The second of the above works out to nil. Therefore, she technically is ineligible for the exemption. My sympathies are, however, with her. You may reprent to the CBDT under Section 119(2)(c) highlighting the reality that though the exemption claimed technically relates to Chapter-III, in reality it has everything to do with Chapter-IV. This you must do because, taking a hyper-technical view the CBDT may otherwise dismiss your application in limine — the above section talks only about exemption under chapter IV or VI-A.

Unexpired risk

I AM a CA student. What is reserve for unexpired risk in case of insurance companies? - Divya Manchanda, New Delhi

It simply represents premium received in advance. To wit, let us say a general insurance company receives annual comprehensive motor insurance premium on July 1. When the accounts are closed on the following March 31, the insurance company would be liable to provide for three months' premium — April, May and June — as income received but not earned.

In other words, it can consider only the nine months' premium as income with the remaining three months' premium being relatable to the subsequent financial year.

STCG positive

I AM a salaried person. I also have short-term capital gain. Can I ask my employer to deduct tax on this gain as well? - T. N. Sivasubramanian, e-mail

Yes, you can do so because the mandate of Section 192 is that while positive income can be reported to the employer for TDS, negative income, except from house property, can't be.

This would take care of your tax liability and obviate the need for payment of advance tax on short-term capital gain which you otherwise will have to.

A deferred concept

WHAT is the concept of `deferred revenue expenditure'? - Ramakrishna Modi,

Gandhi Nagar

Ironically, the question has sprung up at a time when the concept is being given burial. Yes, successive accounting standards have served to marginalise this concept once held sacrosanct by the dyed-in-the-wool accountant. The concept has a lot to do with the age-old matching concept.

For example, if voluntary retirement compensation was paid to an employee who had still five more yeas to go before he retired, it would not have been wrong to amortise the compensation over five financial years just as it would not have been inappropriate to amortise the huge expenditure on promotional blitz of a product over a reasonable period of time.

Unpaid dividend

OUR company declared dividend on June 13, 1996, some of which remains unpaid till date. What shall we do with it? - Anand Kumar, Bangalore

As the law stood then, you ought to have transferred such dividend to `unpaid dividend account' with a scheduled bank within seven days from the date of expiry of 42 days from the date of declaration. If you have complied with this requirement, obviously, seven years would have expired from the date of transfer to such account.

On the expiry of seven years, the unpaid dividend is required to be transferred to the `Investor education and protection fund'. If you have failed to comply with the requirement to transfer to the earmarked bank account the unpaid dividend, you have to pay interest at 12 per cent per annum to the affected investors. In that case the need for transfer to investor protection fund would not arise for the time being because the seven-year period has, in terms of Section 205A(5), to be reckoned from the date of transfer to the earmarked bank account.

Book check

FOR the AY 2002-2003, the AO issued notice under Section 143(2) for production of books and documents. We duly complied with this notice and the AO returned the books apparently satisfied. Now he has issued notice under Section 142 asking for additional information for the same year as well as for the preceding AY. Can he do so especially relating to an earlier year? - Vedu Reddy Boyolla, e-mail

Notice under Section 143(2) does not preclude notice under Section 142. Presumably, the AO did an incomplete verification when you produced records in response to notice under Section 143(2). Under this section, no notice can be issued after 12 months from the end of the month in which the return was filed.

Apparently, the AO is cleverly using the alternative remedy under Section 142 to make up for the lost ground. As to the issue of notice for preceding year, this also seems to be justified assuming the assessment for this year is yet to be done.

Repo kya

WHAT is a repo transaction in the securities market? - R. Vijay, Coimbatore

A small correction. Repo relates to money market. Be that as it may, repo or repurchase agreement represents a transaction in which the RBI agrees to borrow money by selling securities and agreeing to buy the same back at an agreed higher price vis-à-vis the sale price (to provide for interest) after the duration of the de facto loan period expires.

HHC doubt

CAN one claim deduction under Section 80HHC in the face of brought-forward losses? - Sundy Sriram, e-mail

No you can't. Setting off of losses is a step prior to computation of gross total income (GTI). You would appreciate deduction under Section 80HHC is from GTI.

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

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