• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Yes. There seems to be no prohibition under law in this regard. The omnibus object clause, which most companies have, would permit this excursion.

Any profit or loss from such investment would be capital gain or loss. In addition, gold is a taxable asset under the wealth tax law. But none of these need deter a company from investing in gold if it is otherwise up to it.

Legacy sold

IS CAPITAL gains tax payable when one sells his inherited property? -- Rajesh, e-mail

When a person transfers his property through a will among others, such transfer is exempted from capital gains tax by Section 47(iii). As a sequel, Section 49(1) says that an inheritor of a property can claim by way of cost when he transfers the property, the cost to his benefactor or ultimate benefactor.

Thus, if the author of the will had acquired the property for Rs 5,000 that would form the basis when the inheritor sells it, subject to the option to substitute the market value as on April 1, 1981, and indexing the cost if the property happens to be a long-term capital asset.

A property which a person got on partition of his HUF would be similarly treated. But at the time of partition, the HUF will not be taxed.

You would appreciate that since the benefactor is exempted from tax in either case, the beneficiary is called upon to pay tax with reference to cost incurred by the benefactor or ultimate benefactor.

It may be mentioned in passing that if a HUF is partially partitioned after December 31, 1978, such partial partition will not be recognised and the HUF continues to be the owner of the property notwithstanding such partial partition.

Limit push

MY income from salary, including perks and leave encashment, is Rs 3.08 lakh. Therefore, I would get a standard deduction of only Rs 20,000 whereas I would have got Rs 25,000 had my salary been Rs 3 lakh or less. What can I do to push my salary income to this level? -- Rajesh Kumar Pastia, MP

You could perhaps have encashed that many number of days of leave less.

You have not given the details of perks, but if some of them were within your control like purchase of durables from employer at concessional rate, concessional loan, and so on, you could perhaps have manoeuvred your income.

But remember, what you have lost is not Rs 5,000 but 31.5 per cent of Rs 5,000, that is, the additional tax liability due to paring down of standard deduction by Rs 5,000.

Comparisons, if any, must be made with this amount.

Super charge

IT IS proposed to levy surcharge of 10 per cent if one's income is in excess of Rs 8.5 lakh. This virtually amounts to imposing a 48.26 per cent on excess over Rs 8.5 lakh, that is, on Rs 1.5 lakh, assuming a person's income is Rs 10 lakh? -- Anil Shenvi, Bangalore

Yes, that is what it amounts to.

House for sons

MY FRIEND would get Rs 43 lakh from sale of his house. He wants to buy a plot with that money for Rs 23 lakh and distribute the remaining Rs 20 lakh between his two sons. What are the tax consequences? -- Gopi, e-mail

The question is silent on two crucial issues — the purchase details and the value fixed by stamp duty authorities.

If the stamp valuation exceeds the actual consideration, the latter would be ignored and the former would be deemed to be the consideration unless the valuation officer, on an application made by the assessee to his assessing officer (AO), is convinced that the stamp value exceeds the fair value of the property.

Assuming the actual consideration accords with the stamp valuation, the next question is when was the property purchased and at what price. Assuming it is more than three years old, your friend will qualify for inflation of the actual cost by the increase in the cost inflation index during the intervening period, that is, between the point of acquisition and sale.

If indeed the profit thus arrived is Rs 23 lakh or less, your friend has nothing to worry except that he must complete the construction of a residential house on the plot acquired within three years from the date of transfer of the original residential house.

Else, at the end of the third year, the capital gain would become taxable.

Extension of house

A COMPANY is granting the benefit of interest under Section 24 in respect of borrowings made for construction of a house all right but not in respect of another loan for extension of the same house while deducting tax at source from salary under Section 192. Is the company right? -- N. Swaminathan, e-mail

No. The employer is not correct. Section 192 does not give him any choice in this regard.

He has to consider the entire loss from house property for the purpose of TDS under Section 192 irrespective of whether such loss is from a self-occupied or rented house subject to the ceiling on interest under Section 24 in respect of the former.

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

S. Murlidharan

Article E-Mail :: Comment :: Syndication

Stories in this Section
Can a company invest in gold?

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line