The Hindu Business Line : What is there in BPO for me?

Companies in many developed countries find the labour costs in their countries very high. To cut costs, they outsource services, especially the lower-end segment of transactions processing, from countries where labour is cheap, telecommunication facilities are reasonably good, and above all where there is a plentiful supply of English-speaking graduates endowed with reasonable computing skills. Huge cost savings are effected this way.

The time zone differential also adds to the attraction, with work being completed in one country when the other sleeps. India, with a huge reservoir of English-speaking graduates, is a major beneficiary of BPO, though lately there are murmurs of protest in developed countries over the resultant loss of employment opportunities to the locals.

Foreign companies may be spending only a fraction of what they otherwise would have had they stayed put in their home country. But given the huge exchange rate differential between the dollar and the rupee, the employees of Indian BPO units aren't exactly complaining.

Different methods

A MERGER is ordered by the BIFR. While the transferor company had all along been following the WDV written-down value (WDV) method, the transferee company has all along been following the SLM straight-line method (SLM).

In terms of AS-14, the purchase method has been followed while passing the entries incorporating takeover of assets and liabilities. Now, since the two companies have followed two different methods of depreciation, what corrective measure needs to be initiated? For example, should depreciation on the transferor company's assets be recalculated based on the method followed by the transferee company?

R. Kannan, Coimbatore

In my view there is no need for such retrospective calculations because under the purchase method, one attributes independent and fresh values to individual assets untrammelled by their values in the books of the transferor company. You should, therefore, provide for depreciation on such fresh value on the basis of the method being consistently followed hitherto by the transferee company — SLM.

As far as income-tax, well you have little choice but to continue from where the transferor company left. That is, the transferee company would be able to claim depreciation with reference to the WDV in the hands of the transferor company as at the end of the previous year immediately preceding the merger.

TDS request

I AM a salaried man. But my income does not warrant deduction of tax at source. However, I have short-term capital gains which take my income beyond the tax-free threshold. Can I ask my employer to deduct tax at source on the income thus determined?

T. N. Sivasubramaniam, e-mail

Yes. Section 192 gives you this option. And if you exercise this option, your employer, cannot demur. Because in that case he is obliged to deduct tax on the total income. Losses, except the one under the head `income from house property', shall however not be considered by the employer, even if they are reported.

Gains at home

I AM a housewife. I do invest in the share market and make capital gains from time to time. My husband is working in a pubic sector undertaking. What is my tax liability. Do I have to file income-tax return?

Neelam Singh, NOIDA

The answer to your query would depend upon the source of capital for you. You say you are a housewife. The inference one would draw from this fact is that at least the initial capital for investment was provided by your husband. To the extent, the capital gains made by you are out of gifts received from your husband, the same will be added to his total income and not to your income.

But if having taken a gift from him initially you started ploughing back the capital gains alone into the stock market, the capital gains from capital gains, as it were, would be your own and you will have to pay tax on them and file income-tax return.

This is because subsequent investments were not bankrolled by your husband but by you.

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

S. Murlidharan

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