Narrow view on authorship for tax relief illogical

Taxing Matters

Effect to this announcement has been given by enacting a new Section 80QQB in the Income Tax Act, 1961, effective from the assessment year 2004-05.

This long section, covering more than one closely printed page, provides that the concession announced will be available if the following conditions are satisfied:

The author should be an individual resident in India;

His profession should be authorship;

The exemption will be available, if gross income includes

any lump sum consideration for the assignment or grant of any of his interests in the copyright of any book being a work of literary, artistic or scientific nature

royalty, and

copyright fees (whether receivable in lump sum or otherwise) in respect of such book.

The deduction will be equal to the whole of such sum or Rs 3 lakh, whichever is less. Where the payment is not received in lump sum but periodically, the exemption will be limited to 15 per cent of the value of the books sold during the previous year without allowance of any expenditure for example on gross receipts.

Where the income is earned outside India the exemption will be permissible only in respect of foreign income brought to India within six months or within the period as extended from the end of the previous year in which such income is earned.

Joint authors can also claim exemption in respect of incomes coming to their respective shares.

For claiming the exemption, the assessee author will have to furnish the prescribed particulars in the prescribed form with a certificate verified by the person making the payment along with the return of income. This certificate is required both in respect of incomes earned in India and abroad.

So far so good. But the snag lies in the definition of the word "books".

Explanation (b) to Section 80QQB stipulates that "books shall not include brochures, commentaries, diaries, guides, journals, magazines, newspapers, pamphlets, text-books for schools, tracts and other publications of similar nature, by whatever name called."

It appears sensible to exclude brochures, diaries, journals, magazines, newspapers, pamphlets and tracts from the definition of "books", but there seems to be no rationality in excluding text books for schools and commentaries from the category of "books".

In this country, even for schools, text books written and published abroad are being prescribed and read. There is a great need for the text books for school children written by authors in the country who understand the need, the pathos, the culture, the educational standards and other connected aspects for teachings in schools.

Why should the text books written by them be barred from getting the benefit of the exemption graciously announced by the finance minister is difficult to appreciate.

Also exclusion of commentaries from the purview of the books too, prima facie, is unreasonable.

Commentary writing, it needs to be said with respect, is more arduous and difficult than to write story books, fictions, travel experiences, biographies, autobiographies, translating in different languages and works of others.

Commentaries, specially in the field of law greatly assist the dispensation of justice and save time of the bar and judiciary, which will be required to be spent in finding out about the cases, distinguishing them from each other and drawing correct inferences from the past decisions.

In the field of taxation, it is common knowledge that in a number of decisions, extracts from the commentary on the Income Tax Act, written by late NA Palkhiwala, have been given and relied upon. It seems illogical to exclude commentaries from the category of books.

Also the operation of Section 80QQB seems to have been made unduly restrictive by using the words "income derived by him in the exercise of his profession".

This implies that only those persons whose profession is authorship can get the benefit of the section why others who are non-professionals, but have the requisite ability, aptitude and creativity in them to be authors should be denied the exemption is difficult to understand.

The section has been drafted in a manner, which will defeat the very objective behind the finance minister's proposal. The section needs to be relooked to ensure that it is worded in a rational manner.

Guidelines can be formulated to see that the provision is not misused. Some scheme like that contained in Section 35AC providing for approvals can be thought of.

But to make the section unduly restrictive and narrow is going to frustrate the benevolence behind the proposal conceived by the finance minister.