The Hindu Business Line : Why can't a CA advertise?

The age-old injunction, which is witnessing a thaw in quite a few countries, is apparently to ensure that a client goes to a professional and not the other way round. Canvassing by a professional has been looked down upon. The rationale is a client should prove his worth by the quality of his service than by going to town tom-tomming his achievements and strengths.

Moreover, any licentiousness in this regard would work in favour of big firms with deep pockets to the detriment of smaller ones.

Canteen benefit

WE incur expenses on canteen for the benefit of employees. Is this liable to FBT?

Srinivasan, e-mail

Very much to the extent of 20 per cent of such expenditure. One wishes that at least this were spared.

Already, the corporate world is witnessing a spate of monetisation of benefits to avoid FBT.

Stamp duty

DURING the previous year relevant to the assessment year (AY) 2003-2004, I had purchased land for Rs 5.5 lakh and claimed Section 88 rebate on registration fee of land and stamp duty. The same has, however, been disallowed by the AO. What to do?

M. S. Murali, email

I think justice is on your side. Section 88 rebate is available as much on construction as it is on purchase of a house. This being so, acquisition of land is a step inherently necessary for the subsequent construction. Therefore, the sub-clause (d) of clause (xv) of sub-section (2) of Section 88 should be deemed to be including stamp duty, registration expenses on land as well when it uses the catchall phrase `transfer of property'. You may make an application to the assessing officer (AO) under Section 154, asking him to rectify the mistake apparent from the record. In the alternative, you may make an application under Section 264 to the Commissioner the risk in which course is that you cannot file an appeal against his order. But it is a quick and effective remedy if one is sure of his grounds.

TDS on machinery returned

WE are forced to send back the machinery to the supplier abroad for repairs as per the agreement. Are we supposed to deduct any tax at source?

S. Rajesh, email

If the payment is to be made abroad for the repair work done abroad, there would not be any Indian tax liability on the supplier. But if you make the payment, say, to his bank account in India, obviously you would have to deduct tax under Section 195.

Service tax

UNDER Section 194H, while deducting tax from commission, is one also required to add service tax recovered from the client?

SRP, Jaipur

No. Tax is required to be deducted only from one's income. Service tax is on the service provider. That it is passed on to the customers does not alter this position.

Moreover, service tax by no stretch of imagination is one's income.

Tax woes on transfer

I GOT married in 1990 and as a result migrated to Agra from Chennai. However, my income-tax assessments continued to be done in Chennai till 1998-99.

The Agra authorities took over from the assessment year (AY) 1999-2000 and issued a notice under Section 148 in respect of the AY 1998-99. How can they do this when they were not in the picture during that year?

Mayuri Mittal, Agra

I think the income-tax authorities at Agra are entitled to do so. The Department after all is one with a pan-India character, though for administrative ease it may be divided into regions.

Your file apparently was transferred to Agra, and the assessing officer (AO) there has got curious. He has ferreted out information and now, on the basis of this, wants to launch reassessment proceedings for the year 1998-99. You cannot stop him from doing this on the ground that he was not the one who did the original assessment. For that matter, any change of guard does not spell finis to the rights of the Department. The one who steps into the shoes of another has got as much right as his predecessor. That they are separated by regions is no barrier at all.

A house for parents

I AM employed in Delhi and live there in my own house. I have another house at Noida, which is being occupied by my parents.

Will this house also be exempt from tax?

Rajiv Batra, New Delhi

No. Only one self-occupied house is tax-free with its annual value being taken at nil. You have, therefore, to exercise your choice in favour of the Delhi or Noida house.

Obviously, you would choose that house which would have a greater taxable value but for the exemption.

Private trust

I GOT an amount from a private trust for starting an infrastructure project. Will this be treated as my income?

Can I deposit a part of it in a fixed deposit and show the trust as a beneficiary?

Samar J. Singh, Bangalore

The private trust would hardly be playing the Good Samaritan. But if the trust deed indeed permits this, no one can demur.

But why should they park the money with you. Are you going to do the project survey or are you in any way going to take the project forward. The tax authorities would examine this transaction with a fine toothcomb.

The opening of fixed deposit in favour of the trust would reinforce the putative view that the transaction was in fact a loan if not gift.

CA as facilitator

A CHARTERED accountant agrees to pay a monthly instalment of Rs 800 to a finance company on behalf of his employee by deducting the same from his salary every month.

Does he forfeit his right to be appointed as auditor of this finance company?

Ashwini Kumar, email

No, he himself is not indebted to the company and he is not the guarantor either for the loan.

All that he has done is to act as a facilitator without any personal commitments.

Residential status

I AM a CA student. Earlier, one had to be a resident in at least nine out of 10 years preceding the previous year, to become an ordinarily resident.

Now, a mere two years residence in a block of 10 years preceding the previous year, vests one with this status. This indeed is odd. Your comment please.

P. R. Manickam, Chennai

The recent amendment was merely clarificatory if one were to go by the Gujarat High Court verdict in the Mehta case.

According to the court, the Department has been wrong in interpreting the law — it was never nine years, it has always been two years.

Be that as it may, the truth is a mere two-year residence should not vest a person with the appellation ordinarily resident.

How can one be deemed to be an ordinarily resident when he has been a non-resident in as many as eight years in a block of 10 years preceding the previous year. This indeed is jarring. Parliament should take note of this. Better still, it should do away with the distinction between ordinarily resident and not-ordinarily resident.

Who is the auditor?

A PUBLIC limited company at its AGM appointed an auditor other than the retiring one without giving notice of such intention as required by Section 225 to the incumbent auditor. Who will be the auditor appointed at the AGM — the previous one or the Johnny come lately?

Shaji John, Bangalore

The appointment of the new auditor suffers from infirmities and is, therefore, non-est. At the same time, the old auditor cannot continue either because Section 224(2) requires an affirmative action by shareholders for reappointment.

In terms of Section 224(3), the company must give notice to the Central Government, which then becomes entitled to appoint an auditor.

And this notice must be given within seven days of the AGM.

2000 amendment

WHY did the amendment made in 2000 exclude audit of private companies from the restrictions imposed by Section 224(1B)?

Srilini Narasimhan, Noida

While no convincing reasons have been given, I feel that the government ought not to have made such an implicit sweeping generalisation about private companies.

They are, after all, small. There are private companies that rival many public companies, both in stature and size. The amendment then should have left small companies out.

Paid up capital of less than Rs 5 lakh or turnover of less than Rs 40 lakh would have been the appropriate alternative criteria for being spared of Section 227(1B).

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

S. Murlidharan

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