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It is a reality of the business world that nothing moves without greasing the itchy palms of those wielding power. Given this reality, why are bribes paid not allowed as business expenditure?

Prashant Sahu, Jabalpur

It is indeed true that those who are in a position to do a favour or hold out a threat command and get a price for it. The first is exemplified by the ubiquitous spectacle of under-the-table payments made for getting the bills passed by the specified authority in government departments. A famous paint company in India made a fervent plea to the Bombay High Court for allowing such bribes as expenditure.

The court while bemoaning the institutionalisation of corruption refused to oblige the company even while expressing sympathies with it. The second is exemplified by a militant outfit whose writ runs in Assam. An affected company cried on the shoulders of the Tribunal there and seemed to have struck a chord with it. This prompted the Government to pass a retrospective law disallowing all illegal payments by whatever name called. But these two were instances of commercial naiveté. The seasoned businessman knows how to cut diamond with diamond. He generates black money outside his books to take care of such payments.

I have taken a housing loan of Rs 13,45,000 from ICICI Bank and paid a pre-EMI amount of Rs 84,671. The house construction was completed in April 2006. I started payment of my EMIs from May 2006. During 2006-07 I claimed one-fifth of pre-EMI amount, that is, Rs 16,934 as deduction from my taxable income. Due to pre-payment my loan is going to end in the third year of operation.

I have got a balance pre-EMI amount of Rs 67,737 eligible to claim for deduction. Can I claim 50 per cent of the above amount, that is, Rs 33,868 in the 2nd and another 50 per cent of the above amount, that is, Rs 33,868 in the 3rd year as deduction from my taxable income. Kindly clarify.

JVN Bhaskar Sharma, email

That you have pre-paid cannot hasten the process of deduction of preconstruction period interest. It will have to be abated in five years.

Do explain what exactly incremental innovation means in the context of the patent controversy doing the rounds.

Percis Demello, Panaji

Patents, as you may be aware, are granted to encourage research. The reward is in the form of exclusively rights to tap the innovation for 20 years subject to the condition that the innovator discloses his invention with details of its working to the authority of the country granting it.

For the duration of the patent, the knowledge thus made available will not be made public and during this period the patent holder can exploit his exclusive right by charging royalty for allowing the use of the technology. But once the patent period is over the knowledge till now kept under wraps is made public.

Multinational drug companies which have the maximum patent rights across the globe obviously would want the patent protection to go on and on. An incremental innovation is a new facet added to the knowledge that benefits mankind much more than the original invention itself. Thus by making an incremental innovation, the patent holder gets a fresh lease of monopoly.

The Indian law on the subject is that while incremental innovation is fine it should not be a ruse to ever-greening or self-perpetuation.

Therefore the controller of patents can examine the application for incremental patenting with a fine-tooth comb to examine the genuineness or otherwise of the claim. The pre-grant opposition also is useful because often rivals are in a better position to throw greater light on the issue than by the office of the controller.

The WTO must take up this issue in earnest so as to balance the conflicting interests of the innovator and public. Indeed this is at the core of the issue of patent itself.

A person buys a property which he lets out for use for commercial purposes. Does the repayment of the loan taken for this property make the grade under Section 80C?

S.D. Athale, Mumbai

No. The subject house has to be for residential purposes — self or other.

S. MURLIDHARAN

More Stories on : Taxation | For the Asking

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