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INCOME TAXES
 12 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 21 – INCOME TAXES 

 

As result of changes made by the Tax Cuts and Jobs Act of 2017, that became effective as of January 1, 2022, the company is now required to capitalize for tax purposes certain research and development expenses and amortize domestic expenses over a 5 year period and foreign expenses over a 15 year period, resulting in a deferred tax asset for the capitalized amounts.

 

 

Cemtrex Inc. and Subsidiaries

 

In accordance with ASC 740, Income Taxes, specifically related to uncertain tax positions, a Company is required to use a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company believes its income tax filing positions and deductions will be sustained upon examination, and accordingly, no reserves or related accruals for interest and penalties have been recorded as of September 30, 2025.

 

The Company is subject to taxation in the United States federal and state jurisdictions. The Company’s federal income tax and state income tax returns are subject to examination by tax authorities. The Company is not currently under examination by any tax authority.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modification to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and other provisions implemented through 2027. The Company does not anticipate the bill will have a material impact on the financial statements.

 

 

At September 30, 2025, the Company had approximately $68,941,426 of federal, $84,017,242 of state, and $9,798,273 of foreign net operating loss carryforwards. The net operating loss carryforwards, if not utilized, will begin to expire in 2030 for federal purposes and in 2026 for state purposes. The company is currently reviewing net operating losses for Section 382 limitation purposes and will make any required adjustments to the net operating losses at the completion of the study.

 

The following is a geographical breakdown of loss before the provision for income taxes.

  

       
   Year ended September 30, 
   2025   2024 
         
Domestic  $(28,352,803)  $(7,090,508)
Foreign   1,038,715    (385,841)
Loss before provision for income taxes  $(27,314,088)  $(7,476,349)

 

The provision for income taxes consisted of the following.

  

   September 30, 2025   September 30, 2024 
Current (benefit)/provision          
Federal  $-   $- 
State   609,496    165,093 
Foreign   125,384    37,187 
Total current (benefit)/provision   734,880    202,280 
           
Deferred provision          
Federal   -    - 
State   -    - 
Foreign   -    - 
Total deferred provision  $-   $- 
           
Total (benefit)/provision for income taxes  $734,880   $202,280 

 

 

Cemtrex Inc. and Subsidiaries

 

The following is a reconciliation of the effective income tax rate to the federal and state statutory rates.

  

   For the Fiscal Year   For the Fiscal Year 
   Ended   Ended 
   September 30, 2025   September 30, 2024 
         
U.S. statutory rate   21.00%   21.00%
State taxes, net of federal   5.03%   -1.74%
Foreign tax rate differential   -0.28%   -0.23%
Change in valuation allowance   -0.34%   -13.23%
Return to provision   0.20%   -1.44%
State Rate Change   0.21%   -0.50%
Other True Up Adjustments   

-1.25

%   

0.00

%
Goodwill impairment   -0.00%   0.00%
Write-Off of Related Party Note with Majority Owner   0.00%   -1.49%
Issuance Costs - Equity Financing   0.00%   -2.35%
Interest Expense   

-0.98

%   

-2.80

%
Change in Fair Value of Warrants   10.59%   1.64%
Loss on Excess Fair Value of Warrants   -14.62%   0.00%
Other permanent differences   -1.06%   -1.56%
Effective Tax Rate   -2.69%   -2.70%

 

The components of our deferred tax assets and liabilities are summarized as follows.

  

  

September 30, 2025

   September 30, 2024 
Deferred Tax Assets:          
Net operating Loss carryforwards  $22,289,821   $21,908,977 
Inventory and other reserves   365,475    1,363,737 
Allowance for bad debt   32,212    32,919 
CECL Allowance   43,877    - 
Interest Expense Limitation   4,473,727    4,751,442 
Accruals   507,663    439,996 
Deferred Revenue   127,838    - 
Capitalized R&D   1,086,108    852,417 
Warranty reserve   58,946    27,287 
Lease Liability   120,739      
Other   29,087    15,270 
Total gross deferred taxes   29,135,493    29,392,044 
Valuation allowance   (28,220,042)   (28,127,540)
Net deferred tax assets   915,451    1,264,504 
           
Deferred Tax Liabilities:          
Deferred revenue   -    (296,090)
Prepaid expenses   (39,705)   - 
Goodwill amortization   (138,395)   (132,685)
Depreciation   (17,751)   (10,020)
Right of use assets   (114,738)   - 
Other   (604,862)   (825,710)
Total deferred tax liabilities   (915,451)   (1,264,505)
           
Total deferred tax assets (liabilities)  $-   $- 

 

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.

 

 

Cemtrex Inc. and Subsidiaries

 

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based upon the Company’s history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for its deferred tax assets as of September 30, 2025, and 2024.

 

Future utilization of the Company’s net operating loss and research and development credit carryforwards to offset future taxable income may be subject to an annual limitation, pursuant to IRC Sections 382 and 383, as a result of ownership changes that may have occurred or that could occur in the future. An ownership change occurs when a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards. When this analysis is finalized, the Company plans to update its unrecognized tax benefits accordingly.