Financial Daily from THE HINDU group of publications
Sunday, Sep 04, 2005
Financial Daily from THE HINDU group of publications Sunday, Sep 04, 2005 |
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Investment World
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Income Tax Columns - Tax Talk Tax planning for an agriculturist receiving foreign remittance T. Banusekar
I AM an agriculturist aged around 64 years. I do not have any income other than from agricultural activity and, therefore, have not filed any income-tax return so far. My son is a doctor in the US and he has been sending me $50,000 a month since January 2005. My wife and I credit this money into a bank account which is operated jointly. The purpose of the remittance is for maintenance of the family. Can I use the surplus for investment in stocks, deposits, a residential plot/house or agricultural land? What will be the tax implications? T. R. Keshava Rao Reply The amount received by you from your son will be tax-free, whether the same is taken as given for family maintenance or as a gift. The income from the investment may be taxable depending on the manner of investment. Such income will be taxable in the hands of your son or in your hands depending on whether the surplus belongs to you or to your son. To whom the surplus belongs will depend on the understanding you and your son have with respect to the same. Query I took a loan from a bank to purchase shares. Can the interest charged by the bank be treated as part of the cost of acquisition of the shares? F. P. Balachandran Reply The interest can be reduced from the dividend. However, since the dividend is exempt the question of reducing the same from the dividend does not arise. The interest can be added to the cost of acquisition and if the gain is taxable, the benefit of getting the interest as a deduction will be available when the shares are transferred. It has been held in CIT vs Maithreyi Pai 152 ITR 247 (Kar), CIT vs Mithilesh Kumari 92 ITR 9 (Delhi), ACIT vs K. S. Gupta 119 ITR 372 (AP) and Naozar Chenoy v CIT 234 ITR 95 (AP) that interest which is not allowed as a deduction can be added to the cost of acquisition of the asset, the purchase of which the loan was taken. Query The assessee is engaged in buying and selling of shares. The transactions are delivery based and the shares are normally held for at least two months before they are sold. Some of the shares are held for over a year. The gain has all along been offered to tax as capital gains. As the volume of transactions has now gone up substantially can the gain be treated as business income? R. Mohan Reply Insofar as the buying and selling of shares is concerned, the issue of whether the same should be treated as giving rise to capital gains or business income will have to be determined based on the facts and circumstances of the case. These include the period of holding, the frequency of such transactions, the motive of the transaction (which is to be examined on facts), the entries in the books, the infrastructure deployed the source of funds (whether own or borrowed). None of these factors can be taken in isolation for determining whether the transactions by way of buying and selling of shares are in the nature of business or investment. The answer to your query will, therefore, have to be examined on the facts of the case and no conclusion can be arrived at without examining the same. Query I own shares of some blue chip companies, which were acquired by me more than 10 years ago. If these shares are now sold what will be the tax payable. Please note that I have a pension income of Rs 1 lakh per annum. B. A. Kamath Reply Since you have held the shares for more than 12 months, the gain will be treated as long-term capital gains. This gain will be exempt if the shares are sold through a recognised stock exchange and where securities transaction tax has been suffered at the time of sale of the shares.
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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