The Hindu Business Line : Is money paid on compassionate grounds tax-exempt?

Unfortunately, there is no exemption available. He may, however, apply for spreading of his compensation over a few years, as the CBDT may do so in terms of rule 21A read with Section 89. This may reduce his tax burden.

Sale of tea estate

I have a small tea estate without any processing unit. The land in which the plantation is done is agricultural. Now, if I sell the estate, will I be liable to pay capital gains tax?

Angshuman Roy, email

No. This is assuming the land satisfies all the requirements of Section 2(14) — it is not in an urban area and it is used for agricultural purposes.

Service tax on flat

I have purchased a flat in Mumbai with a housing loan financed by ICICI. The builder is not handing over the possession stating that I will have to pay service tax as per the circular. I am paying a huge amount in EMI and have already paid for one-and-a-half years' maintenance. For the last one year I have been battling with the builder over possession; he has given some of the flat owners possession.

Frankie Pereira, Mumbai

Service tax is being steadily extended to more and more services. Construction was roped in last year. Strictly speaking, the service tax is payable by the service provider. But, as with almost all indirect taxes, service tax has more often than not been passed on to the hapless customer. A customer/client able to call the shots should right at the inception guard his interest by writing clearly into the contract that service tax will not be borne by him. I am sure in your case the contractor would have saved his skin by writing the laconic term that all taxes shall be to the buyer's account.

Women and I-T returns

Is a woman required to file income-tax return if her gross total income (GTI) exceeds Rs 1 lakh?

Kag, email

A woman is required to file return if her GTI is Rs 1.35 lakh or more just as a senior citizen is required to file one only when his GTI is Rs 1.85 lakh or more.

Farmer and book-keeping

Is it mandatory for an agriculturist having agricultural income as main source of income, to maintain books of accounts under Section 44AA of Income-tax Act, 1961? Here it will not be out of place to mention that most of the agriculturist are illiterate or have little knowledge about accountancy. In this connection, I would further like to ask whether tax audit under Section 44AB would be required where the turnover of the agriculturist exceeds Rs 40 lakh.

Amit Bansal, email

Rule 2 of Part IV of Schedule I to the Finance Act of every year exempts agricultural income includible as business income for rate purposes from the purview of the two Sections cited by you, namely, 44AA and 44AB. The rationale for such exemption perhaps is the difficulty cited by you.

Deducted but not deposited

I paid Rs 10 lakh to a transporter as freight, etc., from April 2005 to March 2006. TDS was deducted on March 31, 2006, but could not be deposited in time. I want to deposit TDS now in August 2006 and issue a TDS certificate. What are the income-tax provisions in this regard?

Ram Kumar Goyal, email

The tax deducted by you should have been deposited within two months from the expiry of the month in which the tax was deducted unless you had obtained permission from the assessing officer to deposit tax so deducted every quarter — that is, on July 15, October 15, January 15 and April 15. You ought to have issued certificate of deduction of tax at source within a week after the expiry of the said two months. For non-issuance of TDS certificate, the penalty payable is Rs 100 per each day of default. And for failure to deposit the tax on time with the government, you have to pay simple interest at the rate of 12 per cent per annum till the date of actual payment in terms of Section 201. In addition, under Section 221, you can also be penalised with a penalty not exceeding the tax that has not been deposited.

Late remittance of TDS

Whether interest paid in respect of late remitting of TDS to income-tax authorities deductible as expenditure for income-tax purpose?

Hari Babu, email

I think this doubt has arisen because of the view expressed by the apex court in a catena of cases that compensatory interest is after all not a penalty and is, hence, deductible as expenditure. But the Kerala High Court has elucidated very nicely what is not covered by this escape route. The court, in CIT vs Catholic Syrian Bank Ltd (2003 130 Taxmann 447), held that where any prosecution is contemplated for an offence that surely is a criminal violation in nature and the penalty paid therefor would not make grade. Late remittance of TDS is visited with penalty as well as prosecution. Hence, interest paid for this offence is not deductible.

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

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S. Murlidharan

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