The Hindu Business Line : Vertical split at the top

Alternatively, it could also be a subject of Section 398 application inasmuch as both the members are oppressive towards each other in which case the Company Law Board (CLB) may bring about an end to the stalemate by asking the nominee of one member to buy out the other member.

Code not found

IN TERMS of part IV of schedule VI of the Companies Act, 1956, item code of generic names of three main products of the company have to be mentioned. Wherefrom does one get this?

Anand Kumar, Bangalore

Please refer to the publication `Indian Trade Classification' based on harmonised commodity description and coding system (which is universally acclaimed and accepted) brought out by the Ministry of Commerce, Directorate General of Commercial Intelligence & Statistics, Kolkata 700001.

TDS vs TCS

WHAT is the difference between tax deducted at source (TDS) and tax collected at source (TCS)?

Karpaga Vinayakam, e-mail

TDS happens while making a payment — it is a deduction from the recipient's income. To wit, TDS from salary. TCS happens in a diametrically opposite situation.

Under Section 206C, a seller of scrap is required to collect tax at the rate of 1 per cent of the selling price.

While TDS pares down one's receipts, TCS heightens one's purchase bill. While TDS is normally resorted to expedite tax collection and foil tax evasion, the aim of TCS is to bring into the tax net the hard-to-tax categories.

Both, however, abate against the actual tax liability.

Bonus attraction

ISSUE of bonus shares is not treated as dividend for tax purposes. Then why don't corporates resort to them more frequently?

Radha Subramaniam, Chennai

While what you say is correct from the tax angle, one has to consider the future financial implications as well.

When bonus shares are issued, there is a permanent increase in the capital base of the company which is potentially dilutive of earnings and book value per share.

So unless a company can restore the original earnings quickly, the market will react negatively.

The dividend rate almost inevitably is slashed in the aftermath of a bonus issue. And the market never takes kindly to this.

Country to country

WHETHER one should establish a foreign branch or a wholly-owned subsidiary while investing in another country?

V. Sundarrajan, e-mail

One has to study the tax, company law and foreign exchange control laws, among others, of the destination country before coming to a conclusion one way or the other.

In our own country, for example, foreign companies are subjected to corporate tax which is five percentage points higher than the one applicable to domestic companies on the ground that the dividend declared by foreign companies are out of the reach of the Indian tax authorities.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

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