B U S I N E S S

Trading in currency options soon: RBI
New Delhi, July 10
The Reserve Bank is likely to allow trading of currency options on bourses within a week, a senior RBI official said today. "Maybe another week or so (for the announcement)," RBI chief general manager Foreign Exchange Department (Trade) G Jaganmohan Rao told reporters here today. "As of now, they (currency options) are over-the-counter products. Soon, we will allow them on exchange platforms," Rao said, adding that the system will be regulated by the SEBI.

Investor Guidance
HUF can’t get gift from relative
Q: In your column that appeared in The Tribune dated 27-6-2010 you have replied on the matter that female can run HUF. The decisions quoted by you were delivered well before the amendment made in the Hindu Succession Act in the year 2005. With the amendments, the position of females has become even stronger. Thanks for such a timely response. Now, I am sending you a small query on gifts if accepted by HUF. As per Section 56(2)(v) of the Income Tax Act, an HUF can accept gifts from relatives so as not to be taxed under the heading Income from other sources.

Trading in currency options soon: RBI

Investor Guidance
HUF can’t get gift from relative
by AN Shanbhag

Q: In your column that appeared in The Tribune dated 27-6-2010 you have replied on the matter that female can run HUF. The decisions quoted by you were delivered well before the amendment made in the Hindu Succession Act in the year 2005. With the amendments, the position of females has become even stronger. Thanks for such a timely response.

Now, I am sending you a small query on gifts if accepted by HUF.

As per Section 56(2)(v) of the Income Tax Act, an HUF can accept gifts from relatives so as not to be taxed under the heading Income from other sources. The scope has been extended to several other items that earlier was restricted to cash only.

Who are the relatives in case of HUF from whom the gift may be accepted; whether of Karta, or of every coparcener or of every member of the HUF. Needless to say, every member of an HUF may not be coparcener but for the vice-versa.

My CA says that HUF cannot have any relative; hence this section is of no use for HUF; and the need to include HUF in this section was primarily to tax HUF if it gets gifts. Had HUF not been included in this section, HUF could get gifts and walk away without paying taxes.

Please elucidate on the correct position?

— Ashok Kumar Mittal

A: Yes, your CA is very much right.

The same Section defines “relative” to mean-

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

(v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual;

(vii) spouse of the person referred to in clauses (ii) to (vi);

Therefore, HUF cannot receive any gift from a relative over the stipulated limit of Rs 50,000.

However, it can receive a gift under a will or by way of inheritance or in contemplation of death of the payer or donor, as the case may be under sub-section ‘c’ and ‘d’ respectively.

Setting off losses

Q: I have recently sold a painting of S.H. Raza in the current financial year, with long-term capital gain (LTCG) of Rs 10 lakh. Kindly advise whether losses incurred/likely to be incurred from the following transactions will qualify for adjusting against the aforesaid LTCG.

Long-term capital loss (LTCL) from car purchased by me eight years ago for personal use, to be sold during the current financial year. LTCL from my eight years old desktop personal computer, to be sold during the the current financial year. STCL from shares to be purchased on cum bonus basis and then sold ex-bonus during the current year. Bonus shares with nil cost to be retained, thereby deferring the relative tax liability until sale of these bonus shares in subsequent years. STCL from sale of shares, brought forward from the previous financial year.

— Jagjeet Singh

A: LTCL from the car and from the desktop is not available for set-off since these are personal effects and not subject to tax. In other words, neither is any capital gain from such assets taxable nor is any capital loss eligible for set-off or adjustment. However, the STCL from shares sold in the current financial year as well as the STCL brought forward may most certainly be set-off against the taxable LTCG from sale of the painting.

HUF properties

Q: My father had a HUF with my brother, younger brother and youngest sister. After his demise the HUF properties would remain in his name only. With me being the eldest sibling, only the Karta would be substituted. Under the circumstances, do we have to do mutation or get new name in registrar of land records. Kindly advise.

— Randhir Saluja

A: We are a little confused when you state that the properties would remain in your father’s name. We feel that the properties are in the name of HUF and would continue to remain in the name of HUF. You being the eldest member of the family, you become the Karta. There is no need for mutation.

The authors may be contacted at wonderlandconsultants@yahoo.com

Aviation Notes
GoM to decide on Noida airport
by KR Wadhwaney

For the physical health of the Indian civil aviation, there is an urgent need to have Taj International Aviation Hub in Greater Noida, 75 km from the Indira Gandhi International Airport. There are man-made hurdles of distance, raised particularly by the consortium of the GMR's Delhi International Airport Limited (DIAL). But, feasibility or not, the new airport will rise only if there is perfect harmony between Mayavati's BSP and the Congress.

The re-convened meeting of the Group of Ministers (GoM) to discuss legal aspect of having an international airport within 150 km of the IGIA will be held on July 15. Apart from P.Chidambaram, H.R.Bharadwaj, Kapil Sibal and Praful Patel, all ministers, some legal luminaries have been invited to advise on legality issue after examining the contract signed between the Central Government and GMR undertaking.

According to aviation observers, the recommendations of the meeting will be merely 'advisory' as the final outcome for the airport in Noida rests in the lap of politicians.

True to the tradition, the international operations from the recently inaugurated Terminal-3 have been deferred from July 14 to July 28 and the national operations will start in August. This was exactly what had happened when the Terminal-2 of the IGIA was inaugurated in 1980s.

For the postponement of operations, there are two tunes. Airline officials say one thing, while DIAL hums altogether different tune. The fact is that the infrastructure is not 100 per cent operational and airlines have not been provided proper office accommodation.

The airlines have not been provided lounges, as assured. The lack of facility, they fear, will promote a lot of heart-burning and cause inconvenience to passengers. There are several other shortcomings which have forced the postponement of operations.

According to travel agents, they have been charging 'service tax' from passengers for flights from July 1. Why is this being done when services are not being provided to passengers from Terminal-3?

Keeping in mind welfare of 'aam aadmi', the government has refused permission to corporate bigwigs to construct private helipads on roof- tops.

"We may grant permission to government-sponsored units like hospitals, schools and colleges", the minister is stated to have said in his letter. But if government hospitals are allowed to have helipads, how can the Environment Ministry refuse hospitals owned by private sector.

The consensus, however, is that if one industrialist in Mumbai or anywhere is allowed to raise a helipad for his/her use on roof-top, the floodgates will open. There will be chaos in metropolitan cities and woes of common people will increase.