferred tax asset in line with the recent changes made to the Tax Code.

Significant components of activities that gave rise to deferred tax assets and liabilities included on the Balance Sheet was as follows:

	As of March 31,
	2019			2018
Deferred tax assets/(liability):
Employee benefits		2,457			1,890
Property and equipment		15			206
Goodwill		517			573
Allowance for impairment of accounts receivables		473			443
Carry forwarded income tax losses		2,969			4,687
Tax credit for R&D expenses		1,546			1,295
Derivative financial instruments		(120	)		(28	)
Foreign tax liability - FTC carryovers (Mexico)		1,200			—
Others		(592	)		(819	)
Gross deferred tax assets		8,465			8,247
Less: Valuation allowance		(828	)		(1,076	)
Net deferred tax assets		7,637			7,171
Current portion of deferred tax assets		—			—
Non-current portion of deferred tax assets		7,637			7,171

A valuation allowance is established attributable to deferred tax assets recognized on carry forward tax losses and tax credit for R&D expenses by the Group where, based on available evidence, it is more likely than not that they will not be realized. Significant management judgment is required in determining provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. The valuation allowance is based on the Group’s estimates of taxable income by jurisdiction in which the Group operates and the period over which deferred tax assets will be recoverable. The change in valuation allowance is $(248), $(551) and $165 for the years ended March 31, 2019, March 31, 2018, and March 31, 2017, respectively.

The Group entity in Canada has recognized a valuation allowance on deferred income tax assets recognized on carry-forward losses and tax credit for R&D expenses amounting to $828 and $0 as of March 31, 2019, $798 and $0 as of March 31, 2018 and $1,335 and $0 as of March 31, 2017, respectively because it is not probable that future taxable profit will be available against which these temporary difference can be utilized. These carry forward losses and tax credit for R&D expenses do not have any expiry date.

The Group entity in Thailand has recognized a valuation allowance on deferred income tax assets recognized on carry-forward losses amounting to $0 as of March 31, 2019, $278 as of March 31, 2018 and $293 as of March 31, 2017, respectively, because it is not probable that future taxable profit will be available against which these temporary difference can be utilized. These carry forward losses are subject to expiration beginning in 2020. The valuation allowance has been returned down to $0 due to the closure of the Thailand entity in fiscal 2019.

Changes in unrecognized income tax benefits were as follows:

	As of March 31,
	2019		2018		2017
Opening balance	$	441	$	441	$	441
Increase in unrecognized tax benefits – due to tax positions taken in current period for prior periods		—		—		—
Closing balance	$	441	$	441	$	441

As of March 31, 2019, the entire balance of unrecognized income tax benefits would affect the Group’s effective income tax rate, if recognized. Significant changes in the amount of unrecognized tax benefits are not reasonably possible within the next 12 months from the reporting date. The Group includes interest and penalties relating to unrecognized tax benefits within the provision for income taxes. The total amount of accrued interest and penalties as of March 31, 2019, 2018, and 2017 is $0, $0, and $0, respectively. The amount of interest and penalties expenses for the fiscal years ended March 31, 2019, 2018 and 2017 is $0, $0, and $0, respectively.

Majesco and Majesco Software and Solutions Inc. file a consolidated income tax return, and the provision for income tax for the fiscal years ended March 31, 2019, 2018 and 2017 has been made accordingly.

Because any estimate would not be meaningful due to the numerous assumptions upon which it would be based, and because of the significant resources this exercise would require, Majesco has determined that it is not practical to estimate the amount of unrecognized deferred tax liabilities.

In the US and India, the income tax returns are subject to examination by the appropriate tax authorities for the year ended March 31, 2016 and onwards and March 31, 2014 and onwards, respectively.