The Hindu Business Line : The phantom of double taxation

No, this perception of yours is not correct. At the time of calculation of one's advance tax liability, one is allowed the liberty of deducting therefrom the TDS already paid or likely to be paid. TDS after all is ad hoc, except in the case of salary, which is incidentally why a salaried person more often than not does not bother about advance tax. Against one's tax liability finally computed, tax paid in advance either by way of TDS or advance tax or both, abate. Both are advance tax so to speak with TDS more fully incorporating the principle of `pay as you earn'.

Calls in advance

I am a CA student. Please explain the true import of Section 93 of the Companies Act, which seems to permit payment of dividend on `calls in advance'.

Guru Kiran, email

I am afraid Section 93 does not in terms talk about `calls in advance'. "A company may, if so authorised by its articles, pay dividends in proportion to the amount paid-up on each share where a larger amount is paid-up on some shares than on others," is how the section reads.

This cannot be treated as warrant for paying a larger dividend if calls are paid in advance because unless a part of capital is called up by the board, it cannot form a part of the paid-up capital.

My own feeling is that Section 93 may be invoked to penalise the laggards who do not pay up their calls and not reward overenthusiastic investors who pay in advance. There is nothing to stop a company from paying interest on such advance payment but it surely cannot qualify for dividend for the reason stated above. But then the issue raised by you is hypothetical and theoretical given Indian companies penchant for collecting the entire amount along with application.

Reliance Petro has broken from this trend by allowing retail investors to pay a part of the amount along with application.

Reputation and governance

Is corporate reputation different from corporate governance?

Payal Ganguly, Kolkata

Corporate governance, which is the buzzword these days, seeks to maximise shareholder wealth.

To my mind, adhering to sound corporate governance code in the long run would acquire for a company reputation with all the stakeholders and, in that sense, corporate governance is a subset of corporate reputation.

Open-ended MFs

I believe open-ended mutual funds are inherently chaotic. What is your take?

Aishwarya Damodaran, Chennai

I don't know what you have in mind while saying they are chaotic, but yes one can't help feeling that chronic tinkering marks open-ended funds. In a close-ended fund the fund has a fixed maturity whereas an open-ended fund is designed to go on and on.

Premature exit is possible only through the bourses in the case of close-ended funds and as for open-ended funds, exit is through repurchase by the fund itself based on NAV (net asset value) at a given point of time. And this is what makes an open-ended fund chaotic to borrow your own idiom.

Incessant entry and exit makes those staying put vulnerable to gyrations caused by such non-stop traffic. Apart from offering a long-term investment avenue for those wanting to stay put, an open-ended fund seems to have little else to offer.

In fact, in a market threatening to bottom out if all the investors seek to exit, there would be a redemption pressure on the fund. A close-ended fund does not have to agonise over such pressures. My own feeling is there must be only close-ended funds with freedom to fix their duration.

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S. Murlidharan

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