NOTE 15. INCOME TAX

The Company is not subject to any income taxes in the United States or the Cayman Islands and had minimal operations in jurisdictions other than the PRC. BHD and Nanjing Recon are subject to PRC’s income taxes as PRC domestic companies. The Company follows Implementing Rules for the Enterprise Income Tax Law (“Implementing Rules”), which took effect on January 1, 2008 and unified the income tax rate for domestic-invested and foreign-invested enterprises at 25%.

The Company reapplied for high-technology enterprise approval and has passed all relevant reviews. Thus, for the calendar years 2012 and 2013, Nanjing Recon is subject to an income tax rate of 15%.

As approved by the domestic tax authority in the PRC, BHD was recognized as a government-certified high technology company on November 25, 2009 and is subject to an income tax rate of 15% through November 2015.

Deferred tax asset is comprised of the following:

	June 30, 2012		June 30, 2013		June 30, 2013
	RMB		RMB		U.S. Dollars

Allowance for doubtful accounts	¥	1,106,801	¥	1,006,721	$	162,684

Total deferred income tax assets	¥	1,106,801	¥	1,006,721	$	162,684

Following is a reconciliation of income tax at the effective rate to income tax at the calculated statutory rates:

		For the year ended June 30, 2012		For the year ended June 30, 2013		For the year ended June 30, 2013
		RMB		RMB		U.S. Dollars

Income tax calculated at statutory rates	¥	901,687	¥	1,685,434	$	272,362

Nondeductible expenses (non-taxable income)		905,429		(187,280)		(30,264)
Benefit of favorable rate for high-technology companies		(245,205)		(116,335)		(18,799)
Benefit of revenue exempted from enterprise income tax		(1,194,103)		(1,207,316)		(195,100)
Deferred income taxes provision		-		12,288		1,986

Deferred income tax (benefit)		(587,858)		100,080		16,173

Provision for income tax	¥	(220,050)	¥	286,871	$	46,358

	For the years ended June 30,
	2012		2013		2013
	RMB		RMB		U.S. Dollars

Current income tax provision	¥	367,808	¥	186,791	$	30,185

Deferred income taxes (benefit)/provision		(587,858)		100,080		16,173

Provision for income tax	¥	(220,050)	¥	286,871	$	46,358