Sec 207, A critical analysis !!!

I would like to draw your attention on Sec 207 of Income tax Act.

Sec Text is as under:

207. (1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income".

(2) The provisions of sub-section (1) shall not apply to an individual resident in India, who—

(a) does not have any income chargeable under the head "Profits and gains of business or profession"; and

(b) is of the age of sixty years or more at any time during the previous year.

In Simple words Advance tax liability does not arise on senior citizen who does not have any income under Profit and gains of business and profession. 

Now, a question arise:

If an assessee is senior citizen and he is partner in Partnership firm and entitled to get profit from firm which is exempt under 10(2A) and not entitled to any remuneration and interest, Sec 207 apply on him and whether he is not liable to pay advance tax. ??

Answer is NO. He is not liable to pay any advance tax.

Analysis of Section 207: 

In Clause 2(a) of sec 207, the word used is 'CHARGEABLE'. But profit of the firm is not chargeable in the hands of partner.

So, if partner is senior citizen, he is NOT LIABLE to pay advance tax.  

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Posted in Income Tax Act 1961, Queries

Entry for property Transferred as gift by Partnership Firm ?

Query:

A partnership firm has given a Immovable property gift to 2 of its partners. A gift deed is made (with stamp duty value 30Lakh). But the cost of the property in the firm's Balance sheet is only Rs 2Lakh. The entry passed is
 partner's capital a/c 1...Dr Rs 100000
 partner's capital a/c 2 ...Dr Rs 100000 
To Property account. ..........Cr Rs 200000  

 If we pass the entry as above the capitals of the partners will be reduced. Since it is a gift for no consideration at all, why should the capital balances be reduced

Answer: 

As the firm has made gift deed, the entry should be as mentioned.

Further as per simple accounting concept, firm and individual partners are different entity.And this is loss to firm as it has transferred the property as gift. 

And loss will be ultimately debited in partners capital account. While computing the Income tax, if it would have been debited in p&l, the deduction of the same (Loss) could have not be claimed for income tax purposes. So, the effect would be the same in accounts though (Net P&L debit to capital A/c)

 While filing return of income, the same should be treated as capital gain in the return of firm.

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Posted in Accounts, Income Tax Act 1961, Queries

Set off mandatory in the succeeding year or not ?

Query: 

For a company Loss in A.Y. 2012-13 is rs . 12500 Profit in A.Y 2013-14 is Rs. 50000 but company failed to take the set off of the said loss And now, Profit in A.Y 2014-15 is Rs. 5,00,000 So can the company take the set off of the loss in current year. Loss in A.Y. 2012-13 is related to Loss from Business other than speculative business.

Answer

No, the company cannot setoff of the AY 2012-13 Loss in AY 2014-15. 

It is mandatoy to set off loss in the AY 2013-14. 

It is mandatory to set off loss in the AY 2013-14. It is mandatory to set off the carried forward losses in the immediately succeeding year, against the income of such succeeding year. Otherwise, the losses will get lapsed. Tyresoles v CIT 49 ITR 515 (Madras). 

So, Revise return of AY 2013-14 and get refund of tax paid in AY 2013-14.

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Posted in Income Tax Act 1961, Queries

Income Tax deduction under Section 80DD

Section 80dd -
Query:

A) Whether you need to have and submit the medical certificate of disabled person with percentage of disability.?

B) Need to maintain bills for claiming the exemption ?

C) How much deduction can be claimed ?

Answer: 

Abstract of Section 80DD:

(1) Where an assessee, being an individual or a Hindu undivided family, who is a resident in India, has, during the previous year,—

(a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

(b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator or the specified company subject to the conditions specified in sub-section (2) and approved by the Board in this behalf for the maintenance of a dependant, being a person with disability,

the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of a sum of fifty thousand rupees (Rs. 50000) from his gross total income in respect of the previous year:

Provided that where such dependant is a person with severe disability, the provisions of this sub-section shall have effect as if for the words “fifty thousand rupees”, the words“one hundred thousand rupees”(Rs. 100000/-) had been substituted.

(4) The assessee, claiming a deduction under this section, shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner, along with the return of income under sec 139, in respect of the assessment year for which the deduction is claimed:

Answer A) : As per subsection (4) of 80DD, the same said to be prescribed in rules. Rule 12 of income tax act  in this regard,  provides that the return of income shall not be accompanied by any document or copy of any account or form or report of audit required to be attached with return of income under any of the provisions of the Act. Even if the same is not required to be attached with return of income but AO can demand to allow you deduction. So, get a certificate for disability or severe disability.

B) Condition is only  'you incurred any expenditure for the medical treatment (including nursing)'. No condition so as to maintenance of bills. So, if you incur even a 10 Rs. Note for disable, you can get full deduction for Rs. 50000 or 100000 as the case may be.

C) Rs. 50000/- for disable person and Rs. 100000 if the dependent person is severely disable.

"Dependent" for this section are -

(i) in the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them;

(ii) in the case of a Hindu undivided family, a member of the Hindu undivided family,

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Posted in Income Tax Act 1961, Queries

Interest u/s 234B applicable or not if the assessee in not liable to pay advance tax u/s 234C.

Query:

 If assessee has no other income but only an income of capital gain arises on 27 march, 2014 (just before end of financial year). Sec 234C is not applicable as the same is not accrued before 15 march, 2014. now as per sec 234B, an assesee is liable to pay simple interest from 1 April, if assesee has failed to pay advance tax assessed under sec 208. The question is whether interest u/s 234B will be applicable as the assessee is not liable to pay advance tax u/s 234C.

Answer: 

Interest U./s 234C will not be applicable while the 234B will be applicable.

For Applicability of Sec 234B this is not necessary that interest under sec 234C must have been paid. 

 Analysing the provision of 234B which is-

.  "Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section  208  has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of Section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of Sec 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax."

Analysis of Sec 234B: 

1. The assessee is liable to pay advance tax u/s 208 as the tax assessee is more than Rs. 10000/- and;

2. Advance tax paid under the provision of sec 210 is less than 90% of Assessed Tax (irrespective of the fact 234C is applicable or not)

For applicability of provision of Sec 234B, only condition has to be satisfied that tax under sec 208 is liable to be paid. in other words tax assessed should be rs. 10000 or more and tax paid should be less than 90%.

In query both condition satisfies and hence sec 234B will be applicable.

Based on provisions: 

Sec 208: Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is ten thousand rupees or more.

Sec 210: . Every person who is liable to pay advance tax under section 208 (whether or not he has been previously assessed by way of regular assessment) shall, of his own accord, pay, on or before each of the due dates specified in section 211, the appropriate percentage, specified in that section, of the advance tax on his current income, calculated in the manner laid down in section 209 

Sec 211: Only dates are specified.

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Posted in Income Tax Act 1961, Queries