The Hindu Business Line : Marriage counselling for taxpayers

If they are in the same tax bracket, nothing can possibly be done. But if either of them is in a lower tax bracket, the one in the higher bracket can make gifts of income-producing assets before the marriage because the Supreme Court has said that premarital gifts are outside the pale of clubbing provisions.

But should the marriage come unstuck, the poor fellow would be left holding the can! Hopefully that does not happen. Indeed your questions itself suggests that it is not mere infatuation that underpins their relationship.

Assuming the stratagem of premarital gifts was not resorted to, they need not despair. After marriage, the trick available is exchange. Yes, if the husband is in a higher slab, he can palm off his debentures worth, say, Rs 5 lakh in exchange for jewellery of the same value belonging to his better half. This is entirely on paper with the jewellery continuing to adorn the person of the lady.

Erring contractor

A CONTRACTOR whose gross receipts exceeded Rs 40 lakh filed his return showing 8 per cent of the receipts as his income under Section 44AD. What are the penalties applicable?

I take it that he has not got tax audit done and attached the tax audit report with the return though his gross receipts are in excess of Rs 40 lakh.

He may have to in terms of Section 271B pay half percent of his gross receipts or Rs 1 lakh, whichever is less, for violating the requirements as to tax audit. He may also have to pay penalty of Rs 25,000 under Section 271A for non-maintenance of books. But he would be able to avoid this if he takes some rearguard action — get his books written before the Assessing Officer demands them. He may also have to pay interest under Sections 234C and 234B for short-payment of advance tax if his actual income turns out to be much more than 8 per cent of his gross receipts.

He may also be asked to pay penalty for concealment of income under Section 271(1) (c) which may range from 100-300 per cent of tax sought to be concealed.

But it seems the mistake was inadvertent in the sense that all along he expected his gross receipts to stay within Rs 40 lakh. If indeed this is the case he may be able to ward off these penalties.

Crude price

WHY ARE crude oil prices quoted only in US dollar? -- Kokilla Mojumdar, New Delhi

This has more to do with the stranglehold of the US in the international financial and money market. After the collapse of the gold standard, the US has secured a world order in which its currency has held sway so much so that bulk of the world trade is designated in US dollar. The advent of Euro is threatening to change this order. There are reports that though the oil trade continues to be in US dollar, some of the OPEC members have shifted their funds emanating from sale of oil from US economy to Euro. If the US economic downslide continues, it is well possible that the oil trade or a sizeable part of it may be designated in Euro. But the US flush from its Iraq war victory may stave off this challenge.

Financial year

OUR COMPANY has been asked by its foreign parent company to change its financial year so as to synchronise with its own financial year. What are the steps required to be taken? -- N. Swamy, email

No express procedure has been prescribed but it can be gleaned from Section 210. If you can fall in line with your parent by cutting short the current financial year to less than 12 months or by lengthening it to up to 15 months, you don't require anyone's approval subject to articles. If, however, the current year is sought to be stretched beyond 15 months but not beyond 18 months, you would require the special permission of the Registrar.

Medical expenses

WHILE DEDUCTING tax at source from salary, can the employer grant the deduction under Sections 80DD, 80DDD, 80U, and so on, relating to medical expenses? -- E. Balasubramaniam, Chennai

Strictly speaking he cannot. Because Section 192 expressly asks every employer to deduct tax on the estimated income from salary. But the straightjacket of the initial requirement is considerably eased in the following sub-sections which allow an employee to disclose to his employer his non-salary income as well so that tax may be deducted from salary in respect of such income as well. The CBDT every year comes out with a circular for the benefit of employers so that they can discharge their TDS function properly. Except the deduction under Section 80G, effectively all other deductions and rebates can be allowed by the employer himself.

S. Murlidharan

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

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