BENGALURU | THURSDAY, 12 JANUARY 2017 ECONOMY & PUBLIC AFFAIRS 5. <

Budget mightrestore standarddeduction

INDIVJAL DHASMANA

New Delhi, 11 January

Standard deduction forpersonal income taxmight return after over a

decade in the Union Budgetfor 2017-18, if the finance min-istry accepts recommenda-tions of the tax simplificationcommittee chaired by ex-judge R V Easwar.

Sources say the panel, inits second report given recent-ly to the ministry, has sug-gested doing so.

Standard deduction wasgiven as a lump-sum benefittowards cost to income till2003-04. In simple terms, itrefers to a deduction allowedin income tax, irrespective ofexpenses incurred or invest-ment made by assessees.

"Standard deduction issimple to administer," saidAmit Maheshwari, partner,Ashok Maheshwary &Associates. For the deduction,there was no need for a tax-payer to keep proof of expens-es such as bills. Then financeminister P Chidambaram did

away with standard deductionfor salaried personnel in2004-05, on the reasoningthat there was an equivalentincrease in the basic exemp-tion limit and other deduc-tions. It was then abolishedafter the tax exemption ceilingon investment was raised to~1 lakh. The standard deduc-tion slab was ~30,000 for totalincome under ~5 lakh a yearand ~20,000 for income over~5 lakh.

The Easwar panel hasreportedly not recommendedany particular rate or amountfor standard deduction. Itwants smaller deductions giv-en in income tax to be doneaway after standard deduc-tion comes back. The panelhas called for reviewing med-ical reimbursements.

Restoration of standarddeduction will not affect thethreshold for income taxexemption, currently ~2.5 lakha year.

In its first report, the pan-el suggested revision of thethreshold and rates on tax deduction at source. These

formed part of the previousBudget.

The 10-member panel hasalso suggested incorporationof 'masala' bonds (issuedabroad but denominated inrupees, not the local currency)in the Income Tax Act, tobring clarity on the capitalgains tax on these. The reportalso went into non-residenttaxation, assessment proce-dure, property income andsalaries, among others.

“Review of the non-resi-dent tax issue, of Section 9with respect to section 195 ofthe Act, has been examinedby the committee, whichforms a major chunk of litiga-tion,” said a source. These sec-tions talk about the incomedeemed to accrue or arise inIndia from payments to a non-resident, be it salaries, tech-nical fees, capital gains androyalties, and the procedures.

The issues pertain towhether income will be clas-sified as business profit or feesfor technical services or someother head, all of which havedifferent rates.

| Standard deduction was given as alump-sum benefit towards cost toincome till 2003-04

| It refers to a deduction allowed inincome tax, irrespective of expensesincurred or investment made byassessees

| The Easwar panel has reportedly notrecommended any particular rate oramount for standard deduction

| It wants smaller deductions given inincome tax to be done away afterstandard deduction comes back

| Restoration of standard deductionwill not affect the threshold forincome tax exemption, currently~2.5 lakh a year

THE TAXING FUTURE

N TURBULENCE IN TATA SONS N

Mistry presentedWelspun deal asfait accompli:Tata Sons

DEV CHATTERJEE

Mumbai, 11 January

Tata Sons has said the acqui-sition of the Welspun group’srenewable energy subsidiaryby Tata Power was presentedto its board as a fait accompli.

In its petition to theNational Company LawTribunal (NCLT), Tata Sons,the holding company of theTata group, said the Welspuntransaction was expected tocost ~6,700 crore ($1 billion)and any additional debtwould affect Tata Power’scredit rating.

Rating agencies, presum-ing support from Tata Sons,had assigned a higher ratingto Tata Power, over andabove which the additionaldebt was undertaken.

“As a promoter, Tata Sonswas practically left in the darkabout such a significant trans-action while (Cyrus) Mistrywas chairman of Tata Power,”the Tata Sons petition said.

A note on the proposedWelspun acquisition was cir-culated to directors of TataSons on May 31, 2016. But itwas not clarified that defini-tive agreements were to besigned imminently. On June12, 2016, Tata Power annou-nced the Welspun acquisition.

Former Tata Sons chair-man Cyrus Mistry had earli-er said Tata Power’s debt wasa legacy issue because it hadbid aggressively for theMundra project based oncheap Indonesian coal.

“As regulations changed,the losses in 2013-14 aloneamounted to ~1,500 crore.Given that Mundra consti-tutes ~18,000 crore of capitalemployed (40 per cent of thetotal), this substantiallydepresses the return on capi-tal for Tata Power as well ascarries the risk of considerablefuture impairment,” Mistryhad said in a letter to TataSons soon after his ouster onOctober 24, 2016.

Mistry investment firms file contemptpetition against TatasDEV CHATTERJEE

Mumbai, 11 January

The two investment companiesof the Mistry family, CyrusInvestments and SterlingInvestment Corporation, onWednesday filed a contemptpetition against Tata Sons, TataTrusts and their officials in theNational Company LawTribunal for violation of theNCLT order.

The contempt petition saiddespite assurances by Tatalawyers that they would not takeany action against Mistry (pic-tured), pending the hearing of apetition, Tata Sons has calledan extraordinary general meet-ing of its shareholders onFebruary 6 to remove Mistryfrom its board. This action, thepetition said, was against theNCLT consent order datedDecember 22 in which the Tatas

had promised they wouldn’t ini-tiate any action on Mistry’sremoval from the Tata Sonsboard.

But according to a specialnotice dated January 3, 2017 —received from four Tata trusts,which own 13.66 per cent stakein Tata Sons, and signed by itsexecutive trustee R Venkatara-manan — the trusts asked TataSons to convene a shareholdersmeeting to remove Mistry.

Following the notice, Tata Sonssent a notice dated January 5 toits shareholders to call an EGMon February 6 to remove Mistryas director.

In response to the contemptpetition filed by Mistry at theNCLT, a Tata Sons groupspokesperson said, “There is nocontempt. We will make oursubmissions to NCLT.”

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