Husband, wife are not co-owners by default: I-T tribunal

‘Not equal in claiming tax exemptions’

A husband and wife may well be equal partners, sharing the joys and sorrows equally, but they are certainly not equal in claiming tax exemptions. Such exemptions, if any, are only based on relevant documents and not on anything else, according to income tax authorities.

This fact came to the fore recently when a Bengaluru-based couple came knocking at the Income Tax Appellate Tribunal after their joint claim for long-term capital gains (LTCG) exemption on gains arising from the sale of a property was rejected by a tax officer.

While the couple claimed that they jointly invested in the construction of the property and even declared the rent income and sale proceeds equally in their tax returns, the authorities said that since the earlier agreement and the subsequent sale deed were solely in the name of the husband, no such joint claim can be accepted.

The matter dates back to 1986, when the man purchased a land and then constructed a residential property in which he claimed that he and his wife contributed equally.

Thereafter, the property was let out and the rent was again shared equally between the husband and the wife, with both declaring the same in their annual returns as well.

Subsequently, when the property was sold, the gains were shared equally in their filings for tax purposes.

Tax authorities, however, denied the claim of the wife and taxed the entire gains in the hands of the husband. The tax officer’s contention was that the wife’s name was not on the earlier agreement of purchase and also the subsequent sale deed.

According to a note by PwC, which is one of the ‘Big Four’ consultancy firms, the husband stated that the residential property was jointly held, but could not produce any proof to support his claim that his wife contributed towards the purchase.

Malaysian citizen

Further, while the wife was a Malaysian citizen when the property was purchased, she did not have any documents to prove that she sought permission from the Reserve Bank of India (RBI) before purchasing the property.

While hearing the matter, the Bangalore Bench of the Tribunal upheld the tax officer’s stand while noting that the purchase deed and the subsequent sale deed did not mention the wife’s name as either owner or co-owner.

“This ruling of the Tribunal highlights that co-ownership in a property can only be considered from the recitals of the relevant documents and not from any stated intention or claim made, which is legally unsustainable,” tax advisory firm PwC said in the note.

Overseas direct investment falls to USD 1.1 billion in June 2017

Symbolic photo

Guarantees issue decline by 48.1%

Overseas direct investments from India declined by 11.4 per cent to USD 1.1 billion in June 2017. Outward FDI from India touched a nine-year low. This fall in outward FDI was on the back of a sharp 48.1 per cent decline in guarantees issued. On the other hand, equity held increased by 47.3 per cent to USD 568.3 million, while loans disbursed during the month rose by 10.6 per cent to USD 161 million.


Emotive connect with Infosys to remain forever: Gopalakrishnan

Kris Gopalakrishnan also said that the IT boom will continue for the next 30 years in India.

Kris Gopalakrishnan, co-founder and former CEO of Infosys, has said that even though he is no more professionally engaged with the company, the emotional connect will never fade.

The IT veteran’s comments assume significance at a time when there is an ongoing spat between the Infosys management and founders over a range of issues, including the corporate governance and salary hikes given to the top management.

Addressing the students of the Indian School of Business on Friday, Gopalakrishnan said, “The emotional connect will never go away (with Infosys). But you are not professionally involved. You are personally not involved in business. Infosys’ best interest will always be in my mind whether I am able to help or not.”

On his thoughts about founders’ departure from the IT bellwether, he said, “You cannot emotionally walk away from something that you have built over your lifetime, or most of your lifetime…33 or 35 years. But you also prepare yourselves for a second innings and get involved in something else“.

Speaking at an interactive session with students, the industry veteran also said the IT boom will continue for the next 30 years in India and it is the best time for entrepreneurs for venturing into a business as the situation is conducive.

Talking about the environment about startups in India, he said the future would be more exciting for industries such as healthcare and automobiles.

“I firmly believe that the next 30 years will be more exciting because it is not just about IT. It is the use of IT in every aspect of our life and every industry. Automotive industry is going to transform because cars with selfless driving and many are going to come. Alternative fuels and fuel efficient cars and many more innovations are going to come.

Healthcare will also witness many more changes, he opined.

Change Wage Structure For H-1B Visas, Says US Labour Department

In the four-page letter, US Acting Labour Secretary identified the “four-tier wage structure” as one of the main reasons under which companies have been hiring foreign workers on H-1B visas on a low wage.

Washington: The US Labour Department has said a legislative change is required in the four-tiered wage structure to take stronger action against firms using H-1B visas to replace their American employees with workers from countries like India.

“Absent a legislative change, the Department (of labour) lacks the authority to alter the employers’ ability to take advantage of the four-tiered prevailing wage structure currently used by employers in H-I B Labour Condition Applications,” US Department of Labour said in a letter to two top American Senators – Chuck Grassley and Dick Durbin.

US Acting Secretary of Labour Edward C Hugler, in the letter dated April 27, has identified several other legislative changes for it to take stronger action against H-1 B visa-dependent companies who the lawmakers allege displace American workers.
Releasing a copy of the letter to the media, Senators Grassley and Durbin in a joint statement said that Congress needs to give the Department of Labour authority to investigate H-1B visa abuse, which is not the case now.

“The Labour Department’s response further highlights the urgent need to end H-1B visa abuse. The wellbeing of thousands of hard-working Americans is at stake,” they said.

In the four-page letter, Acting Labour Secretary identified the “four-tier wage structure” as one of the main reasons under which companies have been hiring foreign workers on H-1B visas on a low wage.

“With respect to foreign workers being paid less than US workers, the INA (Immigration and Nationality Act) permits US employers to offer wages to H-1B workers based on a four-tiered prevailing wage structure that accounts for experience, education, and the level of supervision for a given occupation,” the Acting Labour Secretary said.

“Since the enactment of the four-tiered wage structure in 2004, a large number of US employers have employed H-1B workers at an entry level or ‘Tier 1’ wage in areas where the ‘average’ wage for all similarly employed American workers in the local area is much higher,” the letter said.

It said that in the absence of a legislative change, the department lacks the authority to alter the employers’ ability to take advantage of the four-tiered prevailing wage structure currently used by employers in the H-IB Labour Condition Applications.

Congress, he stressed, has a key role to play when it comes to protecting American workers and eliminating fraud from the H-1B visa programme.

“Congress must take legislative steps to provide the Department and other federal agencies involved in the H-1B visa programme with the tools it needs to improve and oversee the programme,” he wrote adding that the Department looks forward to working with Grassley and Durbin and others in Congress to achieve that goal.

In their joint statement, Grassley and Durbin said a number of US employers, including some large, well-known, publicly-traded corporations have laid off thousands of American workers and replaced them with H-1B visa holders.

To add insult to injury, many of the replaced American employees report that they have been forced to train the foreign workers who are taking their jobs, they alleged.

“That’s just plain wrong and our bipartisan legislation will help fix that problem, particularly by giving the Labour Department the authority it needs to investigate H-1B visa abuses,” said the two Senators who have introduced legislations in this regard in the US Senate.

The Acting Labour Secretary rued that the INA generally does not permit the Department to challenge the employer’s attestations entered on a Labour Condition Application, nor does the statute otherwise contemplate a comprehensive pre-labour certification review.

According to the letter, the Department is currently considering ways to bring greater transparency to the H-1B program to provide a clearer understanding of the effects of the program on domestic and foreign workers, employers and the public.

Observing that the INA provides very specific statutory limitations governing review of Labour Condition Applications and its investigation of violations of H-1B rules by employers, the letter said the Department simply on the basis of a television or print news report initiate an investigation against a company.

The specificity of statutory provisions demonstrates that the H-1B provisions of the INA carefully define the Department’s authority to conduct investigations, he said.

“The INA specifically limits the circumstances under which investigations may be conducted, he said.

While the INA requires H-1B dependent employers to inquire about displacement of US workers prior to providing H-1B workers to a secondary entity, and it can be unlawful for a dependent employer to displace US workers, the Acting Labour Secretary rued that the statute only prohibits H-1B dependent employers from displacing US workers employed by the secondary entity within the statutorily set period beginning 90 days before and ending 90 days after the placement of the H-1B worker with the secondary employer.

The Department is also considering changes to the Labour Condition Application (the application for a labour certification) for future application cycles, he said.

The Labour Condition Application, which is a required part of the H-1B visa application process, may be updated to provide greater transparency for agency personnel, US workers and the general public, he said.

The Wage and Hours Division (WED) is specifically limited by statute as to the nature and the source of information it can use in order to initiate an investigation, he said adding that WED is in the process of assessing the complaint intake process to better enable them to capture additional information from a credible source that may be used to initiate an investigation under existing INA authority.

Salary Deducted For Not Serving Notice Period Taxable? Good News For You

In many organisations, typically, when an employee resigns but does not serve out the notice period according to the employment conditions, the employer deducts part of the salary attributed to this period.

In a significant ruling, the Ahmedabad bench of Income Tax Appellate Tribunal or ITAT recently ruled that an amount deducted from an employee’s salary for not serving out a notice period cannot be considered as taxable income. “…in our considered view, the actual salary received by the assessee is only taxable and therefore, we allow this ground of appeal of the assessee,” the bench said earlier this month. In other words, this means that where an employee has not served the notice period as per terms of employment and deduction has been made from his or her salary in this regard, such deduction could not be treated as income of employee and subjected to income tax.

The ruling came in a case related to a person who did not serve the full notice period during his stint at two companies and his employers had deducted certain amount while paying the final salaries.

In this particular case, the person had shown only net receipt as income while filing his return of income. The Income Tax Department contended that as salary was taxed on due basis, whether paid or not, and did not allow this deduction. However, the Tribunal ruled in favour of assessee.

Commenting on the tribunal’s ruling, Sandeep Sehgal, director for tax and regulatory at Ashok Maheshwary & Associates LLP, said, “This is a significant ruling. The person got only net amount in his hands and the deductions were made by the employers beforehand. The tribunal recognised this fact and concluded that such deductions made can’t be considered as income in the hands of the person as this is not a real income.”

In many organisations, typically, when an employee resigns but does not serve out the notice period according to the employment conditions, the employer deducts part of the salary attributed to this period. Income tax authorities however tend to tax the entire salary due, whether paid or not. Hence, the Tribunal’s order assumes significance after it said that the deducted amount could not be considered as taxable salary income.

How Ramdev’s Patanjali Aims To Double Sales To Rs. 20,000 Crore In A Year

Co-founded by yoga guru Ramdev, Patanjali is planning to double its revenue base to Rs. 20,000 crore by the next financial year.

Patanjali Ayurved, which is co-founded by yoga guru Ramdev, is planning to double its revenue base to Rs. 20,000 crore by the next financial year. For the just-concluded financial year, which ended on March 31 this year, Haridwar-based FMCG company Patanjali Ayurved clocked a turnover of Rs. 10,561 crore. “We would grow more than double this year… By next year, Patanjali would be in the leading position and in most of the product categories, it would be number one,” Ramdev said.

Elaborating on how Patanjali Ayurved plans to double its sales in the year ahead, Acharya Balkrishna, MD and CEO of Patanjali Ayurved, told NDTV, “The company has opened production units at 2-3 places and going ahead, 3-4 production units will come up this year…we will definitely achieve our target of sales of Rs. 20,000 crore.”

Patanjali Ayurved is also setting up a facility to cater to exports.
Mr Balkrishna said, “In Nagpur, construction of production facility is underway in the Special Economic Zone (SEZ) which will cater to exports. Like doubts on ‘swadeshi’ products have been eradicated here in India, the same way doubts surrounding ‘swadeshi’ products among foreigners will also be eradicated.”

Meanwhile, Patanjali is working on a model to sell its products through e-commerce as well.

“We have done research on e-commerce model and there are some practical problems for FMCG products, we have solved some problem and planning is underway, in coming time if these problems get solved we will go in for e-commerce model as well,” said the Patanjali CEO, who debuted on Forbes magazine’s ‘100 Richest Indians’ list last year.

Allaying concerns of industry experts that FMCG industry is growing at a slower pace after demonetisation, Mr Balkrishna said, “There has not been any impact on our sales rather our sales have increased. When there is shortage of liquidity in the system people tend to spend money on necessary items and people have liked Patanjali as our sales have increased and people think that our products useful.”

Economic affairs secretary questions global rating agencies

YOKOHAMA: India has expressed its displeasure over not getting a rating upgrade by global rating agenciesdespite improvements in growth and fundamentals. Economic Affairs Secretary Shaktikanta Das hit out at them saying they are detached from ground realities of India and that they must introspect as the recent reforms in India warrant an upgrade. Das is at Yokohamato attend the Asian Development Bank’s annual meeting.

Speaking to the Indian media here, he said, “So far as government is concerned, it will continue to take measures which are good for the country, which are good for the economy. The government will continue to take structural reform measures, step up public investment, do what is good for the economy, for our growth, for our employment generation.”

He further added, “The kind of number and quality of reforms which India has experienced in last two-three years is unparalleled. It is only in India that you see this kind of reforms are happening.” Das said that with all these changes, India has continued to maintain 7 per cent plus GDP growth rate, while the ease of doing business has improved considerably.

Stating these facts, he claimed, “If the rating agencies do not give an upgrade to India, if they do not give any weightage to it, I think they are probably far detached from ground realities. So, it is really for them to introspect.”

Earlier this week, Moody’s and Fitch cited weak fiscal position to keep India’s sovereign rating unchanged at ‘BBB-‘, the lowest investment grade with stable outlook assigned to India, a decade ago. In past too, India has questioned the methodology used by global rating agencies saying the nation compares favourably with other emerging countries on metrics such as default risk. In particular, it points to S&P Global Ratings keeping China at AA- despite rising debt and slowing growth.

Markets end in red due to fag-end selling pressure

MUMBAI: Benchmark indices put on a sluggish performance in this truncated week. After posting solid gains in the last week, benchmark indices ended the week in red owing to Friday’s steep fall.

Domestic and global economic developments kept investors on the watch, throughout the week. Mounting issues over NPAs in the banking segment came under the government’s scanner as it issued an ordinance to amend the Banking Regulation Act that will empower the RBI to go after defaulters.

In another move by the government, Indian steel makers took a breath of relief after the Cabinet approved National Steel Policy, under which priority will be given to Indian steelmakers in government tenders for infrastructure projects.

News from other end of the globe, the U.S. Federal Reserve kept the key interest rates unchanged. Further, it viewed the slowdown in economy as transitionary and remained optimistic about the future, hinting at at least a couple more interest rate hikes in this year.

After opening the week at 30,021.49 points, the Sensex posted a loss of 0.20 per cent. It traded in the range of 29,804.12 and 30,176.55 to finally close at 29,858.80.

The Nifty started the week over 9300 mark at 9,339.85 and lost 0.20 per cent by the end of the week. It traded in the range of 9,269.90 and 9,377.10 and closed at 9,285.30.

Anupam Singhi, COO of William O’Neil India said,” Talking about the broader indices the Nifty Midcap snapped from its seven week winning streak to post a loss of 0.21 per cent in this week.

Talking of the trading action in this week, benchmark indices traded sluggishly in the first two trading sessions.

Volatility prevailed on Tuesday and Wednesday as key composites were range bound and closed flat with no major move. Investors awaited U.S. Federal Reserve’s verdict on key interest rate.

However, benchmark indices staged a strong rebound in Thursday’s session to end the day with significant gains. Government’s amendments to the Banking Regulation Act and approval of National Steel Policy fostered market growth. The Nifty clocked an all-time high on closing basis in the session.

The cheers were however short lived as bears rampaged markets on Fiday’s session giving away all the week’s gains. Key indices witnessed sharp correction amid weak metal prices and profit booking.

Meanwhile, foreign portfolio investors (FPIs) and foreign institutional investors (FIIs) sold shares net Rs 930.85 crores during the week.

The total turnover during the week on BSE and NSE fell to Rs Rs 17,292.52 crores and Rs 1,07,803.40 crores respectively from Rs 21,404.14 crore and Rs 1,42,309.69 crs last week.

President promulgates ordinance on banks’ non-performing assets

President Pranab Mukherjee on Friday promulgated an ordinance authorising the Reserve Bank of India to issue directions to banks to initiate insolvency resolution process in the case of loan default.

This will provide a big boost to the government’s efforts to tackle mounting bad loans.

The Banking Regulation (Amendment) Ordinance, 2017, also empowered the central bank to issue directions with regard to stressed assets.

The RBI has been equipped with powers to specify one or more authorities to advise banks for dealing with the problem of non-performing assets (NPAs), which have reached “unacceptably high levels.”

The ordinance has been issued in the light of the urgency to deal with the toxic loans that have crossed the ₹6 lakh crore mark.

Budget 2017: Well-heeled? No honesty hug

NEW DELHI: Finance minister Arun Jaitley has decided to halve the tax rate at the lowest income slab of Rs 2.5 lakh to Rs 5 lakh to 5 per cent but skewered the relatively well-heeled folk by levying a 10 per cent surcharge on incomes between Rs 50 lakh and Rs 1 crore a year.

“The present burden of taxation is mainly on honest taxpayers and salaried employees who are showing their income correctly. Post-demonetisation, there is a legitimate expectation of this class of people to reduce their burden of taxation,” Jaitley said in the budget speech.

Conversely, the levy of the surcharge on the higher income slab seems to indicate that the Modi government believes that the honest taxpayer only resides in the lower income slabs.

Let us not forget that the existing provision of a 15 per cent surcharge continues on taxpayers with a total income of over Rs 1 crore.

Taxpayers were expecting a higher exemption limit. But the government probably chose not to tinker with the tax slabs as that could shrink the tax base.

Around 2.5 lakh income tax payers stand to benefit from the proposal to halve the tax rate among 3.7 crore individuals who filed income tax returns in 2015-16.

As a result, a person having an income of Rs 5 lakh will be required to pay tax of Rs 12,875 only even if he or she does not avail any benefit under Section 80C or other sections. The tax incidence on the same income was Rs 20,600 in the corresponding year-ago period.

If the taxpayer takes the benefit of the Rs 150,000 deduction under Section 80C and Rs 25,000 as deduction for medical insurance and medical expenses under 80D, he or she could pay a tax of only Rs 3,863.

As always, the details lie in the fine print. The tax rebate under Section 87A of the Income Tax Act has been reduced from Rs 5,000 to Rs 2,500 and it will be available only to such taxpayers whose income is up to Rs 350,000. At present, taxpayers with an income of up to Rs 5 lakh can claim the rebate.

The relief to the salaried class is set to leave the exchequer poorer by Rs 15,500 crore.

Some operational changes aimed at improving the income tax structure were also announced. For example, the time for revising a tax return is set at 12 months from completion of the financial year, on a par with that for filing the return.

The time for completion of scrutiny assessments is being compressed from 21 months to 18 months for the assessment year 2018-19 and further to 12 months for the assessment year 2019-20 and thereafter.

Late fee

Taxpayers who are tardy in filing their returns will have to brace for a hefty fee. The government proposes to levy a fee of Rs 5,000 if the return is furnished after the due date but on or before December 31 of the assessment year. This means that even a single day’s delay will attract the fee.

The fee will jump to Rs 10,000 in any other case, says the explanatory memorandum that clarifies the meaning of the new Section 234F of the Income Tax Act. There is a rider here: the fee will not exceed Rs 1,000 if the total income does not exceed Rs 5 lakh.

People in India tend not to file their tax returns – especially those who have an income of up to Rs 5 lakh. The fee will act as a goad to persuade more people to file their tax returns.

Capital gain

Another crucial benefit comes in the form of a shorter holding period for individuals who were looking to sell off their properties.

In case of transfer of immovable property, if the taxpayer holds the asset for three years, the gain is considered long term. The finance minister has proposed to reduce the period of holding to two years.

Further, the base year for cost inflation index has been amended from April 1, 1981, to April 1, 2001. It will help taxpayers to easily ascertain the market value of long-term assets and this measure will also help in reducing their tax burden.

Section 54EC of the Income Tax Act has also been amended to authorise the Centre to notify any other bonds in addition to National Highway Authority and Rural Electrification Ltd to ensure that a taxpayer could claim a long-term capital gains tax benefit of up to Rs 50 lakh by subscribing to these eligible bonds.

This budget lays emphasis on affordable housing. The projects meant for the lower income group will be treated as infrastructure project and such companies will be eligible to certain benefits. The period for completion of project has been extended from three years to five years.

A promoter who has unsold flats will not have to pay tax on notional rent for one year from the end of the financial year in which the completion certificate is obtained.

Limit on cash spend

Cash expenses in case of business or profession will not be allowed if they are above Rs 10,000 on a single day. The present limit of Rs 20,000 has been reduced with the object of encouraging digital payment or payments through cheque or RTGS and NEFT.

The amended rule will apply even if amount is paid for acquiring any capital asset. This is a step in the right direction.

The benefit for making a donation will now be available in case of a donation exceeding Rs 2,000 to any trust or political party if the amount is paid by cheque or through a bank or a digital process. Political parties are also required to accept donations exceeding Rs 2,000 by any mode other than cash. This is also a well-meaning measure.