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

I WAS given a large quantity of gold jewllery on the occasion of my marriage 30 years ago by my parents. I now want to sell this jewellery to help my husband in his business. Will I have to pay income-tax on the amount of sale? -- Shanta Rangaswamy, Erode

`Personal effects' are outside the pale of income-tax. But despite being a personal effect, jewellery has been deliberately denied the exemption that is otherwise available to personal effects. And people of your ilk have not got help from the judiciary either. In CIT vs Sitadevi N. Poddar (1984 148 ITR 506), the Bombay High Court held silver utensils of the type which were used in the kitchen or in the dining room to be personal effects. But golden items of cutlery were not granted the coveted status of personal effects in Poddar (GS) vs CWT (1965 57 ITR 207 Bombay).

My own feeling is that if you convert your gold jewellery into gold utensils, and so on, and use them for devout purposes such as performance of pooja, aradhana, and so on, you may be able to jump into the personal effect bandwagon. But do not press your luck too far because the quantity of such vessels must be reasonable. To the extent you are not able to attach the `personal effect' tag, you will have to pay tax.

But since you have been holding the jewellery for more than three years you can take the sting out of taxation by taking advantage of cost inflation index to increase the cost of the jewellery to your parents which effectively be taken as cost to you. You may even keep the taxman at bay by parking your capital gains in a three-year bond with the National Highway Authority of India, and so on, within six months of sale.

Royalty news

CAN A newspaper compensate its journalists in the form of royalty so as to give the sizeable tax relief proposed by the Budget 2003? -- D. Murali, e-mail

The tax relief is sought to be extended only to authors of books. And the definition of `book' excludes, among others, newspapers. By the very nature of the newspaper industry, it is impossible to first get the authors write a book and then carry its contents piecemeal in the form of articles. Articles typically deal with topical issues and have a here-and-now character.

Daddy's land

A PERSON is the owner of a piece of land. His son wants to construct a house thereon by taking a loan in his name but by making his father a co-applicant. In the alternative he wants to take the land on a long-term lease from his father. Please advise from the income-tax point of view. -- D. Murali, e-mail

What is required is ownership of the superstructure. The assessee may or may not own the land on which the superstructure is raised. This being the position, the tax benefits are very much on. Interest as well as the principal repayments would qualify for the tax benefits as prescribed.

Lawyer fee

WE HAVE to pay our advocate a fee of Rs 40,000. Should we deduct tax at the rate of 5 per cent or 5 per cent plus surcharge of 10 per cent because he hasn't given any proof that his total income will be less than Rs 8.5 lakh? -- S. Vazey, Mumbai

Your kind attention is invited to clause 2(6) of the Finance Bill, 2003. Tax needs to be deducted from professional fees under Section 194J at the rate of 5 per cent if the payment of such income to a professional is not likely to exceed Rs 8.5 lakh during a financial year and at the rate of 5.5 per cent if and only if the income paid or likely to be paid exceeds Rs 8.5 lakh during the financial year.

Therefore, the onus for determining whether surcharge of 10 per cent is to be added to the rate of TDS is not on the assessee but on the person responsible for paying the income. And while so doing, he is not concerned with other incomes of the assessee. He must focus on what he is going to pay as professional fees. If he has paid or is likely to pay more than Rs 8.5 lakh during a financial year, he must add surcharge of 10 per cent; otherwise not. To answer your specific query, if this is a one-off transaction involving a payment of Rs 40,000, you need add surcharge even if the person himself says that he has crores of rupees of income from his profession or investments.

MAOCARO

A COMPANY maintains in its books of account individual account of each fixed asset. Is this enough for the purposes of MAOCARO? -- M. V. Jegannathan, Coimbatore

Yes, assuming such accounts also show location and other details.

(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
Audit committees need to be hot on the scent

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