The Hindu Business Line : An ode to standard deduction

I am inclined to agree with you. The rationale for allowing standard deduction was to reduce their tax burden by allowing a standard amount as deduction which every employee incurs in greater or lesser measure in the course of attending his duties. These are books and periodicals, conveyance, and so on. One can understand if it is disallowed for employees beyond a specified salary threshold because at their level, all these are in any case provided by the employer himself. In the event, its abolition indiscriminately across the board is unfair. It is wrong to say that it has become untenable in the face of sumptuous increase in the tax-free limit. After all, businessmen too have benefited from the increase in exemption limit as you rightly say.

Share benefits

I HAVE got allotment of shares by a company under the demat mode. Will I get dividend and other benefits on these shares?

Pavitra Ratnakar, Mangalore

You need have no apprehensions on this score. The Depositories Act makes it clear that all economic benefits would accrue to the beneficial owner and not the nominal owner of the shares. The nominal owner is the depository but you are the beneficial owner of the shares. You can participate in the general meetings of the company, vote thereat, receive dividend, receive rights shares and bonus shares.

In fact, you are the de facto owner with the de jure ownership resting with the depository. Naturally, this cuts both ways and accordingly the income-tax law says tax on sale of shares would be payable not by the depository but by the beneficial owner of shares. Of course, there would be no tax if you sell your shares through the stock exchange after holding them at least for a year.

Show of hands

WHY does the company law allow voting by show of hands? This seems undemocratic to me?

Sushant Pandey, New Delhi

Voting by show of hands sets store by the one-man-one-vote principle. While this is all right in a democratic political set-up, it may not always be so in a corporate democracy where one's shareholding clout should count. The truth is the company law does not make voting by show hands an inviolable and peremptory rule. Voting on poll is recognised and can be demanded by shareholders if they can muster at least 10 per cent support in terms of shareholding.

In fact, voting by postal ballot which has become the norm for almost all the vital issues is based on the principle of vote being in proportion to one's shareholding. Rival groups in companies put their foot down and insist on poll, especially if they are confident of their strength. Therefore, it is not correct to say that countenancing voting by show of hands is undemocratic.

Proxy relevance

WHY can't a proxy speak at an AGM?

Sukhvinder Singh Rana, Chandigarh

The lawmakers apprehended that companies may otherwise engage professional speakers who may engage in a slanging match disrupting the proceedings. The truth is there is absolutely no stopping a person from speaking if he is hell bent on doing so. Because all that he needs to do so is to become a member. And becoming a member is kid's play given the depository regime under which one can even own a single share. At any rate, the demonisation of proxies is a trifle unwarranted. That every listed company must send with notice of a meeting a proxy form shows that proxies have a role to play. Stifling their voice is undemocratic besides being futile, as pointed out earlier. If professional speakers are heard from both the sides, it would be a step towards more meaningful voting.

Doc's worry

I AM a doctor who started practice recently. A hospital has engaged my services both for mornings and evenings on terms which resemble a variable salary agreement — an agreed amount per patient seen both in the in-patient as well as in the out-patient department. Am I an employee of the hospital? What about the conveyances expenses incurred by me — will they be allowed in full or disallowed to the extent of personal use?

K. V. S. Murthy, Secunderabad

Contract of service is employment. Contract for service is not. The difference, subtle as it is, oftentimes involves hair-splitting. But your case appears to fall under the second category. You would be assessed, among other things, on your professional income which is all the better inasmuch as professionals get that much more elbow room to arrange their tax affairs. The conveyance expenses undoubtedly would inure for both professional and personal use. But the Department, almost as an unwritten rule, does not indulge in hair-splitting and agrees to a reasonable allocation between the two, often to the benefit of the taxpayer.

Auditor's role

IS THE watchdog-not-bloodhound argument in the context of auditor's responsibilities valid in modern times?

Vijay Rodgrigues, Pune

In the Indian context especially, the question does not admit of a dogmatic answer. The law largely expects a statutory auditor to concentrate on the truth and fairness of accounts. He is not yet expected to develop forensic skills, which is what the morphing into a bloodhound requires. His role is more that of a whistleblower and in that sense he still remains a watchdog.

The internal auditor, on the other hand, is cast more in the bloodhound mode, though in practice his bark is rather muted often. Cynical as it might sound, there is no one quite out there to rein in corporate shenanigans. Audit committee carved out of the board obviously does not enthuse much confidence. In the event, the criminal justice system of the country inevitably takes upon the role of the bloodhound. But if the implication of your question is whether there is someone who can go for the jugular when the plundering takes place, the answer I am afraid is in the negative.

(ASK! Send in your queries to ask@thehindu.co.in)

S. Murlidharan

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