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Query 1]
I am working with a private group in power sector with Head Office in Delhi and posted at regional office in Nagpur. I am getting monthly salary of Rs. 60,000/-p.m. and extra 5 months salary towards perks. Presently I am staying in self purchased duplex house (Year 2008 ) in jurisdiction of Koradi Grampanchayat for which I am paying monthly EMI of Rs. 15,000/-p.m. towards IDBI Bank housing loan and yearly interest works out to be Rs. 98,000/p.a. My company is also paying monthly HRA @ 15% of the salary over & above the salary. Kindly explain which exemptions and up to what amount can be avail while assessing the tax liability. []
No Exemption is available towards House Rent Allowance (HRA) where an employee lives in his own house, or in a house for which he doesn’t pay any rent [Section 10(13A) of the Income Tax Act-1961 read with Rule 2A of the Income Tax Rule].
Query 2]
I am a central government employee. In the FY 2009-10 I have received Rs. 94,264/- as VI CPC arrears. From FY 2008-09, I am claiming rebate of Rs.50, 000/- on the strength of certificate issued on 18/02/2009 in favor of my 18 years mentally challenged Daughter. Previously i.e. in FY 2005-06, FY 2006-07 & FY 2007-08, I had never taken the advantage of the mental disability of my daughter as the income tax payable was nullified due to my savings under Chapter VI-A of section 80C, 80CCC etc.
My query is whether I can take the advantage of mentally challenged certificate in the previous financial years by filling in form No 10E? Kindly guide or give remedial measures to save tax around Rs.25, 000/-.   []
  1. Section 89 read with Rule 21A & 21AA governs the claim of relief in respect of Arrears of salary.
  2. Going by the strict legal interpretation of the said provision, the claim in respect of deduction not claimed earlier at the time of filing the original return of income is not admissible while subsequently working out relief u/s 89 read with Rule 21AA.
  3. However, there is a ray of hope by virtue of the decision of the Madras Tribunal in R.J. Basu Vs. ITO (1991) 94 CTR (Trib)(Mad) 296. According to the Tribunal’s Decision, when salary arrears are apportioned over the relevant previous years, the total income of the relevant years would be revised and hence, all consequential effects like changes in standard deductions under section 16(1) and changes in admissible relief in respect of savings effected out of such arrears, etc, should be given. It was rightly held therein that the exercise of giving relief is not complete without actually revising total income of the relevant previous years and giving effect to savings, etc.
  4. We are of the view that Section 89(1) is a beneficial provision & the assessee should be given the tax relief in situations mentioned hereinabove.
Query 3]
  1. I was working with a private company on a yearly composite package of Rs. 4.32 Lacs. I am also carrying on business of stationery as well wherein I have incurred a loss of Rs. 0.80 Lacs in the F.Y. 2009-10. Can I net off the loss against salary income? Please quote the relevant section which allows / disallows such adjustment.
  2. My turnover for the year ended on 31.03.2010 (F.Y. 2009-10) is Rs. 51.65 Lacs. I read in the newspaper that the limit of Rs. 40 Lacs for getting the books audited is increase to Rs. 60 Lacs. Is it applicable for the F.Y. 2009-10 or applicable from the F.Y. 2010-11?
  3. Is there any bar on taking any loan exceeding Rs 20,000/- in cash? If yes, whether it is per occasion or per day? Any exception like loan from wife/relatives, close friends etc? What are the consequences if someone contravenes? What is the logic behind such provisions? Please elaborate. [Ashit J]
Opinion: –
  1. Your income from business is assessable under the head “Income from Business” whereas Salary income is assessable under the head “Income from salary”. Loss under the head “Income from Business” cannot be set off against income under the head “Income from Salary”. Section 71(2A) in the Income Tax Act- 1961 bars such adjustment. However, such loss can be carried forward for set off against business income in subsequent years.
  2. The new enhanced limit of Rs. 60 Lacs, for assessee engaged in business, for getting the books of accounts audited u/s 44AB of the Income Tax Act-1961 is applicable from the F.Y. 2010-11 onwards.
  3. Yes, there are restrictions on acceptance of the loan and deposit above Rs. 20,000/- in cash. Section 269SS debars person from taking or accepting loan from any other person (including relatives or friends etc) otherwise than by an account payee cheques or account payee bank draft if the amount of such loan or deposit or the aggregate amount of such loan & deposit is Rs. 20,000/- or more. The prohibition also applies in cases where the amount of such loan or deposit , together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken is Rs. 20,000/- or more. Thus, only cash loan of an amount below Rs. 20,000/- can be taken from any particular person.
  4. This means that if you have already accepted cash loans say of Rs. 15,000/- on some particular date (in a year) then next time (on any date or in any year) if you accept loan of Rs. 5,000/- or more than it will be considered as violation of section 269SS. However, you may accept any amount below Rs. 5,000/- so that the aggregate amount of such cash loan is less than Rs. 20,000/-.
    The exception is provided in respect of the following from whom the loan or deposit of an amount exceeding Rs. 20,000/- could be accept in cash :-
    i) Government;
    ii) any banking company, post office saving bank or any co-operative bank;
    iii) any corporation established by a Central, State or Provincial Act;
    iv) any Government company as defined in section 617 pf the Companies Act,1956;
    v) such other institution, association or body or class of institutions association or bodies which the Central Government may notify.
    It has been further provided under the above section that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under Income Tax Act, 1961.
    No exception is provided in respect of loan taken from relatives / friends.
    Under Section 271D, a penalty can be impose for violation of section 269SS. The quantum of penalty is a sum equal to the amount of the loans or deposit so taken or accepted.
    The basic object behind incorporation of section 269SS in the Income Tax Act is to ensure that the taxpayers do not give the false explanation of the unaccounted money unearthed during search and seizures. During search and seizures, unaccounted money is found and the taxpayer often used to make the presentation that he had borrowed or received deposits from his relatives or friends and it was very easy for the so-called lender also to adjust the records later to justify the contentions of the taxpayer. To curb this menace, section 269SS was introduced in the Act.
    However, Section 273B provides that no penalty under section 271D shall be imposed if the taxpayer proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheques or account payee demand draft. If there was a genuine and bona fide transaction and if the assessee can satisfactorily prove the reasons for violation of section 269SS, then the Income Tax Officials are vested with the discretionary power of not imposing the penalty. The supreme court in Hindustan Steel V. State of Orissa(1972)83 ITR 26 hold that the penalty will not be ordinarily impos unless the assessee acted deliberately in defiance of law or guilty of conduct, dishonest or acted in conscious disregard to its obligation. The Supreme Court in Asst. Director of Income Tax Vs. Kum. A.B. Shanthi (2002)255 ITR258 upheld the constitutional validity of the provision.

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