A. L. Bharani

Reply

The income of the minor child only up to the date of attaining majority is to be clubbed in the hands of the parent.

The income of the previous year in which the child attains majority is, therefore, to be split as the income arising during minority and the income arising thereafter. It is only the income arising during minority that gets clubbed in the hands of the parent. There is no question of having an income that cannot be separated.

If one can find out the income up to March 31 and the income thereafter, he cannot plead that it is not possible to determine what income accrued up to a particular date which may be a date other than the 31st day of March. Business income may be segregated by maintaining separate books of account, while there may be no difficulty in determining the salary income or the house property income up to a particular date.

Interest normally accrues on a day-to-day basis while dividend accrues when declared.

These may be the broad parameters for segregating the income as earned during minority and as earned after attaining majority. Section 64(1A) requires that all incomes accruing or arising to a minor child need to be clubbed in the hands of the parent except in certain circumstances.

From a plain reading of the Section, it is apparent that what is required to be clubbed is only "income accruing or arising to a minor child".

Agricultural income is not an income within the meaning of Section 2(24) of the Act and, therefore, does not have to be included in the hands of the parent even for rate purposes.

Query

I hold shares of a number of companies, which are either companies that are closed, or those whose shares aer not being traded in the stock exchanges though the companies are listed. Can I claim the entire cost of the shares as a capital loss.

R. L. Bhatia

Rajender Mohan

Asok Biswas

Reply

Where the shares have been purchased much earlier, but where these shares are not traded though they are listed companies, it would not be possible to claim the entire cost as a loss under the head, capital gains.

The loss under the head, capital gains, can be computed only if there is the transfer of capital asset. If the reader transfers the shares to any person, may be to a relative as well at a nominal price, the cost of acquisition minus the nominal sale price (as adjusted by the cost inflation index in case of long capital assets) may be claimed as a loss under the head, capital gains. If the company has gone into liquidation, the amount received on such liquidation as reduced by the deemed dividend under Section 2(22)(c) shall be taken as the full value of consideration.

Therefore, if no consideration is received on liquidation of a company, the entire cost of the asset (subject to indexation) may be claimed as the loss under the head, capital gains. The full value of consideration in the hands of the share holder is to be taken as the amount received by the shareholder minus the deemed dividend under Section 2(22)(c).

Since nothing has been received form the company, the consideration would be nil.

Taking credit for TDS

I AM an individual earning a brokerage. I maintain my accounts on the cash basis. The principals paying brokerage, however, maintain books on mercantile basis. I would like to know in the following circumstances as to when the credit can be taken for the tax deducted at source on payments made by my principals?

The principal credits my account for brokerage on March 31, pays the tax deducted into the government account on March 31, but if the actual payment of brokerage is made in the financial year 2002-03.

The principal credits my account for brokerage on March 31, pays the tax deducted into the government account on May 31, 2002, but if the actual payment of brokerage is made in the financial year 2002-03.

Where part of the brokerage is paid before March 31, 2003 and the balance is credited to my account on March 31 but where the TDS is remitted on May 31, 2002.

If the brokerage is paid after March 31, the TDS is remitted after March 31, where the TDS certificate refers to the brokerage as belonging to the previous year 2002-03 and where the principals account for the same as payable for the previous year, 2002-03.

Amritlal Shah

Reply

Section 199 of the Income-Tax Act makes it clear that credit could be taken to the tax deducted at source in the year in which the corresponding income is offered to tax. Section 198 provides that tax deducted at source is income of the payee. In the light of this, the answers to the queries would be as follows:

In the first case, two possibilities can be envisaged:

The entire brokerage may be offered as the income of the previous year 2002-03 (assessment year 2003-04) and the credit for the entire tax deducted will be taken in that year.

The brokerage to the extent of tax deducted may be taken as the income of the previous year, 2001-02 (assessment year 2002-03) and credit may be taken for the entire tax deducted in that year. The balance of brokerage may be accounted as the income of the previous year 2002-03 (assessment year 2003-04).

In the second case, the reply would be the same as in the earlier case.

In the third case, again two possibilities may emerge:

The brokerage to the extent paid in the financial year, 2001-02 may be taken as the income of that year and credit for TDS of the proportionate sum may be taken in the same year, the balance of income paid in the year, 2002-03 may be taken as the income of that financial year with the proportionate credit for TDS being taken in that year

The brokerage paid in the financial year, 2001-02 may be taken as the income of that year without taking any tax deducted at source.

The balance of income may be taken as the income of the financial year, 2002-03 with credit being taken for the entire TDS in the financial year, 2002-03.

In the fourth case, the entire income has been received and the tax has been deducted at source only in the previous year 2002-03.

Therefore, the entire income may be offered as the income of the financial year, 2002-03 and the credit may be taken for the tax deducted at source in that financial year.

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