Majesco

15 INCOME TAXES

	Year ended March 31, 2017			Year ended March 31, 2016			Year ended March 31, 2015
United States		$	(1508)		$	19,189		$	(3,351)
Foreign			683			(23,938)			2,559
(Loss) /Income before provision for income taxes		$	(825)		$	(4,749)		$	(792)

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

	Year ended March 31, 2017			Year ended March 31, 2016			Year ended March 31, 2015
Current:
U.S. Federal and state		$	28		$	753		$	142
Foreign			270			238			1,004
Total current		$	298		$	991		$	1,146
Prior Period – Current Tax:
U.S. Federal and state		$	86		$	49		$	(410)
Foreign		$	27		$	—		$	—
Total Prior Period – Current Tax		$	113		$	49		$	(410)
Deferred:
U.S. Federal and state		$	(366)		$	(2,052)		$	(1,326)
Foreign			52			(175)			449
Total deferred		$	(314)		$	(2,227)		$	(877)
Provision for income taxes recognized in Statement of Operations		$	97		$	(1,187)		$	(141)

The total income tax expense differs from the amounts computed by applying the statutory federal income tax rate of 39.3% as follows:

	Year ended March 31, 2017		Year ended March 31, 2016		Year ended March 31, 2015
Net (loss)/income before taxes		(825)		(4,749)		(792)
Computed tax expense		(324)		(1,866)		(311)
Non-deductible expenses
– Stock based compensation & Meals &Entertainment		697		367		97
– Others		66		97		103
Valuation allowance		(228)		—		302
Tax charge/(credit) of earlier year assessed in current year		113		330		(172)
Net tax credit on R&D and Sec 199 deduction		(306)		(169)		(238)
Difference arising from different tax jurisdiction		(140)		(127)		90
Others		219		181		(12)
Total taxes recognized in Statement of Operations		97		(1,187)		(141)

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,
	2017		2016
Deferred tax assets/(liability):
Employee benefits		1,538		1,278
Property and equipment		38		52
Goodwill		1,120		550
Allowance for impairment of accounts receivables		385		76
Carry forwarded income tax losses		4,883		6,190
Tax credit for R&D expenses		951		645
Derivative financial instruments		(—)		(60)
Others		(1,413)		(1,835)
Gross deferred tax assets		7,502		6,896
Less: Valuation allowance		(1,628)		(1,463)
Net deferred tax assets		5,874		5,433
Current portion of deferred tax assets		2,018		1,847
Non-current portion of deferred tax assets		3,856		3,586

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 $165, $353 and $379 for the years ended March 31, 2017, March 31, 2016, and March 31, 2015, 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 $1,335 and $NIL as of March 31, 2017, $1,194 and $NIL as of March 31, 2016 and $2,368 and $169 as of March 31, 2015, 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 $293 as of March 31, 2017, $269 of March 31, 2016 and $1,032 as of March 31, 2015, 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.

Changes in unrecognized income tax benefits were as follows:

	As of March 31,
	2017			2016			2015
Opening balance		$	441		$	310		$	172
Increase in unrecognized tax benefits – due to tax Positions taken in current period for prior periods			—			131			138
Closing balance		$	441		$	441		$	310

As of March 31, 2017, 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, 2017, 2016, and 2015 is $NIL, $NIL, and $NIL, respectively. The amount of interest and penalties expenses for the fiscal years ended March 31, 2017, 2016 and 2015 is $NIL, $NIL and $NIL, 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, 2017, 2016 and 2015 has been made accordingly.

There were no undistributed earnings in Majesco and its US subsidiaries as of March 31, 2017 and 2016. The remaining earnings of Majesco from its non-US subsidiaries are considered to be permanently reinvested. As of March 31, 2017 and 2016, the cumulative amounts of such undistributed earnings were $1,848 and $2,716, respectively.

The determination of the amount of the unrecognized deferred tax liability relating to undistributed earnings is not practicable because numerous possible methods could be used to facilitate the repatriation of earnings to the US, and each would require evaluation of withholding taxes, evaluation of the local taxability of dividends as well as an analysis of Majesco’s historical tax position and the ability to use foreign tax credits. Furthermore, due to Majesco’s complex legal structure, the number of jurisdictions involved, and the layers of regulatory requirements, all of which would have to be evaluated to determine the amount of allowable dividends between legal entities and ultimately to the U.S., such an effort would require significant amount of Company resources. 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 June 30, 2010 and onwards and March 31, 2011 and onwards, respectively.