INCOME TAXES

9 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 10 - INCOME TAXES

Shandong Spring Pharmaceutical Co., Ltd. is subject to the Enterprise income tax (“EIT”) at a statutory rate of 25%.

The expense associated with the recognition of a contingent obligation under ASC 480-10-25-8, is not tax deductible in China. Per ASC 740-10-25-3A, “An excess of the amount for financial reporting over the tax basis of an investment in a foreign subsidiary or a foreign corporate joint venture that is essentially permanent in duration. ” Therefore, the tax difference in the amount of $1,382,973 ($5,531,892 x 25% tax rate) caused by expense recognized on our book but not in the Chinese tax purpose at March 31, 2012 will be a permanent difference.

On February 28, 2011, the Company purchased a patent (the “US Patent”) pursuant to the terms of a purchase agreement with L.Y. Research Corp., a New Jersey corporation (“LY Research”), which purchase agreement was amended and restated on August 15, 2011 and amended on October 21, 2011 (the “Purchase Agreement), On October 29, 2012, due to the fact that the conditions set in the Purchase Agreement were not fulfilled, the Company and LY Research entered into a termination agreement to formally terminate the Purchase Agreement, and return the US Patent and the shares to LY Research and the Company, respectively. Prior to termination of the purchase agreement, the Company had conducted an impairment analysis with respect to the US Patent and concluded that an impairment was warranted. The loss from impairment of the US patent is not tax deductible in China. Therefore, the tax difference in the amount of $7,920,122 ($31,680,487 x 25%) caused by loss recognized on our book but not for the Chinese tax purpose at March 31, 2012 was a permanent difference. However, upon the return of the US Patent back to LY Research, the permanent tax differences associated with the recognition of the contingent obligation and the loss from impairment were reversed and there was no permanent tax difference at December 31, 2012.

For the three months ended December 31, 2012 and 2011, Shandong Spring Pharmaceutical Co., Ltd. recorded income tax provisions of $258,827 and $1,112,777, respectively.

For the nine months ended December 31, 2012 and 2011, Shandong Spring Pharmaceutical Co., Ltd. recorded income tax provisions of $1,585,251 and $2,283,837, respectively.