Page 200 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 11: Taxation Planning

6. Any duty of customs or excise repaid or repayable as drawback to any person against Notes
exports under the Customs and Central Excise Duties Drawback Rules, 1971.
7. The value of any benefit or perquisite, whether convertible into money or not, arising
from business or the exercise of a profession.
8. Any interest, salary, bonus, commission or remuneration, by whatever name called, due
to, or received by, a partner of a firm from such firm.
However, it is provided that where any interest, salary, bonus, commission or remuneration, by
whatever name called, or any part thereof has not been allowed to be deducted under Clause (b)
of section 40, the income under this clause shall be adjusted to the extent of the amount not so
allowed to be deducted.

Interest Income is either assessed as ‘’Business Income’’ or as ‘’Income from other sources’’
depending upon the activities carried on by the assessee. If the investment yielding interest
were part of the business of the assessee, the same would be assessable as ‘’business income’’ but
where the earning of the interest income is incidental to and not the direct outcome of the
business carried on by the assessee, the same is assessable as ‘’Income from other sources’’.
Business implies some real, substantial and systematic or organized course of activity with a
profit motive. Interest generated from such an activity is considered Business Income. Otherwise,
it would be interest from other sources.
Where an owner lets out premises along with other assets or provides amenities, the income in
respect of premises would be taxable as income from house property and, the balance would be
taxed as income from other sources. The contract, letting out the premises along with other
assets and providing amenities, is severable.
If an assessee is employed in a company where he is called Managing Agent but is in fact, the
Chief Manager of the company, under what head would the remuneration that he is paid be
charged
Even though he may be called a Managing Agent, the remuneration earned by him will be
charged under the head of Salaries and not as Business Income. The fact that he is actually the
Chief Manager of the company will make the remuneration earned by him chargeable to tax
under the head Salaries. It is the true nature of the contract that will determine the relationship
between the assessee and the company. Once it is established that the managing director functions
subject to the control and supervision of the Board of Directors, the inevitable corollary is that
an employer — employee relationship exists and that being so, his remuneration is assessable
under the head “salary”.

Capital Gains

This head of income taxes the income earned on sale of any investment in form of gold, precious
ornaments, shares, etc or immoveable property.

Section 2(47) of the Income Tax Act, defines transfer in relation to a capital asset, and it includes
The sale, exchange or relinquishment of the asset.
The extinguishment of any rights therein.

In a case where the asset is converted by the owner thereof into, or is treated by him as,
stock-in-trade of a business carried on by him, such conversion or treatment.
Any transaction involving the allowing of the possession of any immovable property to
be taken or retained in part performance of a contract of the nature referred to in section
53A of the Transfer of Property Act, 1882(4 of 1882).

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