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  • Tax Matters: Can loss from delisted shares be set off against capital gains?

    The partners must also declare that the LLP has no liabilities and indemnify any liability that may arise even after shutting down the LLP

    have some junk shares in physical and demat formats. These have been delisted due to various reasons including closure of companies. I do not know whether some amount can be retrieved by claiming long-term capital loss. I can sell some of these shares to adjust long-term capital gains (LTCG) against long-term capital loss (LTCL) arising out of such junk shares.

    — By G S Verma, email

    Shares that have delisted do not necessarily mean having no value. The holder can sell the shares for a very low value. Or he can get a declaration that they are worthless.

    When shares are sold at low value, LTCL is allowed to be set off against LTCG. Till 31 March 2018, LTCL was not allowed to be set off or carried forward on sale of listed equity shares and equity mutual fund units as the capital gains from these were exempt from tax. However, after 31 March 2018, LTCG on these instruments is no longer exempt from tax. Therefore, any LTCL booked on sale of these shares after this date can be used to reduce LTCG. After 31 March 2018, LTCG on them remain exempt up to Rs 1 lakh per annum. The income tax (IT) department clarified on 4 February 2018 that LTCL from a transfer made on or after 1 April 2018 will be allowed to be set off and carried forward in accordance with the existing provisions of the IT Act, 1961. Therefore it can be set off against any other LTCG and unabsorbed LTCL can be carried forward to subsequent 8 years for set off against LTCG.

    When the shares are worthless, no gains or loss arising from a capital asset can be recognized unless there is a transfer of the capital asset. A transfer takes place when there is a sale or buy-back of shares or liquidation of company. At this point, gain or loss can be recognised.

    A trader in shares can, however, claim the benefit of loss in the value of shares, as and when it occurs, because the business profit from the business of trading in shares is to be computed by factoring in the value of the closing stock of shares. These can be valued at the lower of the cost or market value.

    In a bout of enthusiasm, we formed a limited liability partnership (LLP). Unfortunately, not much progress has been made as the various procedures under the LLP Act, 2008, such as filing Forms 11 and 8 are very cumbersome. A heavy penalty of Rs 100 per day is levied for late filing. We are fed up and would like to shut down the LLP. What is a cost-effective procedure?

    — Uttam Singh, e-mail

    The Ministry of Corporate Affairs (MCA) amended the LLP Rules, 2009, by introducing the LLP (Amendment) Rules, 2017, from 20 May, 2017. LLP Form 24 has been introduced by the MCA. It is now possible to easily close an LLP by making an application to the Registrar of Companies to strike off the name of the LLP without completing the annual filing.

    LLP Form 24 can be filed only by LLPs that never commenced business or have ceased commercial activity at least for a period of one year. An affidavit must be executed by all the partners, either jointly or severally.

    The LLP partners must also declare that the LLP has no liabilities. They have to indemnify any liability that may arise even after striking the LLP's name from the register. The liability of the partners will not be extinguished even after closure of the LLP. The partners must state that the LLP had not opened any bank account. If opened, the account has been closed.

    A copy of latest income tax return, if any, has to be filed with the MCA. A statement of accounts, disclosing nil assets and liabilities and certified by a   chartered accountant up to a date not earlier than 30 days of the date of filing of Form 24 must be submitted to the MCA. The concerned ROC will ask for a notice to be published on the MCA website, announcing the striking off of the LLP. Hence, it is best for dormant or defaulting LLPs to use the opportunity to shut down their LLPs. 

    What are the changes under the goods and service tax (GST) law that are applicable from 01 April 2019?

    — Gunvant Suthar

    From 1 April 2019, an intra-state supplier can now pay GST at the rate of 6% (3% Central and 3% State GST) on the first supplies of goods or services for Rs 50 lakh. The scheme is available only if the aggregate turnover of the supplier did not exceed Rs 50 lakh in the previous financial year. The benefit of the scheme is not available to service providers rendering services in multiple states through e-commerce websites or paying tax under composition scheme and to casual taxable person or non-resident taxable person.

    The existing threshold limit on gross turnover in the previous financial year to avail of the composition scheme has been increased to Rs 1.5 crore from Rs 1 crore. For special category states, that is, north-eastern states, the threshold limit has been increased to Rs 75 lakh from Rs 50 lakh.

    As per Section 23 of the CGST Act, 2017, every person is required to obtain GST registration if his turnover from supply of goods or services exceeds Rs 20 lakh. The threshold limit has been increased to Rs 40 lakh if only goods are supplied. The exemption from GST registration is subject to various conditions such as the supplier is not making any inter-state supply and he is not a non-resident taxable person.

    The due dates for filing of GST return (GSTR) form 1 and GSTR-3B for April, May and June of 2019 have been notified.

    A registered person whose turnover is up to Rs 1.50 crore in the preceding financial year or current financial year has to file GSTR-1 quarterly (for April to June 2019). The due date is 31 July 2019. A registered person whose turnover exceeds Rs 1.50 crore has to file GSTR-1 every month. The due date is the 11th of the succeeding month.

    GSTR-3B has to be filed every month by every tax payer who is required to file GSTR-3B. The date is the 20th of the succeeding month.

    A transition plan to the new GST returns system has been worked out. The registered person can avail input tax credit (ITC) of GST paid from July 2017 to March 2018 by the due date of furnishing the return for March 2019, i.e., by 20 April 2019.

    At its 33rd and 34th meeting, the GST Council had recommended the GST rate of 1% for affordable houses and 5% for others without ITC. The promoters are given an one-time option to continue to pay tax at the old rates, i.e., 8% or 12%, with ITC, on ongoing projects, whose construction and bookings started before 01 April 2019, but have not been completed by 31 March 2019.The option is to be exercised once within a prescribed time-frame. If the option is not exercised within the prescribed time limit, new rates apply. However, the date of applicability of new tax rates is yet to be notified.

    Our public charitable trust intends to take a loan from bank against fixed deposits (FDs). Can you suggest amendments to the procedure for permission?

    — Pratayush Oza, email

    As per Section 36A of the Bombay Public Trust Act, 1980, trustees cannot borrow money, whether by mortgage of property or otherwise, for the purpose of or on behalf of the trust, except with the sanction of the charity commissioner and subject to such conditions as may be imposed by him in the interest or protection of the trust.

    Along with the application, several documents have to submitted to the charity commissioner such as schedule I, details of previous loans, resolution and details of loan repayment, need for the loan and copies of tax returns filed. Sometimes schedule I requires updation. The procedure takes a long time. Therefore, a trust may not get the loan due to procedural delays.

    Borrowing of money from bank against the security of FDs for acquisition of assets or to meet expenses of the trust should not require permission. Automatic permission should be available. Such borrowing is preferred to premature encashment of FDs as the interest to be paid is less than the loss of interest that is caused by premature encashment of FDs.

    Similarly, when borrowing from bank does not exceeding 10% of the value of the assets of the trust for the purposes of the activities of the trust or for acquiring assets of the trust, no prior permission should be required.

    Alternatively the process for permission, if any, should be made online, with the form and the list of documents required duly prescribed in the rules. There should be a time limit of 30 days for disposal of such applications.

     I am a 75-year-old retired government servant and want to open a Public Provident Fund (PPF) account in my name, with my daughter, aged 46 years, as nominee. Suppose the account holder dies after two yrs of subscription. Will the nominee have to wait for completion of 15 years to get the accumulated amount in the PPF account? Can the nominee continue to subscribe to the PPF for the remaining period if she desires?

    — By S K Agrawal, email

    On death of a subscriber, the balance in the PPF account is paid on demand to his nominee or successor. To claim the PPF amount, Form G has to be submitted along with the passbook and death certificate.

    Excess amount deposited in a PPF account after death of the subscriber will not attract any interest and will be returned as it is. However, the balance, if not withdrawn, continues to earn tax-free interest. The nominee or legal heir is not allowed to continue the PPF account by making fresh contributions.


    Our charitable trust demolished an old building and reconstructed another one for which permission of the charity commissioner was not taken. Now we want to sell the property. Can you draft suggestions for elimination of permission for sale of property?

    — Trikok Pradhan, e-mail

    Trustees can sell trust property if it is provided in the trust deed. But the sale cannot take place and the sale deed cannot be registered without the permission of the charity commissioner. The process is cumbersome and time-consuming.

    Prior permission is not required from the charity commissioner for sale of property under Section 36 of the Bombay Public Trust Act, 1950, if the property is sold after inviting bids, the stamp duty valuation is less than Rs 1 crore and the sale price is higher than the stamp duty valuation of the property.

    Permission is not required by the owner trust for demolition of a building that is more than 40 years old and the trust is getting the building reconstructed unless there is an alienation of any rights in the reconstructed property.

    Currently, leasing of property for more than three years is regarded as alienation of immovable property for the purposes of Section 36. Leave-and-licence agreements for a period of up to five years should not be regarded as alienation of immovable property.

    There should be a time limit for disposal of applications for alienation of property under Section 36, say, of 90 days from the date of filing the application along with all required documents. The list of documents required along with such application should be specified in the rules. The time limit should operate from the date that all such documents are filed.

    The entire process should be made online to minimise the interface between the officials of the charity commissioner and the trustees.

    The replies are only in the nature of guidelines. The tax counsellors and the publication are not responsible for any decision taken by readers on the basis of the same. Readers may e-mail their queries on direct taxation to: tax-matters@capitalmarket.com

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Flash News 05-Mar-2021
  •  ( 15:55) Shilpa Medicare gets USFDA nod for arthritis drug  
  •  ( 15:54) Sun Pharma subsidiary to acquire 12.5% stake in WRS Bioproducts  
  •  ( 15:54) Indiabulls Housing allots $150 million foreign currency convertible bonds  
  •  ( 15:54) European shares trading lower  
  •  ( 15:53) Asian markts close on a negative note  
  •  ( 15:53) Nifty closes below 15,000 mark  
  •  ( 15:53) Coal India declares second interim dividend  
  •  ( 15:52) Sensex drops 440 pts amid weak global cues, firm crude oil prices  
  •  ( 14:13) BEML appoints Deloitte Haskins & Sells LPP as consultant for demerger of non-core assets  
  •  ( 13:35) The Nifty index holds its 15,000 mark  
  •  ( 13:34) Indices experience intense volatility; metal and bank stocks in demand  
  •  ( 11:34) PVR launches 6-screen property in Forum Centre City Mall, Mysuru  
  •  ( 11:28) Equity indices trade sideways with losses  
  •  ( 10:49) PNB Housing Finance, Yes Bank join hands to offer customized retail loans  
  •  ( 10:10) Heranba Industries lists at Rs 900 per share vs issue price of Rs 627 apiece  
  •  ( 09:52) Dilip Buildcon receives LoA for two Karnataka-based projects  
  •  ( 09:45) BCPL Railway Infrastructure bags a LoA from Railway Vikas Nigam  
  •  ( 09:29) Positive market breadth  
  •  ( 09:25) Nifty drops below 15,000   
  •  ( 09:24) ISGEC Heavy Engg. secures a deal from Shree Cement to set up boilers  
  •  ( 09:22) Wipro acquires London-based Capco for $1.45 billion  
  •  ( 09:19) Market trading lower in early trade  
  •  ( 08:15) OPEC+ extends most oil output cuts into April  
  •  ( 08:09) US stocks drop on Thursday as Powell fails to ease rate fears  
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