Financial Daily from THE HINDU group of publications
Monday, Sep 13, 2004
Columns - For the Asking
Unsure of rebate for premia over a fifth of sum assured
Ashok A. Bhandage, e-mail
The premia on this policy would qualify for tax rebate up to Rs 6,000 being 20 per cent of the sum assured. On maturity, I am afraid, you will have to pay tax on the maturity amount, including bonus, as the premia for a year has exceeded 20 per cent of the sum assured.
Nitin Gami, e-mail
There is exemption from capital gains tax for the former proprietor subject to satisfaction of all the conditions mentioned in Section 47(iv).
The other major favourable consequence is the successor company can carry forward the unabsorbed business loss and unabsorbed depreciation for set off against its own future profits.
For this purpose, such unabsorbed losses shall be deemed to have been incurred in the year of corporotisation of the business. Failure to comply with the conditions set out in Section 47(iv) would result in the successor company picking up the tax bill arising out of grant of these twin tax benefits. One wishes that Section 43(6) had explicitly stated, as it has in other cases of business restructuring such as merger and demerger, that the successor company would be entitled to depreciation only with reference to the WDV in the hands of the proprietor immediately before corporatisation.
In any case the assessing officer (AO) can invoke Explanation 3 to Section 43(1) if he suspects that the purpose of conversion was to claim higher depreciation on the artificially fixed higher actual cost.
Are the provisions of the Companies Act applicable to unlimited companies?
R. M. Subramniam, e-mail
Section 12(2)(c) defines an unlimited company as "a company not having any limit on the liability of its members."
The provisions of the Act apply to such a company mutadis mutandis.
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