The Hindu Business Line : Psychiatrist's bills go missing and I need tax counselling

I INCUR around Rs 14,000 a year on psychiatric treatment of my ailing sister. The medicines are purchased under prescription of a psychiatrist. However I have not cared to maintain proof of payment by insisting on bills and collecting them systematically. Will I get any deduction while computing my taxable income? - N. Hariharan, e-mail

You could have made the grade for complete deduction of Rs 14,000 under Section 80DDB but for your laxity in not accumulating the bills. Section 80DDB allows a deduction of the actual amount of medical expenditure on a dependant subject to an overall ceiling of Rs 40,000. In the event, you may have to try under a more demanding Section 80DD, which surprisingly does not ask for any proof of payment — it offers a straight deduction from gross total income a deduction of Rs 50,000 or Rs 75,000 according as the dependant's disability is ordinary or severe.

While under Section 80DDB even a private specialist can give a certificate of the factum of the ailment, Section 80DD insists on a certificate from a medical authority as defined in the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995. Indeed your laxity could turn out to be a blessing in disguise because, should you succeed in getting the requisite certificate, you would end up getting a deduction of Rs 50,000, though admittedly you have spent only Rs 14,000.

Lapsing losses

THERE is a change in majority shareholding in a listed company in one financial year. This triggers the takeover regulation pursuant to which the company is delisted. This happens in the following financial year. The company has got accumulated losses. Will all these losses lapse? - L. V. Srinivasan, Chennai

First of all, you must make sure that this company has indeed become a closely-held company, that is, the antithesis of a widely-held company as defined in Section 2(18). You must see whether the company still makes the grade under Section 2(18) as a widely-held company in which case Section 79 cannot be invoked.

But I presume that you have already examined this aspect. I take it that on delisting the company has ceased to be widely-held.

Now coming to the nitty-gritty of Section 79 vis-à-vis your company, well in the first year when there was the shareholding upheaval, Section 79 would not have been attracted because as on the last day of that year, the shares were not de-listed. But the very next year, the act of delisting took place.

For this year and subsequent years you must ensure that at least 51 per cent of the voting power is in the same hands as on the last day of the previous year in which set off of losses is sought as it was on the last day of the previous year in which such loss was incurred. Perhaps you do not fulfil this requirement. But still there is a ray of hope for you.

The Madras High Court, in the Concorde Industries case, has held that Section 79 is not applicable to unabsorbed depreciation. This view has not been disturbed by the Supreme Court. You may take advantage of this judicial thaw.

Retainer fix

SECTION 17(3)(iii) brings into the tax net any amount due to or received whether in lumpsum or otherwise by any assessee from any person before his joining any employment with that person or after cessation of his employment with that person. Does this include retainer fees also, which an ex-employee might get post-retirement? - A. S. Panchapakesan, Erode

Retainer fees are taxable as business or professional income under Section 28 in any case whereas the section cited by you is on only when there is or was or is going to be an employer-employee relationship.

US investment

AN INDIAN company has invested in a US company in dollars not for short-term gains but as a long-term investment. Should it revalue its investments at the year-end to accord with the exchange rate as on the balance-sheet date while preparing its balance-sheet in India. - Anand Kumar, Bangalore

As per the AS-13 of India, when one has invested substantially into another company, the ideal method of accounting for investment would be the equity method because it is this method which precisely brings out the investor's share of the sweepstakes.

The equity method not only considers the cost of investment but also the proportionate share of reserves and surpluses.

But whatever the method, cost or equity method, there is no escaping the adjustment for currency rate fluctuation at the year-end.

Diagnostic business

WE ARE a private company running a diagnostic centre. To see whether tax audit is compulsory or not should we benchmark ourselves against the norm for the business or against the norm for a profession? - C. S. Murthy, e-mail

The relevant portion of Section 44AB reads thus:

"Every person carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year or carrying on profession shall if his gross receipts in profession exceed ten lakh rupees in any previous year....get his accounts of such previous year audited..."

The answer to your niggling doubt can be easily found in this. Yours is admittedly a business and not a profession. Diagnostic centres are not the esoteric privilege of pathologists alone if my knowledge of the medical and paramedical world is up-to-date.

Profession is one which is unique to members of a professional body.

In the event you need not get your accounts tax-audited unless your gross receipts exceed Rs 40 lakh. The use of the words `turnover or gross receipts' in the context of `business' fortifies this view.

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

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