“COMMERCIAL ESTABLISHMENT – WHETHER OCCUPIED OR RENTED- NOT LIABLE FOR WEALTH TAX”


TAX TALK-30.07.2012-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)
“COMMERCIAL ESTABLISHMENT – WHETHER OCCUPIED OR RENTED- NOT LIABLE FOR WEALTH TAX”
Query 1]
Sir, I am a pensioner getting around Rs. 2 Lacs per annum. After including MIS, NSC, etc Interest, total income works out to approx Rs. 2,72,000/-. I am investing Rs. 75,000/- in the tax saving instruments. After availing basic exemption of Rs. 2, 40,000/-, my tax is Nil. Please advise me whether I have to file a return? I have been told that according to latest development, no return is required to be filed if the income is up to Rs. 5 Lacs. [muthuswamyiyer@gmail.com]
Opinion:
For the FY 2011-12 (A.Y: 2012-13),
1.      You would not be required to file the return of income if you are a very senior citizen (80 years & above) as the basic exemption limit is 5 Lacs for very senior citizen.
2.      If, however, you are below the age of 80 years, you would be required to file the return of income as the basic exemption limit would be Rs. 2.50 Lacs only & your gross total income is exceeding Rs. 2.50 Lacs.

Query 2]
Sir, please provide the following information in making/ taking a gift:
1.      Whether it is to be executed on a judicial/non judicial stamped paper?
2.      Whether it is to be registered in any Government office?
3.      Whether Donor or Donee is to be a PAN card holder?
4.      What should be done to inform the IT Department about the execution to avoid tax deduction? Any other information to make the execution perfect & correct in all respects from Income Tax point of view.
[ramanmurthynov10@gmail.com]
Opinion:
1.      For the purpose of Income Tax Act-1961, you can make the gift even by simply executing the gift deed on plain paper
2.      Registration is not mandatory for gift of moveable property. However, for Gift of immoveable property, Registration is compulsory under the Registration Act.
3.      PAN is not mandatory for making a gift.
4.      There is no specific provision/ Law to inform the IT Department about the gift done or to be done. Also, the gift is not subject to the TDS provision.

Query 3]
1.      My father is a regular income tax & wealth tax assessee. Two year back, he has constructed a commercial complex in Raipur on which he is generating an annual rent of Rs. 7.20 Lacs. He has paid the wealth tax on the commercial complex as well, in addition to income tax on the rental income received. I read somewhere that no wealth tax liability arises in such cases. The other opinion that we have received is that the wealth tax will not be applicable if it is used for own business. Please clarify whether wealth tax is applicable in my father’s case? Please also advise if it is not applicable, whether I can get back the wealth tax already paid in the previous year?
2.      In one of our closely held company wherein myself & my father are the only shareholder & Director, the sales has increased by 62% as compared to previous year. Whether as a result of such a drastic increase in sales, the company can pay additional commission of say 25% more as compared to the percentage of sales commission paid in earlier year? I have been told that the excess commission is disallowable u/s 36(1)(ii). However, I think that the excess commission is logical & justifiable and hence can be allowed. Please Advice. [shrigopal215@gmail.com]
Opinion:
1.      Any property in the nature of commercial establishment or complex is not an asset under section 2(ea)(i)(5) of the Wealth Tax Act & accordingly it is not chargeable Wealth Tax. It may be noted that u/s 2(ea)(i)(5), it is not necessary that the property in the nature of commercial establishment or complexes should be occupied by the assessee for the purpose of his own business or profession, carried out by him only. What is necessary is the use of the property, irrespective of the fact whether it is used or occupied by the assessee himself or by anyone else for the purpose of any business or profession carried on by them.
In your case, you have already filed the return & paid the tax. If there is mistake in the original return filed, a revised return can be filed before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier.
If however, said time limit has expired, a rectification application can be filed u/s 35 of the Wealth Tax Act.
2.      The facts & circumstances of each & every individual case determines the availability of deduction u/s 36(1)(ii) of the Income Tax Act-1961. If the extra commission is paid for the services rendered & justified for the reason given in the query, the same would be allowable as expenses. It may be noted that the commission paid in lieu of dividend or profit, the same will be disallowed [Loyal Motro Service Co. Vs. CIT (1946) 14 ITR 647 (Bom)].



Comments

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