The Hindu Business Line : Why are businesses tax-blind and job-stingy?

You are referring to Section 80JJAA of the Income-tax Act that gives a 190 per cent weighted deduction spanning three years for industries employing 10 per cent more vis-à-vis the previous year's strength and also for new industries employing more than 100 persons. Business is not the function of tax incentives alone. In fact, the income-tax incentive, prima facie, attractive as it is, is antediluvian deep down.

It is not in keeping with times when the accent is on cost cutting, automation and mechanisation. In capital intensive and highly automated industry, the move was bound to elicit a lukewarm response. Besides, given our labour laws and lack of reforms in this front, employers do not want to court trouble by going for more and more permanent employees. Greenfield projects are simply not coming up in the face of freer imports and glut situation staring some industries.

There are, however, avenues that are intrinsically labour-intensive. Road laying and four/six laning of national and state highways could provide significant employment opportunities. The Government's ambitious river-linking project could also provide tremendous employment opportunities.

Penny-wise

I HAD acquired some penny stocks for Rs 50,000 and in the recent bull run I could sell them and plough back the same in two good shares the combined value of which today is Rs 3 lakh. Unfortunately, these two shares do not belong to the calibre of BSE-500. If I shift my investments to BSE-500 shares, what would be the tax implication? -- Cheremuku Krishanan, e-mail

I am afraid you are not entitled for any tax relief on the sales that you have already made. The exemption under Section 10(36) requires purchase of BSE 500 shares during the financial year 2003-04 and holding them for 12 months or more. Yes, the investment made in BSE-500 shares during 2003-04 would qualify for tax exemption if and when sold only if you allow them to become long-term assets.

Left, right

I AM told that placing liabilities on the left and assets on the right side of the balance-sheet was recommended by Kautilya in his classic `Arthshastra'. Is it true? What exactly is the logic? -- M. R. Sunitha, e-mail

In all humility, I plead ignorance. But the wily Chanakya would be squirming in his grave at the rising trend of liabilities being left out in the cold for leftovers.

Holding period

WHEN shares are held in demat mode and are thus fungible, how to ascertain their holding period for finding out whether the shares transferred are short-term or long-term? -- L. V. Gandhi, Vishakapatnam

As per Section 45(2A), FIFO (first in first out) is the norm for shares held in demat mode.

Small cabbie

A CAB operator has gross receipts of Rs 2.5 lakh and net profit of around 8 per cent. Is it compulsory for him to maintain accounts? Will his return be rejected for want of proper books of accounts? -- R. M. Subramaniam, e-mail

No. He has not yet crossed the limit of Rs 10 lakh for turnover as well as the limit of Rs 1.20 lakh for profit set by Section 44AA(2) the crossing of which alone compels him to maintain books of accounts.

(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
All that goes into an alliance talk

Why are businesses tax-blind and job-stingy?

Leadership secrets of history

Lights, camera, action and the little master

Live but one day at a time — today