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AS IT IS, the grievance of the dividend lobby is that since dividend is not allowed as expenditure, it amounts to double taxation when it is taxed in the hands of the shareholders. There is an orchestrated move to get the shareholders off the tax hook on this account. Can a company forgo claim of deduction for salary and enable the salaried class to orchestrate a similar claim for exemption of salary from taxation in their hands? -- T. A. P. Krishnan, e-mail

It may be of interest to you and to our readership in general that there is nothing explicit in the income-tax law disallowing dividend as expenditure. Section 40, which puts its foot down on certain payments, does not target dividend. One wonders why no intrepid corporate has ever tried its luck by claiming dividend as expenditure. Be that as it may. Coming to foregoing of claim of salary as expenditure, I am not sure whether any company would like to stick its neck out because it is not likely to be so employee-friendly that it will shoot itself in the foot which forgoing of salary as expenditure amounts to.

The assessing officer may not insist on granting the deduction for salary because while he can, nay, must do so in respect of depreciation thanks to Explanation 5 to Section 32(1), no such obligation has been thrust upon him in respect of other items of expenditures. At any rate, such altruistic concern for employees may not bear any fruits for the employees either because in the absence of any legal provision barring double taxation, the employer willy-nilly has to deduct tax at source from his employees' salary despite having magnanimously forgone his legitimate claim for deduction of salary as expenditure.

Holding company

IS ANY form required to be filed with the Registrar when a holding company holds a few shares in the names of nominees in terms of Section 49(3) so as not to fall foul of the minimum strength requirement? -- Harit, e-mail

No, because none has been prescribed specifically. Earlier, when one had to disclose his beneficial interest when he did not have the nominal interest and vice-versa, thanks to Sections 187B and 187C one had to comply even in the absence of a specific requirement under Section 49(3). But with the Companies (Amendment) Act, 2000 doing away with the requirement of notifying cases of beneficial and nominal interests not vesting with the same person, there is neither a specific nor a general regime that requires a holding company or its nominees to notify the Registrar in the event shares are held by the holding company in the name of nominee(s).

Postal ballot

IS IT necessary to transact a business at the AGM after it had run through the postal ballot? -- Aman Kumar, e-mail

Logically, the answer is in the negative because the very idea of ushering in the scheme of postal ballot was to obviate the need for holding a meeting and to facilitate all-round active participation in corporate governance. But the non-obstante opening clause of Section 192A, overrides only the "foregoing provisions", that is provisions contained in sections preceding Section 192A. Thus a company, despite passing the accounts through postal ballot, will have to nevertheless lay the accounts before the AGM as such mandate is under Section 210 which follows Section 192A and which has not been overridden by Section 192A. But the departmental circular 16 of July 24, 2001, has an ominous and irrational ring when it says "the chairman of the general meeting shall declare the results in the general meeting" and "the date of passing of the resolution will be the date of the general meeting" because this goes contrary to the letter and spirit of Section 192A. The circular goes against Section 192A by mandating meeting to be held even in respect of matters covered by sections preceding Section 192A.

On second thoughts

I BOUGHT a piece of land with a view to constructing a house thereon. I had taken a loan for the purpose. Later on, I changed my mind and disposed of the land. Will I get tax rebate in respect of the instalments paid in respect of this loan? -- K. V. V. N. Gupta, Vishakapatnam

No, you are not eligible for tax rebate under Section 88 because that section gives rebate only in respect of a residential house property and not land. But then the rebate is on in respect of both purchase and construction. This being so, it is possible that one might have got the rebate when he paid for the land.

Section 88 is silent on what happens to the rebate granted in an earlier previous year in respect of land acquired with a view to constructing a house thereon all right but is subsequently disposed of. It only says that if a residential house on which rebate is granted is transferred within five years of taking possession thereof, the rebate granted earlier would deemed to be the tax liability of the previous year in which the default takes place.

Relief 89

I HAVE received arrears relating to the last five years. Do I get any relief under the income-tax law to guard against the bunching effect that will expose me to a higher tax liability? -- K. V. V. N. Gupta, Vishakapatnam

Relief under Section 89 is available for you. Though the section requires you to make an application to your assessing officer, in terms of Rule 21AA you can make an application in Form 10E to your employer himself who is authorised to grant the relief, which consists in preventing the bunching effect, while deducting tax at source.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

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