Financial Daily from THE HINDU group of publications
Monday, Feb 21, 2005
Financial Daily from THE HINDU group of publications Monday, Feb 21, 2005 |
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Mentor
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Books Columns - Reading Room Who says accountants don't think of entertainment D. Murali
You'd learn from the book that the AICPA has issued standards on accounting by producers or distributors of films, but the ICAI hasn't brought out any such guidance or pronouncement, though in terms of movies produced, the Indian industry's tally in 2002 was 800 compared to Hollywood's 225. There's a helpful FAQ with queries such as: "How are foreign film producers taxed on English movies shown in Indian theatres?" Gidwani answers: "Major Hollywood film producers (studios) have branches in India. They are taxable in India in respect of the revenue collections for movies released in India. The practice so far has been to tax them on a presumptive basis (that is, a percentage of collections)." Another question reads: "In case of music companies how is cost of music rights amortised for tax purposes?" Before answering that, let me ask you a different question: "Isn't it time for Entertainment?"
Business taxation
"As every businessman knows, determination of commercial profits from business is a complicated undertaking," writes R. J. Chelliah in his foreword. "The rules for determining taxable profits are in several respects different from those postulated for determining commercial profits. The manner of calculating depreciation and deductions allowed differ under the two sets of rules determining book profits and taxable profits." Gupta gives the reference of section numbers and case laws; plus offers to entertain e-mail requests for IT rules and notifications not mentioned in the book, as "a unique service." Subheads in each chapter are self-explanatory, and the author's paraphrasing of law is something most people will be able to relate to, because the sentences are simple and short, a far cry from the tedious stuff that law usually tends to be. For instance, when explaining the concept of `annual value' for let out property, Gupta writes: "The starting point for computing income from house property is the bona fide annual value. This is the inherent capacity of the property to earn income... It is important to note that it is not necessary the property should actually be let out. The municipal value of the property, the cost of construction, the standard rent in the locality (under the Rent Control Act, if any), the rent of similar properties in the same locality, and so on are all good indicators of the annual value." Suitable for a quick read before February 28 changes the tax scenario.
Aim high when negotiating
"People faced with two relatively unattractive choices try to avoid both"; and this is how the author explains `avoidance-avoidance model', free from jargon. What's BATNA, you know? It's `best alternative to no agreement'. If BATNA is more attractive than the proposals you receive, "the more power you have." Boulwarism is a version of one-offer only, leaving no room for traditional methods of negotiation. While discussing cultural differences, Kennedy reminds you that `not all' Italians are excitable, Germans have no sense of humour, and Scandinavians are formal, reserved and serious. Know also that `haggle' is a noble art. "The seller discovers the maximum a buyer will pay, without disclosing the minimum he or she will accept (and vice versa)." Towards the end of the book is `Yes, but', a closing ploy. It's not that once you meet the point, agreement will result. Because another `yes, but' will pop up. "Exorcise the `yes, but'," therefore, as the author commands. "Retaliate with the `no, but'." About reading the book, however, it'd be wise to say `Yes,' with no buts.
When to worry about a swollen non-Plan
In a chapter on Government of India finances, the author clarifies that the distinction between Plan and non-Plan components does not correspond to developmental vs non-developmental. Because both Plan and non-Plan expenditure contain developmental and non-developmental items. "Once a Plan scheme is fully operative, or a Plan project is completed, its maintenance and operational expenses are shifted to non-Plan budget." Thus, over time, non-Plan swells because more schemes and projects are completed and shifted from the Plan portion, but you should start worrying when there are unproductive items such as interest payments, as in our country. "The proportion of non-Plan expenditure now stands at 72 per cent of the total." Over 98 per cent of non-Plan expenditure is on revenue account, including interest, defence, subsidies, grants and so on. Though defence expenditure has been rising in absolute terms, it has registered a decline "both as a proportion of total expenditure and of non-Plan expenditure," observes Bhatia. Ideal pre-Budget education.
Tailpiece "Students get bored when I draw up economic models on the board." "So?" "I decided to draw in `economic' models to the board."
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