NOTE 16. 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 2014 and 2015, 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, 2014		June 30, 2015		June 30, 2015
	RMB		RMB		U.S. Dollars

Allowance for doubtful receivables	¥	1,209,961	¥	1,072,279	$	176,107
Net operating loss carry forward		-		669,819		110,008

Total deferred income tax assets	¥	1,209,961	¥	1,742,098	$	286,115

Deferred tax liability is comprised of the following:

	June 30, 2013		June 30, 2015		June 30, 2015
	RMB		RMB		U.S. Dollars

Income tax cost due to unpayable accounts	¥	180,186	¥	180,186	$	29,593

Total deferred income tax liability	¥	180,186	¥	180,186	$	29,593

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

	For the year ended		For the year ended		For the year ended
	June 30, 2014		June 30, 2015		June 30, 2015
	RMB		RMB		U.S. Dollars

Income tax calculated at statutory rates	¥	3,073,289	¥	(6,108,744)	$	(1,003,276)

Nondeductible expenses (non-taxable income)		115,054		5,335,231		876,237
Benefit of favorable rate for high-technology companies		(1,229,316)		385,650		63,338
Benefit of revenue exempted from enterprise income tax		(794,651)		(190,614)		(31,306)

Deferred income tax (benefit)		(203,240)		137,683		22,612

Over-accrued tax of prior year		-		(2,111,281)		(346,748)

Provision (benefit) for income tax	¥	961,136	¥	(2,552,075)	$	(419,143)

The Company’s tax provision is comprised of the following:

	For the years ended June 30,
	2014		2015		2015
	RMB		RMB		U.S. Dollars
Current income taxes	¥	1,164,376	¥	(2,019,938)	$	(331,746)

Deferred income taxes provision (benefit)		(203,240)		(532,137)		(87,397)

Provision for income tax	¥	961,136	¥	(2,552,075)	$	(419,143)