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Chidambaram may tax property deals
New Delhi, February 18
Encouraged by the success of bank cash transaction tax introduced last year to track down black money, Finance Minister P. Chidambaram is expected to introduce a property transaction tax to check widespread black money in real estate while presenting Budget on February 28.

Ircon to bid for Chandigarh monorail project
New Delhi, February 18
Ircon, the construction arm of Indian Railways, is planning to diversify into real estate and hydroelectric projects, budget hotels and bid for Chandigarh’s monorail project

Bangalore goes industry-friendly
Bangalore, February 18
H.D. Kumaraswamy-led government is not only speeding up the process of establishing Hardware Park, Karnataka’s answer to Fab City, but is also in the process of expanding it.

Aviation Notes

Tax anomalies pique commuters
The truce between pilots and Sahara Airways is temporary. The unrest continues to simmer under the cover of wishy-washy settlement. The trouble will resurface as the core issue of salaries and perks of commanders and pilots remains unresolved.



EARLIER STORIES
 

Investor guidance

HRA exemption and housing loan rebate can be claimed together
Q: I am a government servant working in Chandigarh and am living in rented accommodation in Chandigarh. I have also recently bought a fully-built flat in the same city, on home loans and have taken its possession. However, I have not given it on rent as yet and am still staying in rented accommodation. Can I claim both HRA exemption and housing loan rebates?
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Chidambaram may tax property deals
Manoj Kumar
Tribune News Service

New Delhi, February 18
Encouraged by the success of bank cash transaction tax introduced last year to track down black money, Finance Minister P. Chidambaram is expected to introduce a property transaction tax to check widespread black money in real estate while presenting Budget on February 28.

“The nominal tax is likely to be imposed on the seller of residential and commercial properties to track down the buyers and their incomes at the time of filing income tax returns,” said official sources in the Finance Ministry.

The government is also toying with the idea of making it mandatory for the Registrars in states and UTs registering properties under the provision of ‘Power of Attorney” to file annual returns to track down the transactions.

Official sources said Income Tax department has urged the ministry to take necessary steps immediately as lakhs of buyers and sellers in the country are not showing property transactions in their IT returns, leading to tax evasion worth thousands of crores every year.

According to industry estimates, the bull run in the stock market and rise in urban income by over 12 per cent last year have further fuelled real estate prices across the country. The property prices have gone up by 125 to 300 per cent in metros and major towns across the country.

Finance Ministry has admitted, said sources, real estate transactions as the major area for creation of black money. At present, residential property market constitutes almost 80 per cent of the real estate market in India, and is growing at about 34 per cent annually.

“The high rate of stamp duty levied by states varying up to 15 per cent has further forced the people to resort to undervaluation of property transactions,” said a senior official.

He pointed out that it was a fact that majority of buyers and sellers were reporting undervalue pricing in transaction leading further generation of black money in the economy.

On the basis of information collected from banks, the Ministry has unearthed bogus transactions worth hundreds of crores. Finance Minister is expected to make a statement in the Lok Sabha next week.

The tax experts have told the Ministry that such tax in addition to lowering of stamp duty by states would help make property transactions more transparent, rise in revenue collection and fall in property rates.

“Imposition of nominal percentage of tax at source, under which the seller would have to pay tax to the IT department would help the government to track down the transactions amounting to thousands of crores every year,” he said, adding that the suggestion of such tax has been given by the Institute of Chartered Accountants during pre-Budget consultations.

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Ircon to bid for Chandigarh monorail project

New Delhi, February 18
Ircon, the construction arm of Indian Railways, is planning to diversify into real estate and hydroelectric projects, budget hotels and bid for Chandigarh’s monorail project

The Railway PSU, along with the Container Corporation of India (Concor), is planning to bid for constructing and operating rail lines and container depots in Jordan, Nigeria, Mozambique and Saudi Arabia, top Ircon officials said here today. It is looking for suitable partners in each of these categories.

“With more ports being set up in Africa and other parts of the globe, everyone wanted to tap the tremendous opportunity in port-related infrastructure such as rail connectivity, setting up of container depots and managing infrastructure,” they said.

The PSU has a tie-up with a Malaysian company with expertise in monorail, M-Trans Holdings. The tie-up, Ircon-M-Trans joint venture, will work together for the planning and construction of monorail projects in various cities in India.

Ircon, they said, was also planning to diversify into real estate and hydroelectric projects, apart from strongly focussing on urban transport projects as well.

It also plans to bid for Chandigarh’s monorail project, the sources said.

Ircon is also entering into an agreement with its sister concern Indian Railway Catering and Tourism Corporation (IRCTC) to construct budget hotels as planned by the Railways. — PTI

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Bangalore goes industry-friendly
Jangveer Singh
Tribune News Service

Bangalore, February 18
H.D. Kumaraswamy-led government is not only speeding up the process of establishing Hardware Park, Karnataka’s answer to Fab City, but is also in the process of expanding it. In one of his first decisions after the Fab City went to Andhra Pradesh, Chief Minister Kumaraswamy directed the acquisition of another 2,000 acres of land next to the park.

Talking to TNS, Karnataka IT Secretary Shankarlinge Gowda said the 1,400 acres, which were to be acquired for the Hardware Park had been notified and that the process of acquisition had started.

The new government, in a proactive move, has also ordered acquisition of 500 acres of land in Bidadi and Dobspet areas. While the land acquisition in Bidadi could help Toyota, the land in Dobspet is earmarked for the IT sector.

A high-level committee has cleared the investment proposal put forward by Infosys for establishment of a 700 acre IT park in South Bangalore, close to its present headquarters.

The Karnataka IT Secretary, meanwhile, also disclosed that his department was in discussions with a big retail chain as well as few multinational banks, which wanted to set up shop in Bangalore. He said Bangalore had already recorded the third largest sale of commercial space of 9.5 million square feet after Tokyo and London.

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Aviation Notes

by K.R. Wadhwaney

Tax anomalies pique commuters

The truce between pilots and Sahara Airways is temporary. The unrest continues to simmer under the cover of wishy-washy settlement. The trouble will resurface as the core issue of salaries and perks of commanders and pilots remains unresolved.

The study reveals that salaries of commanders/ pilots in Sahara are much higher than salaries of commanders/pilots in Jet Airways. Many Sahara pilots feel ‘be-sahara’ alleging that they have been left in lurch by the management.

The adjustment of two sets of pilots working in two different airlines is a vexed issue. The fixation of seniority is equally problematic. No pilot (for that matter any official in any department) will accept lower emoluments and no commander will sit quiet if he is superceded.

The pilot community is pampered and arrogant. A majority of them are known to be edgy and fussy. The more they get, the more they demand. Many of the executive pilots are guilty of not adhering to duty and time limits because flying allowances are enormous. But the management of all airlines worldwide have to tolerate tantrums because they are nerve-centre of airlines.

Indeed, it is true that Sahara pilots should not have resorted to strike. However, much they might be criticised for their arm-twisting strategy, the fact was that they were left with no option except to indulge in trade unionism. Job guarantee is one thing but salaries/perks protection and seniority is quite another.

The three-day Sahara pilots’ strike did cause inconvenience to commuters. The tactics did help pilots extract some fringe benefits, like waiver of six-month notice period for resigning and also concession of golden handshake.

All relevant facts of the deal between two bosses of airlines have not yet been known. It is about time, the government steps in to see that terms and conditions have been finalised so that travelling public is not subject to inconvenience in future.

While war on national and international fares continue to wage intensely, there is a huge anomaly pertaining to ‘taxes’. Different airlines charge different quantum of taxes. If one carrier charges Rs 3,700 as taxes, another charges almost double the quantum. Why should there be variation in taxes? In every case, passengers are the sufferers. The Civil Aviation ministry and Directorate-General of Civil Aviation (DGCA) should clarify as to how and why European and US airlines are allowed to levy heavier quantum of taxes than others?

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Investor guidance

by A.N. Shanbhag

HRA exemption and housing loan rebate can be claimed together

Q: I am a government servant working in Chandigarh and am living in rented accommodation in Chandigarh. I have also recently bought a fully-built flat in the same city, on home loans and have taken its possession. However, I have not given it on rent as yet and am still staying in rented accommodation. Can I claim both HRA exemption and housing loan rebates?

— Kushaljit Singh Sodhi

A: Yes. The exemption of HRA u/s 10(13A) has no bearing on the deductions for home loan repayment u/s 80C and interest payable u/s 24. You can claim both.

Merged shares

Q: My wife is holding 1,700 shares in NIEL for more than two years as on July 1, 2004. She was also holding 7,200 shares in another company NIL for more than one year as on July 1, 2004. NIL was merged into NIEL and consequent upon the amalgamation, her holding of 7,200 was reduced to 1,800 in NIEL as on July 5, 2005, in her demat account. Thus, as on July 5, 2005 she was holding total 3,500 shares in NIEL (1700 + 1800). If she sells all 3,500 shares now and pays STT also; in that case whether any short-term capital gain (STCG) can occur on any part of the holding particularly 1,800 shares added to her account in NIEL consequent upon the amalgamation of the above two companies. It may please be kept in mind that upon amalgamation of two companies there was no sale or purchase nor any transfer occurred in the name of any other person.

— Inderdeep Singh, Chandigarh

A: Section 47(vi) that the transfer ‘in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company’ will not be considered as a capital gain. Now, Section (49e) states that where the capital asset became the property of the assessee under any such transfer as is referred to in Section 47(vi), the cost of acquisition shall be deemed to be the cost for which the previous owner of the property acquired it”. Now, coming Explanation (iii) of Section 48 states: “Indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on April 1, 1981, whichever is later.

Now, this means that the cost of acquisition of the new 1,800 shares is the total price she paid while purchasing 7,200 shares of NIEL. However, as and she sells these new shares, the indexed cost will be same as the original cost because the first year of holding would be the same as the year of selling, FY 05-06.

It will be treated as long-term capital asset because no transfer has taken place on the date of amalgamation.

A little complicated but the Act contains many more such complex provisions.

Payment to relative

Q: Suppose an assessee has made cash payment to a relative of Rs 22,000. Here, both Section 40A(2) and Section 40A(3) will be attracted.

A) In what order should the Sections be applied i.e. should Section 40A(2) be applied first or should Section 40 A(3) be applied first.

B) 1) In case payment in cash of Rs 22,000 is made as salary to relative and it is presumed that assessing officer allows only Rs 2,000 as salary then Rs 20,000 will be disallowed u/s 40(A)2.

2) In the above example whether Section 40(A)3 will also be attracted as payment is made in cash and is in excess of Rs 20,000. Then disallowance u/s 40(A)3 is Rs 4,400 i.e. 20 per cent of Rs 22,000.

3. Thus, the total deduction for the expenditure of Rs 22,000 is Rs 20,000 + Rs 4,400 i.e. Rs 24,400.

Therefore, can the disallowance under the Income Tax Act exceed the total expenditure made?

Kindly enlighten me on the correct implication of the above-referred cases.

— Sudhakar

A: 1. Sec. 40(A2a) clearly states that where the assessing officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.

It is very clear that it is the assessing officer who will take a view. The assessee is expected to claim the entire expense in normal fashion.

2. When two views are possible, the view that favours the assessee or is beneficial to him should be followed — CIT v. P.R.S. Oberoi [1990] 52Taxman267 (Cal). If it makes no difference, the normally accepted practice is to apply the Section which is first in the numerical order and ignore the others unless, the later Section states, “notwithstanding anything to the contrary contained in any other provision of this Act…”.

Tax returns

Q: I am a senior citizen having some income from other sources like interest, capital gains etc. After taking the deduction u/s 80C, my total income is below the taxable limit. I am under the impression that since the taxable income is below the tax limit, I don’t have to file my tax return. Incidentally, I don’t come under the one-by-six scheme. However, recently someone told me that to file tax returns, I have to consider income before Section 80C etc. deduction and not after. I am not too sure this is correct as all this while, I have not been filing returns as my net income used to be below the tax threshold. For example, last year I considered the Section 80L deduction of Rs 12,000 for computing net taxable income. On similar lines, I should be able to take into account Section 80C deduction. Am I correct?

— Sachdev

A: You are correct and wrong both at the same time! This is because till last year, you could take into account deductions under Section 80 (such as 80L, 80CCC, 80G, 80U etc) to arrive at the net taxable income for purposes of return filing. In other words, if your total income after claiming all these deductions was below the taxable limit, you needn’t have filed tax returns. However, Budget 2005 has brought in an amendment due to which from FY 05-06, it is your income before deductions under Section 80 (this includes 80C this year) that has to be considered for filing returns. In other words, the gross income before claiming any deductions under Section 80C, 80U etc. has to be below the tax threshold in order for not filing tax returns. Therefore, in your case, being a senior citizen, if your income before Section 80C deduction is below Rs. 1,85,000, you don’t have to file tax returns, else you have to.

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BRIEFLY


Pokemon’s popular character Pikachu is shown at a Pokemon park in Japan
Pokemon’s popular character Pikachu is shown at a Pokemon park in Japan. Japan’s game giant Nintendo said on Saturday it would operate Pokemon theme park around the world, with the first one opening in Taiwan this June.
— AFP

Credit card
Mumbai, February 18
The Centurion Bank of Punjab (CBoP) has ventured into credit card business in association with the Art of Living Foundation, a Bangalore-based non-governmental organisation (NGO). Launched to commemorate the silver jubilee celebration of the foundation last Friday, subscribers of the card, christened Miracle Card, would require to contribute Rs 50 as aid for the underprivileged children of the NGO. — PTI

Thomson deal
Paris, February 18
Thomson has won an agreement to deliver digital set-top boxes to support Tata Sky's new direct-to-home satellite television service in India, the French electronics firm said on Friday. Thomson said it planned to increase sales by as much as 2 billion euros by the end of 2006 and aims to broaden its media and entertainment base, mainly in Asia. — Reuters

SCPL takeover
Porbandar, February 18
The workers' union of Saurashtra Chemical Private Limited (SCPL) today claimed that as many as 5,000 employees had become jobless following its takeover by Nirma. SCPL was earlier run by Birla group. Workers' union president Imamkhan Pathan claimed that the company was sold for about Rs 250 crore to Nirma and the employees were rendered jobless by the new management. — UNI

Tax counters
New Delhi, February 18
Punjab & Sind Bank has authorised most of its branches at Chandigarh, Bhopal, Patiala, Ludhiana, Jalandhar and Amritsar, besides all branches in Delhi and Mumbai to collect direct taxes to facilitate customers in the cumbersome task of paying taxes. — TNS
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