Tax Related Issues From
Content
Tax Related Issues from "The Hindu"
The Hindu Monday 12th February 2007 Interest from NR(E) deposits and RF a!!ounts !ontinues to be e"empt My son is having a Non-resident External Account NR(E and !oreign "urrency onresident #e$osits (!"NR % &esides Resident !oreign "urrency Account (R!" ' I am under the im$ression that interest income from these are exem$t% since my son continues to &e a non-resident' (ut I am sur$rised to find from (usiness )ine dated !e&ruary *% ($age +, that such exem$tion has &een discontinued -ith effect from March ,+% .//*' 0lease confirm -hether it is so' Exem$tions for interest for NR(E and !"NR de$osits are availa&le under 1ec' +/(2 and Resident !oreign "urrency Account under 1ec' +/(+* (iv (fa ' The exem$tions -ere sought to &e -ithdra-n -ith effect from A$ril +% .//* &y the !inance (No'. Act% .//2% &ut a su&se3uent amendment &y the !inance Act% .//* has restored the exem$tion -ith effect from the same date% that is% A$ril +% .//* indefinitely' The (oard in "ircular No', of .//4% dated !e&ruary .5% .//4 (.//4 .6+ ITR (1t' ... at ..5 has also clarified this $osition of la- restoring the exem$tions' The reader is% therefore% right in his inference that the exem$tion is not lost' 1' RA7ARATNAM The HIN#$ 12th February 2007 T#% in the !ase of property &oss I am an em$loyee of a $u&lic sector com$any' I have loss in res$ect of my income from a $ro$erty -hich I had let out' I made a declaration of such loss to the #is&ursing 8fficer' Ho-ever% my ##8 has declined to ta9e into consideration the loss on the ground that such loss cannot &e admitted in res$ect of let out $ro$erty' 1ec' +:.(.( only &ars any ad;ustment for loss "other than loss under the head income from house $ro$erty for the same financial year"' )oss from $ro$erty can% therefore% &e ta9en into consideration for tax deduction from salary income in 1ec' +:. of the Act' No distinction is made &et-een the loss on account of let out $ro$erty and selfoccu$ied $ro$erty' Instructions are issued in the matter of T#1 from salary &y the "entral (oard of #irect Taxes year after year' "ircular No'+. of .//4 dated Novem&er .5% .//4 (.//4 .65 ITR (1t' +./ clearly &rings out this $osition ma9ing no distinction &et-een let out and self-occu$ied $ro$erty' Exam$les 5 and 6 annexed to the "ircular -ould re3uire loss from $ro$erty income to &e ta9en into consideration' Though these illustrations have ta9en into account loss from self-occu$ied $ro$erty% it does not mean that loss alone is to &e ta9en into account' There are many such instances% -here there is excess deduction of tax due to the reluctance of the ##8s to ta9e any decision' 1uch excess deduction is not uncommon% so that there is -or9 all-round% for the deductor to deduct -hen there may &e no lia&ility and file statements% em$loyees to file timely refund claims and for the Incometax #e$artment to issue the refund' The very o&;ect of T#1 $rovision is to match tax deduction -ith lia&ility' <hile the Income-tax #e$artment ta9es action% -here tax has &een failed to &e deducted% it does not try to educate deductors to avoid -rong deduction% -here it is unnecessarily deducted' 1' RA7ARATNAM The Hindu 12th February 2007
%hare of a member of H$F on partition I am the 9arta of a Hindu =ndivided !amily (H=! % since my father>s demise on May +:65' He did not leave any <ill' Ex$enses on marriage of my &rother and sister &esides household ex$enses of the ;oint family -ere met from my individual income% since the income from the hereditary $ro$erty -as meagre' In the event of $artition% I understand that all of us -ill &e entitled to e3ual share' Am I entitled to reim&urse myself the amount s$ent &y me &y -ay of a larger share? 0lease advise in your column' If the reader has maintained accounts in ;oint family -ith his contri&ution sho-n as loan to H=!% he -ould &e entitled to recover the same at the time of $artition' At any rate% such accounts% if maintained% are only matters of evidence' If there is a consensus among the family mem&ers at the time of $artition to give a larger share to anyone for -hatever reason% there could &e no o&;ection' In fact% $artition to &e valid need not &e e3ual' If there is no such agreement% the res$ective shares as on date of $artition -ould &e governed &y the la-% so that any claim for ad;ustment for any ex$enses incurred &y any mem&er for the ;oint family at the &elated stage of $artition may -ell de$end on the consent of the other mem&ers' 1' RA7ARATNAM %TT paid on &on' term !apita& 'ains is ta" e"empt The Hindu 0()02)2007 I had on #ecem&er .:% +::* invested Rs' +/ la9h in @othari 0ioneer Tax 1hield :4% an e3uity lin9ed savings scheme' 8n redem$tion of the units on March ,+% .//4% I -as $aid Rs' 65%*,/% out of -hich 1ecurities Transaction Tax (1TT of Rs' +5* -as recovered &y !ran9lin Tem$leton' 1ince 1TT -as $aid% is the long-term ca$ital gain of Rs' 55%*,/ exem$t under 1ec' +/(,6 % although the redem$tion cannot &e said to have &een transacted through a recognised stoc9 exchange' I may em$hasise that in the case of its ne- Tem$leton India E3uity Income !und% it has &een clarified that no long-term ca$ital gains tax is chargea&le on redem$tion of the units% since investors are lia&le to $ay 1TT' 1ec' +/(,6 exem$ts long-term ca$ital gains on transfer of e3uity share in a com$any or a unit of an e3uity oriented fund% if such transaction is chargea&le to 1TT' 1ince the amount received is on redem$tion of units in e3uity lin9ed savings scheme% the assessee should &e eligi&le for exem$tion of long-term ca$ital gains' It is true that 1TT is $aya&le for all transactions through recognised stoc9 exchanges' In the reader>s case% the relevant &onds are units of an e3uity-oriented fund -ithin the Ex$lanation to 1ec' +/(,6 ' The reader is a$$arently an investor and not a trader ac3uiring shares and such &onds as stoc9-in-trade merely for resale% so that the sur$lus is not from transfer of long-term ca$ital asset -ithin the meaning of ca$ital asset under 1ec' .(+2 % -hich excludes assets held for &usiness' 1ec' +/(,6 infers the only other condition% that such transaction should have &een chargea&le to 1TT' <here the !und has $aid 1TT as certified &y it% it is clear it -as $ut through a recognised stoc9 exchange' At any rate% the fact that the transaction has suffered 1TT s$ares tax on the long-term ca$ital gains on sale or redem$tion of the units' A share or unit is a long-term ca$ital asset% if held% for more than a year' Ho* are !apita& 'ains !omputed+ The Hindu 0()02)2007 I $urchased a flat in 1e$tem&er .//, for Rs' 4',/ la9h and sold this during Novem&er .//4' <hile $urchasing this $ro$erty% I too9 a &an9 loan of Rs' 2 la9h' I closed this loan out of the sale $roceeds% to the extent of Rs' +'6. la9h to retrieve the original sale deed &ac9' No- can I deduct this loan re$ayment out of the sale $roceeds and calculate
ca$ital gains on the net consideration? (esides I incurred stam$ duty% registration charges% and architect and advocate>s fees% -hile $urchasing this $ro$erty' !urther I incurred &ro9erage fees -hile $urchasing and selling' (ut the recei$ts are hard to o&tain from them' "an I claim -ithout $ro$er recei$ts? Not only that% I $aid for com$ound fencing% electricity de$osit% se-erage de$osits etc' "an I add these $ayments in my cost &efore the -or9 out of cost inflation index? According to 1ec' *2 of IT Act% the exem$tion can &e claimed only -hen the sale $roceeds are 9e$t in ""a$ital Aains Account 1cheme"' Is it necessary the entire sale $roceeds are to &e 9e$t in the a&ove scheme or only the ca$ital gain $ortion? #oes it vary in its a$$lication -hen 1ec' *2E" is a$$lied? <hat is allo-ed as a deduction in com$utation of ca$ital gains is the cost of the asset and the cost of im$rovement% if any' Though the $ro$erty sold might have &een charged &y -ay of loan to &an9 or others% the amount $aid to have the $ro$erty released -ould not &e cost of the $ro$erty% since the loan is self-created% as held &y the 1u$reme "ourt in 7agadishchandran (B'1'M'R' v "IT (+::5 ..5 ITR .2/ (1" ' The amount incurred at the time of $urchase for the $ur$oses of stam$ duty% registration charges or advocate>s fees -ill &e $art of the cost' (ro9erage $aid at the time of $urchase -ill also &e cost% -hile &ro9erage $aid at the time of sale -ill reduce the sale consideration' 8rdinarily ex$enses claimed are ex$ected to &e $roved% not necessarily -ith reference to recei$ts for the $ayees% &ut -ith credi&le evidence% that such ex$enses -ere actually incurred' 1ince the reader has held the $ro$erty for more than three years% it is a long-term ca$ital asset% so that the cost can &e indexed' It has &een stated that the assessee has incurred cost on fencing' 1uch cost may not &e ca$a&le of &eing claimed as cost of im$rovement% since such ex$ense may not &e construed as on ca$ital account' If it is only of ca$ital nature% it can &e treated as cost of im$rovement' If a com$ound -all has &een erected instead of fencing% it might have added to the cost' #e$osit for electricity and se-erage -ill not &e ta9en as cost% &ut if the de$osits are endorsed in favour of the $urchaser -ithout extra charge for the sale% it may go to reduce the sale consideration' The reader is right in inferring that if the sale $roceeds could not &e utilised for ac3uiring another $ro$erty &efore the due date for filing return relevant for the year of ca$ital gains% such ca$ital gains -ill have to &e invested under "a$ital Aains Accounts 1cheme for availing the &enefit of reinvestment in another residential $ro$erty -ithin the s$ecified $eriod' !or $ur$oses of relief under 1ec' *2% -here the ca$ital gains arise on sale of residential $ro$erty% it is sufficient% if ca$ital gains alone are invested' If -hat is sold is any other asset% the amount to &e invested for ac3uiring another residential $ro$erty is the entire net sale consideration for getting full exem$tion' In either case% -here the amount is invested is less than ca$ital gains C sale $roceeds% relief -ill &e $ro$ortionate to the amount de$osited C utilised' It is $ossi&le for a tax$ayer to get the &enefit of reinvestment in residential house $ro$erty under 1ec' *2C*2! either along -ith relief under 1ec' *2E" or solely on investments in notified &onds' (ut% there are no notified &onds no- availa&le' 1ince the com$utation is com$lex and there are rigid time limits for availing reliefs% it is &etter that those lia&le get timely $rofessional advice' It is seen from a num&er of letters received in res$ect of ca$ital gains that most $eo$le try to get advice from all and sundry' Ne-s$a$er columns are also no su&stitute% since facts of the case are more relevant' Tele$honic re3uests and self-addressed covers continued to &e received for getting such advice' They are not entertained% since these -ill not su&stitute $rofessional advice after eliciting all relevant facts from the tax$ayer' It is advice $rior to sale% -hich is li9ely to &e useful for com$lying -ith tax o&ligations and availing tax reliefs' 1' RA7ARATNAM
Ta" dedu!tion at sour!e on sa&e of &abe&&ed 'oods The Hindu 2,-01-2007 8nly a contract for su$$ly of any article or a thing as $er $rescri&ed s$ecifications -ould &e a contract for -or9' There is some confusion as to the treatment of sale of goods containing the logo or the la&el of the customer' 1uch contracts are &eing treated as -or9s contract% &ecause of the im$rint of customer>s identity% though they should &e mere sale not lia&le for tax deduction at source as -or9s contracts' "ircular No' +, of .//4 dated #ecem&er +,% .//4 -hich reiterates the $rinci$le that sale is different from -or9s contract does not really indicate -hether the vie- ta9en &y some of the de$artmental officers in this regard is correct' @indly clarify' The Income-tax #e$artment is $rone to treat su$$ly of $ac9ing material and goods $re$ared -ith la&els or logos as -or9s contract and not merely sale of goods' The Tri&unal had &een ta9ing the vie- that a sale does not &ecome a -or9s contract merely &ecause a la&el or logo or any other mar9 is attached or $rinted on the &asis of the materials furnished &y the customer% it does not cease to &e a contract for sale' The (om&ay High "ourt in (#A )td' v IT8 (T#1 (.//4 .6+ ITR 6: ((om held so% -here the assessee su$$lied -ra$$er la&els for &ottles containing li3uor sold &y the client' The cost of the la&els on the -ra$$er -as &orne &y the customer' The High "ourt after considering the $recedents under excise and sales tax la- concluded that it -as a contract of a sale and not a -or9s contract' A similar vie- -as ta9en &y the #elhi High "ourt in "IT v #a&ur India )td' (.//4 .6, ITR +:5 (#el in the case of su$$ly of corrugated &oxes -ith la&els &earing assessee>s logo $rinted on such &oxes' It -as held to &e a sale and not -or9s contract &asing its conclusion on the decision of the 1u$reme "ourt in a sales-tax case in 1tate of Himachal 0radesh v Associated Hotels of India )td' (+:5. .: 1T" 252' It distinguished the decision of the Madras High "ourt in 1tate of Tamil Nadu v Anandam Bis-anathan (+:6: 5, 1T" +% -hich dealt -ith a case% -here the contract related to $rinting of university 3uestion $a$ers% the consideration for -hich -as more for confidentiality of the -or9 than one of sale on $rinted 3uestion $a$ers' Ans-er to Duestion No' +* in "ircular No' 5+* dated August 6% +::* (+::* .+* ITR (1t' +. considered that the su$$ly of $rinted material -ould &e -or9s contract covered &y 1ec' +:2"' It -as this clarification% -hich had caused some confusion' This clarification &esides &eing too general also runs contrary to "ircular No' 46+ dated March 6% +::2 (+::2 ./4 ITR (1t' .:: in 0aragra$h 5(vi % -hich had ta9en the viethat contract for su$$ly of goods -ould not &e governed &y 1ec' +:2"' It is -ith the $ur$orted o&;ective of reconciling these "irculars% "ircular No' +, of .//4 dated #ecem&er +,% .//4 has no- &een issued' It $oints out that the inference in "ircular No' 5+* dated August 6% +::* has to &e considered along -ith the $rinci$les laid do-n in "ircular No' 46+ dated March 6' +::2' It $roceeds to state that it -ould &e necessary to examine each contract for an ans-er to the 3uestion% -hether it is a contract for -or9 or a contract for sale' 8nly a contract for su$$ly of any article or a thing as $er $rescri&ed s$ecifications -ould &e a contract for -or9' This clarification is -elcome' It -ould have &een more a$$ro$riate if the decisions of the (om&ay and #elhi High "ourts had &een noticed and the reasoning therein acce$ted% so as to &ring a&out greater clarity' It is a$$arent that the "ircular is intended to guide the assessing officers to acce$t such reasoning' Tax conse3uence of an unregistered sale The Hindu 22nd .anuary 2007 I entered into an agreement for sale in -riting and received full consideration% &ut the sale -as not registered' I had only executed a 0o-er of Attorney in favour of a real
estate dealer% -ho $urchased the flat from me' Till date it is not registered' I am certain that the dealer is going to register the sale through my 0o-er of Attorney for a much larger amount due to the rising $rices of $ro$erty' <ill I &e called u$on to $ay ca$ital gains on the value of the $ro$erty on registered sale? The 3uery does not mention anything a&out the $ossession' <hen full consideration had &een received% the $ossession in all $ro&a&ility should have &een handed over to the real estate dealer% -ho had $urchased the flat' The sale is deemed to &e com$lete -ith $ossession% if such $ossession had &een given in $ursuance of an agreement of sale in -riting on the doctrine of $art-$erformance under 1ec' *,A of the Transfer of 0ro$erty Act% +66.' In the light of the 0o-er of Attorney already executed% and evidence of handing over $ossession% it should &e $ossi&le for the assessee to ex$lain to the assessing officer that he -ill not &e lia&le for the consideration received &y the dealer' The difference as &et-een the consideration $aid &y the dealer and the amount received &y him as 0o-er of Attorney holder -ill &e taxa&le only in the hands of the dealer as his &usiness $rofits' If this factual $osition is confirmed &y the dealer% there may not &e any hassles for the reader to file the return for the assessment year .//5-/6 and convince the assessing officer% that his lia&ility is limited to consideration received &y him' The attention of the readers is dra-n to the amendments made &y the Registration and 8ther Related )a-s (Amendment Act% .//+ amending 1ec' *,A of Transfer of 0ro$erty Act% +66. and 1ec' +5 of the Registration Act% +:/6% re3uiring even on agreement for sale covered &y 1ec' *,A to get registered -ith effect from 1e$tem&er .2% .//+' The legal effect of the same may not affect the com$utation of tax lia&ility in the hands of the reader% since an assessee cannot &e lia&le on consideration more than -hat he has actually received' 1ec' */"% ho-ever% -ould foist lia&ility for ca$ital gains &y deeming guidelines value as sale $rice% if it ha$$ens to &e more than the $rice admitted as consideration in the sale deed% su&;ect to assessee>s right to $rove that% -hat is received% is fair mar9et value' In the reader>s case% sale has not &een registered' There is no $rovision for invo9ing 1ec' */" on such deemed sale -ith reference to guidelines value as on such date' There may not &e any com$lication even for the dealer under 1ec' */"% &ecause the section a$$lies only to the case of registered sale of ca$ital asset' In the dealer>s case% he is selling only his stoc9-in-trade' 1' RA7ARATNAM T#% on /ehi!&e hire The Hindu 22-01-2007 Eou had indicated that even $ayment for hiring of vehicles -ould no- re3uire tax deduction at source under 1ec' +:2-I% -hich -as hitherto limited to immova&le $ro$erty' (ut I may dra- your attention to the clarification issued in "ircular No'**6 dated March .6% +::/ (+::/ +6, ITR (1t' +*6% -herein the (oard has conceded that -here a vehicle is given on hire along -ith the $rovision of a driver and a conductor -ith the remuneration for use &eing fixed for the num&er of hours such vehicle is made availa&le% it is a service contract for carrying out the -or9% so that it -ill &e covered under 1ec' +:2"' It -ill% therefore% a$$ear that 1ec' +:2-I% -hich -ill no- cover amount of rent or any other $ayment for the use of any $lant% machinery or e3ui$ment -hich -ill no dou&t include vehicles% should &e treated as confined to a case -here vehicle alone is given on hire and not -here service &y running the vehicle is made availa&le' The circular referred to &y the reader is one issued $rior to the amendment to 1ec' +:2I -ith effect from 7uly +2% .//4% s$ecifically ma9ing any rent or hire or any other
com$ensation for use of $lant% machinery or e3ui$ment for tax deduction under 1ec' +:2-I' The issue is -hether it is a case of hiring out a vehicle or rendering a service &y ma9ing availa&le the vehicle' These are t-o distinct contracts' There is% therefore% ;ustification for reader>s inference that% -here the vehicle is made availa&le as a matter of service% the (oard>s "ircular No'**6 dated March .:% +::/ (+::/ +6, ITR (1t' +*6 -ould continue to have a$$lication' The "ircular has not &een revo9ed' At any rate% the reasoning in the "ircular -ould indicate that the inference dra-n therein does not get su$erseded &y the amendment% -hich cannot cover -hat is s3uarely a service contract for -or9 so that in such cases tax deduction should continue to &e governed &y 1ec' +:2" and not under 1ec' +:2-I' It may also &e noticed that Ex$lanation III inserted under 1ec' +:2"(. deems -or9 to include "carriage of goods and $assengers &y any mode of trans$ort other than &y rail-ays"' This amendment made -ith effect from 7uly +% +::*% -hich is su&se3uent to the "ircular% su$$orts the "ircular and &uttresses the reader>s inference' 1uch trans$ort contract and not mere contract of vehicle can &e understood as &eing governed &y 1ec' +:2"(. Ex$lanation III% -hich &eing a s$ecial clause should override 1ec' +:2-I' 1' RA7ARATNAM %e!- (0E shou&d be brou'ht ba!1 to &ife The Hindu 1(-01-2007 Than9s to your column in The Hindu Tax !orum informing us that relief under 1ec' *2E" may not al-ays &e availa&le' Earlier -e -ere com$lacent that -e could al-ays invest sur$lus funds arising out of ca$ital gains &y selling $ro$erty in &onds and avoid tax' I am one of those contem$lating selling a $ro$erty and -ould not li9e to find myself in a situation% -here I have to $ay hefty ca$ital gains tax and lose -hatever &enefit arising out of the sale of $ro$erty' Eou have rightly suggested further notification of other underta9ings' I have a suggestion -hich I feel is &etter' As the ca$acity of underta9ings to use funds is limited% the government may have to issue fre3uent notifications from time to time after identifying deserving underta9ings' Nationalised &an9s may &e authorised to issue s$ecial ca$ital gains &onds% -hich -ill naturally &e at a lo-er rate of interest than for fixed de$osits in &an9s' 8nly funds got out of sale of $ro$erty may &e $ermitted investment in these &onds' These &onds can have fixed loc9-in $eriod of four years% -ith no facility for $remature encashment' I re3uest you to give $u&licity to this suggestion of mine in your columns% as I feel a letter to the !inance Ministry may not receive any attention% -hereas if the suggestion receives $u&licity in your column% it is li9ely to receive consideration of the authorities' The Hindu has received a num&er of letters suggesting restoration of life for 1ec' *2E" &y further notifications of eligi&le &onds' The reader>s suggestion is one% -hich avoids the necessity of fre3uent notifications as and -hen the current &onds are oversu&scri&ed -ith uncertainty as to the availa&ility in vie- of the ceiling% -hich is &eing $laced for any such notified &onds' 0ress Note dated #ecem&er .5% .//4 noticing the "hardshi$ caused to tax$ayers &ecause of non-availa&ility of the &onds" states that another notification has &een issued ma9ing availa&le &onds for an aggregate amount of Rs' ,%*// crore for the &onds to &e issued &y Rural Electrification "or$oration and National Housing Authority of India' Extension of time limit for investment has &een allo-ed u$ to March ,+% .//5 for those -ho have transferred assets as &et-een 1e$tem&er .:% .//* and 1e$tem&er ,/% .//4 (&oth dates inclusive ' A ceiling of Rs' */ la9h has &een $laced for any single assessee for such investments under 1ec' *2E"' The amount is
measly considering the num&er of assessees see9ing to avail the &enefit% a$art from the fact that it caters only to a fe- $ersons among assessees similarly $laced' The nelimit is &ound to &e exhausted even &efore it is $u&licised' In vie- of the $ressing need for infrastructure develo$ment% the suggestion from the reader H' R' 1rinivasan of Mysore should &e -elcomed% since the revenue loss &y such concession -ould &e more than offset &y the advantage of finance channelised for infrastructural needs of the government and $u&lic sector $ro;ects' The multi$lier effect of such investments on em$loyment and gro-th should &e much more re-arding than the revenue loss' 1elective dilution of relief under 1ec' *2E"% -hich only authorises s$ecification of the &onds and not dilution of the statutory relief itself% is not sound fiscal $olicy' 8ne does not ex$ect the "(#T to over-ride the mandate of 0arliament' 1' RA7ARATNAM Ta" !onse2uen!e of an unre'istered sa&e The Hindu3 Monday3 04 .anuary 2005 I entered into an agreement for sale in -riting and received full consideration% &ut the sale -as not registered' I had only executed a 0o-er of Attorney in favour of a real estate dealer% -ho $urchased the flat from me' Till date it is not registered' I am certain that the dealer is going to register the sale through my 0o-er of Attorney for a much larger amount due to the rising $rices of $ro$erty' <ill I &e called u$on to $ay ca$ital gains tax on the value of the $ro$erty on registered sale? The 3uery does not mention anything a&out the $ossession' <hen full consideration had &een received% the $ossession in all $ro&a&ility should have &een handed over to the real estate dealer% -ho had $urchased the flat' The sale is deemed to &e com$lete -ith $ossession% if such $ossession had &een given in $ursuance of an agreement of sale in -riting on the doctrine of $art-$erformance under 1ec' *,A of the Transfer of 0ro$erty Act% +66.' In the light of the 0o-er of Attorney already executed% and evidence of handing over $ossession% it should &e $ossi&le for the assessee to ex$lain to the assessing officer that he -ill not &e lia&le for the consideration received &y the dealer' The difference as &et-een the consideration $aid &y the dealer and the amount received &y him as 0o-er of Attorney holder -ill &e taxa&le only in the hands of the dealer as his &usiness $rofits' If this factual $osition is confirmed &y the dealer there may not &e any hassles for the reader to file the retur the AE .//5-/6 and convince the assessing officer that his lia&ility is limited to consideration received &y him' The attention of the readers is dra-n to the amendments made &y Registration and 8ther Related )a-s (Amendment Act% .//+ amending 1ec' *,A of Transfer of 0ro$erty Act% +66. and 1ec' +5 of the Registration Act% +:/6% re3uiring even on agreement for sale covered &y 1ec' *,A to get registered -ith effect from 1e$tem&er .2% .//+' The legal effect of the same may not affect the com$utation of tax lia&ility in the hands of the reader' 1ec' */" -ould foist lia&ility for ca$ital gains &y deeming guidelines value as sale $rice% if it ha$$ens to &e more than the $rice admitted as consideration in the sale deed% su&;ect to assessee>s right to $rove that% -hat is received% is fair mar9et value' In the reader>s case% sale has not &een registered' There is no $rovision for invo9ing 1ec' */" on such deemed sale -ith reference to guidelines value as on such date' There may not &e any com$lication even for the dealer under 1ec' */"% &ecause the section a$$lies only to the case of registered sale of ca$ital asset' In the dealer>s case% he is selling only his stoc9-in-trade' 1' RA7ARATNAM 6mendment to Hindu %u!!ession 6!t Hindu %u!!ession (6mendment) 6!t 200( ) #au'hter7s ri'ht as !opar!enor The Hindu 01-01-2007
8n and from the commencement of the Hindu 1uccession (Amendment Act% .//*% in a 7oint Hindu family governed &y the Mita9shara la-% the daughter of a co$arcener shall% (a &y &irth &ecome a co$arcener in her o-n right in the same manner as the sonF (& have the same rights in the co$arcenary $ro$erty as she -ould have had if she had &een a sonF (c &e su&;ect to the same lia&ilities in res$ect of the said co$arcenary $ro$erty as that of a son% and any reference to a Hindu Mita9shara co$arcener shall &e deemed to include a reference to a daughter of a co$arcenerG" HIt re$eats the same -ording of TN Andhra and @arnata9a ActsI It actually creates a legal fiction of a daughter &ecoming a son' <e have to a$$ly the $rinci$le that -hen you are &idden to imagine a state of affairs you cannot allo- your mind to &oggle' I feel that t-o conse3uences directly follo-' !irst% daughters &eing co$arceners% they -ill &ecome 9artas of the $ro$erty -hich devolves &y survivorshi$ on them' This is &ecause only $ro$erty devolving &y succession -ill &ecome a&solute $ro$erties and $ro$erties devolving &y survivorshi$ -ill have the cloud on the title &y the shado- of the survivors and co$arceners arriving on the scene &y &irth and second% death of a co$arcener does not mean an actual $artition &ut only a notional $artition to ascertain his share% -hich devolves &y succession' Therefore% the other co$arceners continue to remain as H=!' Another 3uestionG the senior-most co$arcener &ecomes the 9arta J -ill the daughter &eing the eldest &ecome the 9arta of the surviving H=!? I also feel that any co$arcener can leave a -ill &e3ueathing his share to the H=! so that the H=! is $er$etuated' 1ince the Hindu la- is &eing distorted &eyond recognition it is the least -e can do to $reserve the H=! as a uni3ue Hindu institution'" The a&ove comment from 7ustice T' N' "' Rangara;an on the issue ""an -omen &e co$arceners" is interesting and innovative and does not call for any comment% as $ossi&le vie-s on the su&;ect' 1till dual ca$acity for a daughter on a $ar -ith her &rother and the right of eldest daughter to &e the 9arta are $ro&a&ly conce$ts too radical to follo- from the amendments' The vie- that a co$arcener can leave a -ill vesting his legacy -ith ;oint family character and &y doing so $er$etuate the Hindu 7oint !amily is non-controversial% &ut &y doing so the right of female heirs cannot $ro&a&ly &e defeated' The amendments do not force $artition% &ut only demarcate and confer the right to a daughter on deemed $artition' 1urvival of H=! de$ends solely on the family ties% so that reform in Hindu la- to meet the felt needs of the society cannot $ossi&ly &e &lamed for the -ea9ening of ;oint family system' 1' RA7ARATNAM
The Hindu Monday 12th February 2007 Interest from NR(E) deposits and RF a!!ounts !ontinues to be e"empt My son is having a Non-resident External Account NR(E and !oreign "urrency onresident #e$osits (!"NR % &esides Resident !oreign "urrency Account (R!" ' I am under the im$ression that interest income from these are exem$t% since my son continues to &e a non-resident' (ut I am sur$rised to find from (usiness )ine dated !e&ruary *% ($age +, that such exem$tion has &een discontinued -ith effect from March ,+% .//*' 0lease confirm -hether it is so' Exem$tions for interest for NR(E and !"NR de$osits are availa&le under 1ec' +/(2 and Resident !oreign "urrency Account under 1ec' +/(+* (iv (fa ' The exem$tions -ere sought to &e -ithdra-n -ith effect from A$ril +% .//* &y the !inance (No'. Act% .//2% &ut a su&se3uent amendment &y the !inance Act% .//* has restored the exem$tion -ith effect from the same date% that is% A$ril +% .//* indefinitely' The (oard in "ircular No', of .//4% dated !e&ruary .5% .//4 (.//4 .6+ ITR (1t' ... at ..5 has also clarified this $osition of la- restoring the exem$tions' The reader is% therefore% right in his inference that the exem$tion is not lost' 1' RA7ARATNAM The HIN#$ 12th February 2007 T#% in the !ase of property &oss I am an em$loyee of a $u&lic sector com$any' I have loss in res$ect of my income from a $ro$erty -hich I had let out' I made a declaration of such loss to the #is&ursing 8fficer' Ho-ever% my ##8 has declined to ta9e into consideration the loss on the ground that such loss cannot &e admitted in res$ect of let out $ro$erty' 1ec' +:.(.( only &ars any ad;ustment for loss "other than loss under the head income from house $ro$erty for the same financial year"' )oss from $ro$erty can% therefore% &e ta9en into consideration for tax deduction from salary income in 1ec' +:. of the Act' No distinction is made &et-een the loss on account of let out $ro$erty and selfoccu$ied $ro$erty' Instructions are issued in the matter of T#1 from salary &y the "entral (oard of #irect Taxes year after year' "ircular No'+. of .//4 dated Novem&er .5% .//4 (.//4 .65 ITR (1t' +./ clearly &rings out this $osition ma9ing no distinction &et-een let out and self-occu$ied $ro$erty' Exam$les 5 and 6 annexed to the "ircular -ould re3uire loss from $ro$erty income to &e ta9en into consideration' Though these illustrations have ta9en into account loss from self-occu$ied $ro$erty% it does not mean that loss alone is to &e ta9en into account' There are many such instances% -here there is excess deduction of tax due to the reluctance of the ##8s to ta9e any decision' 1uch excess deduction is not uncommon% so that there is -or9 all-round% for the deductor to deduct -hen there may &e no lia&ility and file statements% em$loyees to file timely refund claims and for the Incometax #e$artment to issue the refund' The very o&;ect of T#1 $rovision is to match tax deduction -ith lia&ility' <hile the Income-tax #e$artment ta9es action% -here tax has &een failed to &e deducted% it does not try to educate deductors to avoid -rong deduction% -here it is unnecessarily deducted' 1' RA7ARATNAM The Hindu 12th February 2007
%hare of a member of H$F on partition I am the 9arta of a Hindu =ndivided !amily (H=! % since my father>s demise on May +:65' He did not leave any <ill' Ex$enses on marriage of my &rother and sister &esides household ex$enses of the ;oint family -ere met from my individual income% since the income from the hereditary $ro$erty -as meagre' In the event of $artition% I understand that all of us -ill &e entitled to e3ual share' Am I entitled to reim&urse myself the amount s$ent &y me &y -ay of a larger share? 0lease advise in your column' If the reader has maintained accounts in ;oint family -ith his contri&ution sho-n as loan to H=!% he -ould &e entitled to recover the same at the time of $artition' At any rate% such accounts% if maintained% are only matters of evidence' If there is a consensus among the family mem&ers at the time of $artition to give a larger share to anyone for -hatever reason% there could &e no o&;ection' In fact% $artition to &e valid need not &e e3ual' If there is no such agreement% the res$ective shares as on date of $artition -ould &e governed &y the la-% so that any claim for ad;ustment for any ex$enses incurred &y any mem&er for the ;oint family at the &elated stage of $artition may -ell de$end on the consent of the other mem&ers' 1' RA7ARATNAM %TT paid on &on' term !apita& 'ains is ta" e"empt The Hindu 0()02)2007 I had on #ecem&er .:% +::* invested Rs' +/ la9h in @othari 0ioneer Tax 1hield :4% an e3uity lin9ed savings scheme' 8n redem$tion of the units on March ,+% .//4% I -as $aid Rs' 65%*,/% out of -hich 1ecurities Transaction Tax (1TT of Rs' +5* -as recovered &y !ran9lin Tem$leton' 1ince 1TT -as $aid% is the long-term ca$ital gain of Rs' 55%*,/ exem$t under 1ec' +/(,6 % although the redem$tion cannot &e said to have &een transacted through a recognised stoc9 exchange' I may em$hasise that in the case of its ne- Tem$leton India E3uity Income !und% it has &een clarified that no long-term ca$ital gains tax is chargea&le on redem$tion of the units% since investors are lia&le to $ay 1TT' 1ec' +/(,6 exem$ts long-term ca$ital gains on transfer of e3uity share in a com$any or a unit of an e3uity oriented fund% if such transaction is chargea&le to 1TT' 1ince the amount received is on redem$tion of units in e3uity lin9ed savings scheme% the assessee should &e eligi&le for exem$tion of long-term ca$ital gains' It is true that 1TT is $aya&le for all transactions through recognised stoc9 exchanges' In the reader>s case% the relevant &onds are units of an e3uity-oriented fund -ithin the Ex$lanation to 1ec' +/(,6 ' The reader is a$$arently an investor and not a trader ac3uiring shares and such &onds as stoc9-in-trade merely for resale% so that the sur$lus is not from transfer of long-term ca$ital asset -ithin the meaning of ca$ital asset under 1ec' .(+2 % -hich excludes assets held for &usiness' 1ec' +/(,6 infers the only other condition% that such transaction should have &een chargea&le to 1TT' <here the !und has $aid 1TT as certified &y it% it is clear it -as $ut through a recognised stoc9 exchange' At any rate% the fact that the transaction has suffered 1TT s$ares tax on the long-term ca$ital gains on sale or redem$tion of the units' A share or unit is a long-term ca$ital asset% if held% for more than a year' Ho* are !apita& 'ains !omputed+ The Hindu 0()02)2007 I $urchased a flat in 1e$tem&er .//, for Rs' 4',/ la9h and sold this during Novem&er .//4' <hile $urchasing this $ro$erty% I too9 a &an9 loan of Rs' 2 la9h' I closed this loan out of the sale $roceeds% to the extent of Rs' +'6. la9h to retrieve the original sale deed &ac9' No- can I deduct this loan re$ayment out of the sale $roceeds and calculate
ca$ital gains on the net consideration? (esides I incurred stam$ duty% registration charges% and architect and advocate>s fees% -hile $urchasing this $ro$erty' !urther I incurred &ro9erage fees -hile $urchasing and selling' (ut the recei$ts are hard to o&tain from them' "an I claim -ithout $ro$er recei$ts? Not only that% I $aid for com$ound fencing% electricity de$osit% se-erage de$osits etc' "an I add these $ayments in my cost &efore the -or9 out of cost inflation index? According to 1ec' *2 of IT Act% the exem$tion can &e claimed only -hen the sale $roceeds are 9e$t in ""a$ital Aains Account 1cheme"' Is it necessary the entire sale $roceeds are to &e 9e$t in the a&ove scheme or only the ca$ital gain $ortion? #oes it vary in its a$$lication -hen 1ec' *2E" is a$$lied? <hat is allo-ed as a deduction in com$utation of ca$ital gains is the cost of the asset and the cost of im$rovement% if any' Though the $ro$erty sold might have &een charged &y -ay of loan to &an9 or others% the amount $aid to have the $ro$erty released -ould not &e cost of the $ro$erty% since the loan is self-created% as held &y the 1u$reme "ourt in 7agadishchandran (B'1'M'R' v "IT (+::5 ..5 ITR .2/ (1" ' The amount incurred at the time of $urchase for the $ur$oses of stam$ duty% registration charges or advocate>s fees -ill &e $art of the cost' (ro9erage $aid at the time of $urchase -ill also &e cost% -hile &ro9erage $aid at the time of sale -ill reduce the sale consideration' 8rdinarily ex$enses claimed are ex$ected to &e $roved% not necessarily -ith reference to recei$ts for the $ayees% &ut -ith credi&le evidence% that such ex$enses -ere actually incurred' 1ince the reader has held the $ro$erty for more than three years% it is a long-term ca$ital asset% so that the cost can &e indexed' It has &een stated that the assessee has incurred cost on fencing' 1uch cost may not &e ca$a&le of &eing claimed as cost of im$rovement% since such ex$ense may not &e construed as on ca$ital account' If it is only of ca$ital nature% it can &e treated as cost of im$rovement' If a com$ound -all has &een erected instead of fencing% it might have added to the cost' #e$osit for electricity and se-erage -ill not &e ta9en as cost% &ut if the de$osits are endorsed in favour of the $urchaser -ithout extra charge for the sale% it may go to reduce the sale consideration' The reader is right in inferring that if the sale $roceeds could not &e utilised for ac3uiring another $ro$erty &efore the due date for filing return relevant for the year of ca$ital gains% such ca$ital gains -ill have to &e invested under "a$ital Aains Accounts 1cheme for availing the &enefit of reinvestment in another residential $ro$erty -ithin the s$ecified $eriod' !or $ur$oses of relief under 1ec' *2% -here the ca$ital gains arise on sale of residential $ro$erty% it is sufficient% if ca$ital gains alone are invested' If -hat is sold is any other asset% the amount to &e invested for ac3uiring another residential $ro$erty is the entire net sale consideration for getting full exem$tion' In either case% -here the amount is invested is less than ca$ital gains C sale $roceeds% relief -ill &e $ro$ortionate to the amount de$osited C utilised' It is $ossi&le for a tax$ayer to get the &enefit of reinvestment in residential house $ro$erty under 1ec' *2C*2! either along -ith relief under 1ec' *2E" or solely on investments in notified &onds' (ut% there are no notified &onds no- availa&le' 1ince the com$utation is com$lex and there are rigid time limits for availing reliefs% it is &etter that those lia&le get timely $rofessional advice' It is seen from a num&er of letters received in res$ect of ca$ital gains that most $eo$le try to get advice from all and sundry' Ne-s$a$er columns are also no su&stitute% since facts of the case are more relevant' Tele$honic re3uests and self-addressed covers continued to &e received for getting such advice' They are not entertained% since these -ill not su&stitute $rofessional advice after eliciting all relevant facts from the tax$ayer' It is advice $rior to sale% -hich is li9ely to &e useful for com$lying -ith tax o&ligations and availing tax reliefs' 1' RA7ARATNAM
Ta" dedu!tion at sour!e on sa&e of &abe&&ed 'oods The Hindu 2,-01-2007 8nly a contract for su$$ly of any article or a thing as $er $rescri&ed s$ecifications -ould &e a contract for -or9' There is some confusion as to the treatment of sale of goods containing the logo or the la&el of the customer' 1uch contracts are &eing treated as -or9s contract% &ecause of the im$rint of customer>s identity% though they should &e mere sale not lia&le for tax deduction at source as -or9s contracts' "ircular No' +, of .//4 dated #ecem&er +,% .//4 -hich reiterates the $rinci$le that sale is different from -or9s contract does not really indicate -hether the vie- ta9en &y some of the de$artmental officers in this regard is correct' @indly clarify' The Income-tax #e$artment is $rone to treat su$$ly of $ac9ing material and goods $re$ared -ith la&els or logos as -or9s contract and not merely sale of goods' The Tri&unal had &een ta9ing the vie- that a sale does not &ecome a -or9s contract merely &ecause a la&el or logo or any other mar9 is attached or $rinted on the &asis of the materials furnished &y the customer% it does not cease to &e a contract for sale' The (om&ay High "ourt in (#A )td' v IT8 (T#1 (.//4 .6+ ITR 6: ((om held so% -here the assessee su$$lied -ra$$er la&els for &ottles containing li3uor sold &y the client' The cost of the la&els on the -ra$$er -as &orne &y the customer' The High "ourt after considering the $recedents under excise and sales tax la- concluded that it -as a contract of a sale and not a -or9s contract' A similar vie- -as ta9en &y the #elhi High "ourt in "IT v #a&ur India )td' (.//4 .6, ITR +:5 (#el in the case of su$$ly of corrugated &oxes -ith la&els &earing assessee>s logo $rinted on such &oxes' It -as held to &e a sale and not -or9s contract &asing its conclusion on the decision of the 1u$reme "ourt in a sales-tax case in 1tate of Himachal 0radesh v Associated Hotels of India )td' (+:5. .: 1T" 252' It distinguished the decision of the Madras High "ourt in 1tate of Tamil Nadu v Anandam Bis-anathan (+:6: 5, 1T" +% -hich dealt -ith a case% -here the contract related to $rinting of university 3uestion $a$ers% the consideration for -hich -as more for confidentiality of the -or9 than one of sale on $rinted 3uestion $a$ers' Ans-er to Duestion No' +* in "ircular No' 5+* dated August 6% +::* (+::* .+* ITR (1t' +. considered that the su$$ly of $rinted material -ould &e -or9s contract covered &y 1ec' +:2"' It -as this clarification% -hich had caused some confusion' This clarification &esides &eing too general also runs contrary to "ircular No' 46+ dated March 6% +::2 (+::2 ./4 ITR (1t' .:: in 0aragra$h 5(vi % -hich had ta9en the viethat contract for su$$ly of goods -ould not &e governed &y 1ec' +:2"' It is -ith the $ur$orted o&;ective of reconciling these "irculars% "ircular No' +, of .//4 dated #ecem&er +,% .//4 has no- &een issued' It $oints out that the inference in "ircular No' 5+* dated August 6% +::* has to &e considered along -ith the $rinci$les laid do-n in "ircular No' 46+ dated March 6' +::2' It $roceeds to state that it -ould &e necessary to examine each contract for an ans-er to the 3uestion% -hether it is a contract for -or9 or a contract for sale' 8nly a contract for su$$ly of any article or a thing as $er $rescri&ed s$ecifications -ould &e a contract for -or9' This clarification is -elcome' It -ould have &een more a$$ro$riate if the decisions of the (om&ay and #elhi High "ourts had &een noticed and the reasoning therein acce$ted% so as to &ring a&out greater clarity' It is a$$arent that the "ircular is intended to guide the assessing officers to acce$t such reasoning' Tax conse3uence of an unregistered sale The Hindu 22nd .anuary 2007 I entered into an agreement for sale in -riting and received full consideration% &ut the sale -as not registered' I had only executed a 0o-er of Attorney in favour of a real
estate dealer% -ho $urchased the flat from me' Till date it is not registered' I am certain that the dealer is going to register the sale through my 0o-er of Attorney for a much larger amount due to the rising $rices of $ro$erty' <ill I &e called u$on to $ay ca$ital gains on the value of the $ro$erty on registered sale? The 3uery does not mention anything a&out the $ossession' <hen full consideration had &een received% the $ossession in all $ro&a&ility should have &een handed over to the real estate dealer% -ho had $urchased the flat' The sale is deemed to &e com$lete -ith $ossession% if such $ossession had &een given in $ursuance of an agreement of sale in -riting on the doctrine of $art-$erformance under 1ec' *,A of the Transfer of 0ro$erty Act% +66.' In the light of the 0o-er of Attorney already executed% and evidence of handing over $ossession% it should &e $ossi&le for the assessee to ex$lain to the assessing officer that he -ill not &e lia&le for the consideration received &y the dealer' The difference as &et-een the consideration $aid &y the dealer and the amount received &y him as 0o-er of Attorney holder -ill &e taxa&le only in the hands of the dealer as his &usiness $rofits' If this factual $osition is confirmed &y the dealer% there may not &e any hassles for the reader to file the return for the assessment year .//5-/6 and convince the assessing officer% that his lia&ility is limited to consideration received &y him' The attention of the readers is dra-n to the amendments made &y the Registration and 8ther Related )a-s (Amendment Act% .//+ amending 1ec' *,A of Transfer of 0ro$erty Act% +66. and 1ec' +5 of the Registration Act% +:/6% re3uiring even on agreement for sale covered &y 1ec' *,A to get registered -ith effect from 1e$tem&er .2% .//+' The legal effect of the same may not affect the com$utation of tax lia&ility in the hands of the reader% since an assessee cannot &e lia&le on consideration more than -hat he has actually received' 1ec' */"% ho-ever% -ould foist lia&ility for ca$ital gains &y deeming guidelines value as sale $rice% if it ha$$ens to &e more than the $rice admitted as consideration in the sale deed% su&;ect to assessee>s right to $rove that% -hat is received% is fair mar9et value' In the reader>s case% sale has not &een registered' There is no $rovision for invo9ing 1ec' */" on such deemed sale -ith reference to guidelines value as on such date' There may not &e any com$lication even for the dealer under 1ec' */"% &ecause the section a$$lies only to the case of registered sale of ca$ital asset' In the dealer>s case% he is selling only his stoc9-in-trade' 1' RA7ARATNAM T#% on /ehi!&e hire The Hindu 22-01-2007 Eou had indicated that even $ayment for hiring of vehicles -ould no- re3uire tax deduction at source under 1ec' +:2-I% -hich -as hitherto limited to immova&le $ro$erty' (ut I may dra- your attention to the clarification issued in "ircular No'**6 dated March .6% +::/ (+::/ +6, ITR (1t' +*6% -herein the (oard has conceded that -here a vehicle is given on hire along -ith the $rovision of a driver and a conductor -ith the remuneration for use &eing fixed for the num&er of hours such vehicle is made availa&le% it is a service contract for carrying out the -or9% so that it -ill &e covered under 1ec' +:2"' It -ill% therefore% a$$ear that 1ec' +:2-I% -hich -ill no- cover amount of rent or any other $ayment for the use of any $lant% machinery or e3ui$ment -hich -ill no dou&t include vehicles% should &e treated as confined to a case -here vehicle alone is given on hire and not -here service &y running the vehicle is made availa&le' The circular referred to &y the reader is one issued $rior to the amendment to 1ec' +:2I -ith effect from 7uly +2% .//4% s$ecifically ma9ing any rent or hire or any other
com$ensation for use of $lant% machinery or e3ui$ment for tax deduction under 1ec' +:2-I' The issue is -hether it is a case of hiring out a vehicle or rendering a service &y ma9ing availa&le the vehicle' These are t-o distinct contracts' There is% therefore% ;ustification for reader>s inference that% -here the vehicle is made availa&le as a matter of service% the (oard>s "ircular No'**6 dated March .:% +::/ (+::/ +6, ITR (1t' +*6 -ould continue to have a$$lication' The "ircular has not &een revo9ed' At any rate% the reasoning in the "ircular -ould indicate that the inference dra-n therein does not get su$erseded &y the amendment% -hich cannot cover -hat is s3uarely a service contract for -or9 so that in such cases tax deduction should continue to &e governed &y 1ec' +:2" and not under 1ec' +:2-I' It may also &e noticed that Ex$lanation III inserted under 1ec' +:2"(. deems -or9 to include "carriage of goods and $assengers &y any mode of trans$ort other than &y rail-ays"' This amendment made -ith effect from 7uly +% +::*% -hich is su&se3uent to the "ircular% su$$orts the "ircular and &uttresses the reader>s inference' 1uch trans$ort contract and not mere contract of vehicle can &e understood as &eing governed &y 1ec' +:2"(. Ex$lanation III% -hich &eing a s$ecial clause should override 1ec' +:2-I' 1' RA7ARATNAM %e!- (0E shou&d be brou'ht ba!1 to &ife The Hindu 1(-01-2007 Than9s to your column in The Hindu Tax !orum informing us that relief under 1ec' *2E" may not al-ays &e availa&le' Earlier -e -ere com$lacent that -e could al-ays invest sur$lus funds arising out of ca$ital gains &y selling $ro$erty in &onds and avoid tax' I am one of those contem$lating selling a $ro$erty and -ould not li9e to find myself in a situation% -here I have to $ay hefty ca$ital gains tax and lose -hatever &enefit arising out of the sale of $ro$erty' Eou have rightly suggested further notification of other underta9ings' I have a suggestion -hich I feel is &etter' As the ca$acity of underta9ings to use funds is limited% the government may have to issue fre3uent notifications from time to time after identifying deserving underta9ings' Nationalised &an9s may &e authorised to issue s$ecial ca$ital gains &onds% -hich -ill naturally &e at a lo-er rate of interest than for fixed de$osits in &an9s' 8nly funds got out of sale of $ro$erty may &e $ermitted investment in these &onds' These &onds can have fixed loc9-in $eriod of four years% -ith no facility for $remature encashment' I re3uest you to give $u&licity to this suggestion of mine in your columns% as I feel a letter to the !inance Ministry may not receive any attention% -hereas if the suggestion receives $u&licity in your column% it is li9ely to receive consideration of the authorities' The Hindu has received a num&er of letters suggesting restoration of life for 1ec' *2E" &y further notifications of eligi&le &onds' The reader>s suggestion is one% -hich avoids the necessity of fre3uent notifications as and -hen the current &onds are oversu&scri&ed -ith uncertainty as to the availa&ility in vie- of the ceiling% -hich is &eing $laced for any such notified &onds' 0ress Note dated #ecem&er .5% .//4 noticing the "hardshi$ caused to tax$ayers &ecause of non-availa&ility of the &onds" states that another notification has &een issued ma9ing availa&le &onds for an aggregate amount of Rs' ,%*// crore for the &onds to &e issued &y Rural Electrification "or$oration and National Housing Authority of India' Extension of time limit for investment has &een allo-ed u$ to March ,+% .//5 for those -ho have transferred assets as &et-een 1e$tem&er .:% .//* and 1e$tem&er ,/% .//4 (&oth dates inclusive ' A ceiling of Rs' */ la9h has &een $laced for any single assessee for such investments under 1ec' *2E"' The amount is
measly considering the num&er of assessees see9ing to avail the &enefit% a$art from the fact that it caters only to a fe- $ersons among assessees similarly $laced' The nelimit is &ound to &e exhausted even &efore it is $u&licised' In vie- of the $ressing need for infrastructure develo$ment% the suggestion from the reader H' R' 1rinivasan of Mysore should &e -elcomed% since the revenue loss &y such concession -ould &e more than offset &y the advantage of finance channelised for infrastructural needs of the government and $u&lic sector $ro;ects' The multi$lier effect of such investments on em$loyment and gro-th should &e much more re-arding than the revenue loss' 1elective dilution of relief under 1ec' *2E"% -hich only authorises s$ecification of the &onds and not dilution of the statutory relief itself% is not sound fiscal $olicy' 8ne does not ex$ect the "(#T to over-ride the mandate of 0arliament' 1' RA7ARATNAM Ta" !onse2uen!e of an unre'istered sa&e The Hindu3 Monday3 04 .anuary 2005 I entered into an agreement for sale in -riting and received full consideration% &ut the sale -as not registered' I had only executed a 0o-er of Attorney in favour of a real estate dealer% -ho $urchased the flat from me' Till date it is not registered' I am certain that the dealer is going to register the sale through my 0o-er of Attorney for a much larger amount due to the rising $rices of $ro$erty' <ill I &e called u$on to $ay ca$ital gains tax on the value of the $ro$erty on registered sale? The 3uery does not mention anything a&out the $ossession' <hen full consideration had &een received% the $ossession in all $ro&a&ility should have &een handed over to the real estate dealer% -ho had $urchased the flat' The sale is deemed to &e com$lete -ith $ossession% if such $ossession had &een given in $ursuance of an agreement of sale in -riting on the doctrine of $art-$erformance under 1ec' *,A of the Transfer of 0ro$erty Act% +66.' In the light of the 0o-er of Attorney already executed% and evidence of handing over $ossession% it should &e $ossi&le for the assessee to ex$lain to the assessing officer that he -ill not &e lia&le for the consideration received &y the dealer' The difference as &et-een the consideration $aid &y the dealer and the amount received &y him as 0o-er of Attorney holder -ill &e taxa&le only in the hands of the dealer as his &usiness $rofits' If this factual $osition is confirmed &y the dealer there may not &e any hassles for the reader to file the retur the AE .//5-/6 and convince the assessing officer that his lia&ility is limited to consideration received &y him' The attention of the readers is dra-n to the amendments made &y Registration and 8ther Related )a-s (Amendment Act% .//+ amending 1ec' *,A of Transfer of 0ro$erty Act% +66. and 1ec' +5 of the Registration Act% +:/6% re3uiring even on agreement for sale covered &y 1ec' *,A to get registered -ith effect from 1e$tem&er .2% .//+' The legal effect of the same may not affect the com$utation of tax lia&ility in the hands of the reader' 1ec' */" -ould foist lia&ility for ca$ital gains &y deeming guidelines value as sale $rice% if it ha$$ens to &e more than the $rice admitted as consideration in the sale deed% su&;ect to assessee>s right to $rove that% -hat is received% is fair mar9et value' In the reader>s case% sale has not &een registered' There is no $rovision for invo9ing 1ec' */" on such deemed sale -ith reference to guidelines value as on such date' There may not &e any com$lication even for the dealer under 1ec' */"% &ecause the section a$$lies only to the case of registered sale of ca$ital asset' In the dealer>s case% he is selling only his stoc9-in-trade' 1' RA7ARATNAM 6mendment to Hindu %u!!ession 6!t Hindu %u!!ession (6mendment) 6!t 200( ) #au'hter7s ri'ht as !opar!enor The Hindu 01-01-2007
8n and from the commencement of the Hindu 1uccession (Amendment Act% .//*% in a 7oint Hindu family governed &y the Mita9shara la-% the daughter of a co$arcener shall% (a &y &irth &ecome a co$arcener in her o-n right in the same manner as the sonF (& have the same rights in the co$arcenary $ro$erty as she -ould have had if she had &een a sonF (c &e su&;ect to the same lia&ilities in res$ect of the said co$arcenary $ro$erty as that of a son% and any reference to a Hindu Mita9shara co$arcener shall &e deemed to include a reference to a daughter of a co$arcenerG" HIt re$eats the same -ording of TN Andhra and @arnata9a ActsI It actually creates a legal fiction of a daughter &ecoming a son' <e have to a$$ly the $rinci$le that -hen you are &idden to imagine a state of affairs you cannot allo- your mind to &oggle' I feel that t-o conse3uences directly follo-' !irst% daughters &eing co$arceners% they -ill &ecome 9artas of the $ro$erty -hich devolves &y survivorshi$ on them' This is &ecause only $ro$erty devolving &y succession -ill &ecome a&solute $ro$erties and $ro$erties devolving &y survivorshi$ -ill have the cloud on the title &y the shado- of the survivors and co$arceners arriving on the scene &y &irth and second% death of a co$arcener does not mean an actual $artition &ut only a notional $artition to ascertain his share% -hich devolves &y succession' Therefore% the other co$arceners continue to remain as H=!' Another 3uestionG the senior-most co$arcener &ecomes the 9arta J -ill the daughter &eing the eldest &ecome the 9arta of the surviving H=!? I also feel that any co$arcener can leave a -ill &e3ueathing his share to the H=! so that the H=! is $er$etuated' 1ince the Hindu la- is &eing distorted &eyond recognition it is the least -e can do to $reserve the H=! as a uni3ue Hindu institution'" The a&ove comment from 7ustice T' N' "' Rangara;an on the issue ""an -omen &e co$arceners" is interesting and innovative and does not call for any comment% as $ossi&le vie-s on the su&;ect' 1till dual ca$acity for a daughter on a $ar -ith her &rother and the right of eldest daughter to &e the 9arta are $ro&a&ly conce$ts too radical to follo- from the amendments' The vie- that a co$arcener can leave a -ill vesting his legacy -ith ;oint family character and &y doing so $er$etuate the Hindu 7oint !amily is non-controversial% &ut &y doing so the right of female heirs cannot $ro&a&ly &e defeated' The amendments do not force $artition% &ut only demarcate and confer the right to a daughter on deemed $artition' 1urvival of H=! de$ends solely on the family ties% so that reform in Hindu la- to meet the felt needs of the society cannot $ossi&ly &e &lamed for the -ea9ening of ;oint family system' 1' RA7ARATNAM
