Financial Daily from THE HINDU group of publications
Sunday, May 02, 2004
Financial Daily from THE HINDU group of publications Sunday, May 02, 2004 |
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Investment World
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Taxation Columns - Tax Talk Dreams of car and house with retirement money T. Banusekar
Reply The Rs 4 lakh received by your father will qualify for exemption under Section 10(10C) subject to the conditions stipulated by the section read with Rule 2BA being satisfied. The exemption will be restricted to the amount stipulated by the section. The excess over the exempt portion will be taxable, but will qualify for relief under Section 89(1) read with Rule 21A. Your father can use the VRS money which he gets by way of compensation for any purpose, including the repayment of loans taken by him earlier. Query If I receive a gift from a foreign national, who is not of Indian origin and who is not my blood relative, by way of remittance from outside India, what will be the tax implications? -Jagannadha Rao Reply There will be no tax implications either for you or for the foreign national in India since gift is not an income within the meaning of Section 2(24) of the Income-Tax Act. Query A limited company has acquired land in an island and has developed an aqua culture project. For this purpose the company has taken a loan from the bank. In this project a few ponds are developed and river/seawater is pumped in and seeds and manure are put and after about six months the crop is harvested and sold. Will this income be treated as agricultural income and, therefore, be exempt from income-tax? - Ganesh Daivajna Reply The Supreme Court, in CIT v Raja Benoy Kumar Sahas Roy (1957 32 ITR 466 SC), has held that the basic operations relating to agriculture are tilling of land, sowing of seeds, planting and similar operations on land. These basic operations would require the expenditure of human skill and labour upon the land itself. The court held that other operations such as weeding, digging of soil around the growth, removal of undesirable growth and all operations which foster the growth and preserve the same not only from insects and pests but also from degradation from outside, tending, pruning, cutting, harvesting and rendering the produce fit for the market would all be taken as part of agricultural operations if they are taken up in conjunction with the basic operations. In your case, you can consider whether you fall within these tests laid down by the Supreme Court and if you do, the income derived would be agricultural income and therefore exempt under Section 10(1) of the Act. Query I am a NRI and had invested money in the UTI under the CGGF Scheme in 1993 in the name of my minor children. At the time of investment, I was told that the proceeds would be repatriable on my children attaining 21 years of age. In 2001-02, the UTI has deducted tax at source on the maturity proceeds citing that my child is a resident in India and that income from mutual funds is taxable for that year. In this context, I would like to know whether the law could be changed so as to make such sum taxable when it was understood at the time of investment that it would not be taxable? If the UTI has deducted tax at source wrongly is it possible to get refund of the tax so deducted? - S. Sambamurthy Reply Income from mutual funds of the previous year 2001-02 were exempt in the hands of the unit holder under Section 10(33) of the Act. It was only in the previous year 2002-03 that such incomes were taxable in the hands of the unit holder. The UTI therefore should not have deducted tax at source on the income earned in the previous year 2001-02. If tax has been deducted, refund can be claimed by filing a return enclosing the TDS certificates. However, in your case, the return should have been filed before March 31, 2004 (one year from the end of the relevant assessment year) for claiming the refund. A claim for refund by filing a return beyond this date can be entertained only if an application is made to the Central Board of Direct Taxes and the delay condoned by them in exercise of their powers under Section 119(2)(b). The law can be amended to bring to tax an income which was understood to be non-taxable when the investment was originally made. There can be no prohibition on such amendments and these are valid. Query We are civil engineering contractors carrying on operations in several States. We employ labour contractors and sub-contractors at the work site and our association with them is only for a short duration. Our turnover is quite large and we offer to tax our net income which is probably higher in percentage terms than most people in a similar business. The assessing officer (AO) at the time of assessment asks us to produce these contractors and sub-contractors who invariably refuse to our request. We in turn have requested the department to issue summons to these persons, which the officer refuses to do. What is our remedy in such cases? - V. S. Iyer Reply It has been held in several cases that it will be the duty of the AO to issue summons to parties whose personal appearance he requires when the request for issue of summons is made by the assessee. Reference in this connection may be made to the following cases: Sadaram Puranchand vs CIT (1937 5 ITC 459 Calcutta); Munnalal Murlidhar vs CIT (1971 79 ITR 540 Allahabad); S. Velu Palandar vs DCIT (1972 83 ITR 683 Madras); and Addl. CIT vs Radhey Sham Jagdish Prasad (1979 117 ITR 186 Allahabad). It is surprising to note that some assessing officers, despite such categorical court decisions, refuse to exercise their powers to assist the assessee in assessment proceedings. The CBDT would do well to instruct all officers to issue such summons when required and asked for by the assessee during the course of assessment or other proceedings. At any rate your remedy will lie only in an appeal against the order of the assessing officer if he has added the payments made to the contractors and sub-contractors on the ground that the said payments are not proved.
Minor tax worries of a Major
Last year I did not claim the rebate in respect of the tuition fee paid for my son. Can I claim it this year or should I submit another return for the last year in which I can claim the rebate? - Major C. M. Pillai Reply It appears that you may be eligible to get a deduction under Section 80GG in respect of the rent paid. Under this section, a deduction is available in respect of the rent paid to the extent of the least of excess of rent paid over 10 per cent of adjusted total income, Rs 2,000 per month, 25 per cent of adjusted total income. Adjusted total income means the total income computed after all deductions under chapter VI-A (Sections 80CCC to 80U) other than Section 80GG. The section does not require that the rent should have been paid in the previous year. It would suffice if the rent were paid for the previous year in which the deduction is claimed. Therefore, in your case, the rent that is attributable to the year in question will qualify for the deduction on the above basis. It may be noted that the section allows a deduction to individuals and HUFs provided the HUF, individual, his spouse or minor child or where he is a member of a HUF, such HUF does not own a residential accommodation in the same place where he ordinarily resides or performs duties of his office, employment or carries on his business or profession. This section also does not allow a deduction to an individual who is in receipt of HRA. Insofar as tuition fee is concerned it may be noted that rebate can be claimed for the tuition fee only from assessment year 2004-05 (previous year 2003-04). Therefore the question of failure on your part to claim it in the last year (where probably you are referring to the previous year 2002-03 since your query was received prior to March 2004) does not arise. You can claim rebate in respect of the tuition fee paid in the previous year 2003-04 in the assessment year 2004-05.
(Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.)
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