T N Pandey: Underwriting of risk is not a technical service

CHAT ROOM

It is difficult to see a person who undertakes the risk of underwriting as one who is rendering a service to the person for whose benefit the risk is undertaken.

An underwriter is under a financial commitment to take up the shares in case the issue is not subscribed fully. This undertaking of the risk does not fall to be considered as a managerial, technical or consultancy service.

Whether there is condition that for claiming deduction under Section 80G, payment must be made out of taxable income?

No. There is no condition in Section 80G that to be eligible for deduction under this section, the payment must be out of income chargeable to tax.

We are a firm of builders, not engaged in any manufacturing or trading activities. But we have been preparing the trading account and profit and loss account, arriving at the gross profit and net profit separately. Since we are not engaged in any trading, can we dispense with the trading account and prepare profit and loss account, arriving at the net profit only? Will this be considered a change in the method of accounting, requiring qualification by the auditor?

You have not mentioned any particular reason for changing the practice. But since there will be a change in the manner of presentation of accounts, the auditor can give note in the accounts - not by way of qualification but as information for those, who have been used to see the accounts in a particular way.

Earlier, vehicle tax could be paid yearly. Now, the one-time RTO tax is required to be paid. When a new vehicle is purchased, the first year's tax was required to be capitalised. Subsequent years' tax was on revenue account. Is the entire amount of lifetime tax required to be capitalised?

Yes.

Can the tribunal, in the guise of rectifying an order under Section 35 of the Wealth Tax Act, recall the order and pass it a fresh?

No. Section 35(1)(e) provides that with a view to rectifying any mistake apparent from the record, the tribunal may amend any order passed by it under Section 24. Sub-section (5) of Section 35 provides that where an amendment is made under Section 35, an order shall be passed in writing by the tribunal.

The power vested in the tribunal, by Section 35, is only to amend the order, to rectify any mistake apparent from the record and not to review its order. Section 35 states that a mistake should be rectified by amending the original order.

Therefore, rectification presupposes the continued existence of the original order. When an amendment is made to the original order, the amendment merges with the original order. The original order is read with the amendment thereto.

If the power to rectify the original order by way of amendment to that order is to be interpreted as permitting recalling of the original order, then the original order ceases to exit and a fresh original order is made. Recalling the original order involves rehearing of the matter, which is not the purpose and intention of the provision for rectification.

When the wording of the statutory provision are clear and unambiguous and can be given effect without any difficulty, it is not permissible to given an extending meaning to the provision.

The words "amended the original order to rectify any mistake apparent from the record" does not mean recall the original order, rehear the matter and replace the original order by a fresh order. The purpose can be achie-ved by continuing the original order and passing an amendment order stating whatever is necessary to rectify the mistake apparent from the record.

Whether the issue involved is one or more makes no difference, as what is contemplated and provided for is an amendment to the original order and not an order in substitution of the original order.

Can interest under Section 234B and 234C be levied in respect of deemed income under Section 115JB?

Yes. The controversy regarding applicability of Sections 234B and 234C on the book profits computed under Section 115J, which resulted in conflicting judgments by various high courts, no longer exists as Section 115JB(5) specifically provides that other provisions of the Act, unless otherwise specifically excluded, will apply on the profits computed under Section 115JB of the Act.

As there is no specific exclusion provision for the purpose of levy of interest under Sections 234B and 234C, interest under Section 234 B and 234 C shall be chargeable.