The Hindu Business Line : Employer is not bound to morph into an ITO

OUR employer has all of a sudden told his staff that hereafter only employee's provident fund contribution will be considered for the purpose of granting rebate under Section 88 in the run up to deducting tax at source from salary. Is the employer's stand correct?

Dhanapal, Salem

Your employer seems to be on a strong wicket. The mandate of Section 192 to him is to deduct tax at source from employees' salary income.

Through amendment to this section, an employer's obligation has been unfairly widened to include deduction of tax from other sources as well should an employee offer such income for TDS at his employer's hands, though in practice employees utilise this option only to disclose losses from house properties, which they can.

In the absence of an express direction by Section 192, an employer is not bound to morph into a full-fledged ITO. Indeed, employers all over have been itching to raise the banner of revolt against the tyranny of being foisted with the thankless role of ITO. It seems your employer has chosen to take the lead. All these years, employers have been meekly obeying the circular issued annually for their guidance if not for their benefit.

These circulars invariably exhorted employers to grant all tax rebates and all deductions that the ITO himself would have at the time of assessment thus obviating the need for enacting on the part of the employees the rigmarole of payment of advance tax only to get it back as refund after assessment.

The only exception perhaps are Section 80G, 80GGA deduction and so on, the tax benefits under which have been reserved to be granted only at the time of assessment.

The reason why employers are reluctant to grant all the deductions and rebates is not far to seek — desire not to shoulder onerous responsibilities. But at the same time, if the lead taken by your employer heralds a wholesale rebellion by the employers, it would mark the beginning of tax tyranny for employees. The Government has to find a via media.

The days of free lunch are over. The Government has to compensate the employers for doubling in as assessing officers (AOs) and simultaneously amend Section 192 expressly to spell out what all deductions and rebates he must allow.

Rental remix

IF A FACTORY comprising land, buildings, machinery and furniture is taken on lease, is tax deductible under Section 194-I which deals with TDS on rental for land and buildings with or without furniture?

Kranti Prasad, Guntur

The target of Section 194-I is the landlord. This is clear from the overall scheme of the section. It is not uncommon for landlords to let their property together with furniture and fittings. But the section unwittingly lets out a vast majority of landlords by mandating the making available of furniture by the landlord a necessary condition for attracting its mandate.

The truth however is, despite this faux pas, assessees have understood the spirit of the section correctly. When a factory is taken on lease, the lease rental is substantially for the production facility and not for land and buildings.

Therefore, Section 194-I is not attracted when the subject matter of payment is not land and buildings.

1981 story

IN RESPECT of long-term capital assets acquired prior to April 1, 1981, the assessee has the choice of substituting the market value of the asset on that date in place of the actual cost. Now, how to satisfy the tax authorities as to the genuineness of such value determined by the assessee?

M. P. Tony, e-mail

While for listed securities, there would be share market quotations, for bullion there would be metal market quotations for April 1, 1981. That leaves assets for which there is no regular and ready market. For these assets, there is no choice but to rely on the certificate of a registered valuer.

Leave on leaving

ON RESIGNATION, I got my leave encashed. Is this eligible for exemption under Section 10(10AA) of the Income-tax Act which sets store by the word `retirement'?

Aniruddha Ambekar, e-mail

No, the section also uses the additional words "whether on superannuation or otherwise". The retirement of an employee may be of various kinds. It may be on superannuation or voluntary such as resignation. This section equally applies to voluntary retirement on account of resignation. (CIT vs Shahney (RJ) ITR 160 (Mad).

Fund fundas

WHAT is the difference between a growth fund and an income fund?

Heena Kalra, New Delhi

If an investor has got a reasonable appetite for risk and is prepared to bide his time, he must go for a growth scheme of a reputed mutual fund.

In growth scheme, no period dividend is paid but the profits are ploughed back into the stock market so that at the end of the term of the scheme, what the investor gets is, reward in the form of capital gains on the units he had initially invested.

In an income scheme, on the other hand, the reward is in the form of periodic dividends with no scope for profits to be ploughed back into the market.

(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
Grooming in law for wannabe secretaries

Employer is not bound to morph into an ITO

Kal ka newspaper boy, aaj ka Kalam

Don't lead if you don't have the right to lead