Investment in long-term specified assets, namely, the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) bonds, is required to be made within six months of making the transfer giving rise to the long-term capital gains. The amendment made by the Finance Act, 2007 has put a cap on the investments one can make in a financial year at Rs 50 lakh.

This gives elbowroom to those people who made the transfer in the second half of the previous year. Thus if you made a transfer on October 15, you can buy bonds for Rs 50 lakh before the year runs out on March 31 following.

And you can follow this up with an investment of another Rs 10 lakh before April 15 so as to keep the deadline of six months. By splitting your investment into two tranches you have honoured both the requirements — cap of Rs 50 lakh per year as well as the six-month deadline. Of course this would cut into your quota of Rs 50 lakh for the next year but then you don’t presumably earn long-term capital gains attracting tax regularly so as to worry about this small intrusion.

The CTC (cost to company) with regard to some of the officers works out to Rs 11 lakh, of which, Rs 1 lakh is by way of fringe benefits — reimbursement of expenses incurred for conveyance from residence to office and back. There are also a few officers who use their own cars for the purpose and whose expenses are reimbursed. Do we need to take bills from all of them as evidence of expenditure incurred by the company?

Anita, email

Yes. Since these reimbursements now become the expenses of the company, the onus is on the company to produce evidence which is possible only if the employees themselves produce the same at the time of reimbursement.

As you might be aware, the assessing officer (AO) has the power to disallow a business expenditure not backed by evidence. As a sequel, on the disallowed part of the expense, there would be no fringe benefit tax (FBT).

To wit, let us say the conveyance expenses for a company is Rs 12 lakh, of which, Rs 2 lakh is on account of reimbursements to staff in the manner envisaged by you for which they produce no evidence. The conveyance expense now allowed would be only Rs 10 lakh, of which, 20 per cent (5 per cent for select industries) would be targeted for imposition of FBT at the rate of 33.99 per cent.

An employee whose basic salary is Rs 34,000 per month also gets loyalty reward of Rs 1 lakh. He requests that no tax be deducted on this as he is confident of saving to this extent in the prescribed avenues. What shall we do?

Anita, email

I am afraid this is not possible. For TDS, all taxable salary must be aggregated and tax worked out after allowing deduction under Section 80C for savings in prescribed avenues. Loyalty reward does not come for special treatment under income-tax law.

An erstwhile partner writes to the clients of the firm about his separation from the firm and says he is now practising independently. Is it a professional misconduct?

Naina Daliwal, email

On the contrary, it seems what he has done is very much ethical because clients should not harbour under the wrong notion as to his continued association with the firm.

The only possible misdemeanour seems to be the averment that he is practising independently. But then this cannot be held out against him because he has not asked them to break away from the firm and come to him.

A CA writes to the Commerce Ministry inquiring if it maintains a panel of auditors and, if yes, to include his name. Is he guilty of soliciting a client?

Naina Daliwal, email

No, he isn’t. The council of the ICAI had long ago opined that empanelment with government does not amount to solicitation of professional work.

S. MURLIDHARAN

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