Section 8DDB introduced by the Finance (No.2) Act, 1996 wef 1.4.1997 provides for deduction of expenditure on medical treatment of prescribed diseases or ailment up to Rs 15,000 incurred by a tax payer for self or a dependent relative or any member of a HUF (where the assessee is an HUF) in the relevant previous year. Have the diseases/ailments been prescribed for which such deductions can be claimed?

R Dayal, Kanpur

Yes. The diseases listed are dementia, dystonia musculorum deformans, motor neuron disease, ataxia, chorea, hemibalalismus, alphasia and Parkinsons disease under the category of neutrological diseases. Cancer, full-blown acquired immuno-deficiency syndrome (AIDS), chronic renal failure, hemophilia and thalassaemia. To claim the deduction, the tax payer will have to submit a certificate in the prescribed form from a doctor with post-graduate qualifications and registered with Indian Medical Association.

I am a member of a scientific research centre which is being run for improving the quality of spices like chillies and black pepper. We provide consultancy for growing better quality of products, their preservation, grinding, marketing and improvement of yield. In return, we receive fees from the persons who seek our assistance. Are the fees received by us liable to tax under the I-T Act?

B Saroja, Visakhapatnam

Section 10(21) states that income of a scientific research association which is approved for the purpose of clause (ii) of sub-section (1) of section 35 is entitled to exemption. However, there are certain conditions in order to claim this exemption. These include application of such income wholly and exclusively to the objects for which the association is established and the accumulated income is utilised for the objects within prescribed time period. Also these should be invested or deposited in the prescribed modes and forms.

What conditions are required to be satisfied to claim exemption for educational institutions provided for under section 10(22) of the I.T. Act, 1961?

R K Pandey, Chennai

The latest pronouncement on this issue is from Authority for Advance Ratings. In Educational Institute of American Hotel & Motel Association v CIT (1966) 132 CTR (AAR)40, this Authority has analysed section 10(22) and has laid down the following conditions precedent to the availability of exemption as under

(i) The educational institution must actually exist for the application of the said section and the mere taking of steps would not be sufficient to attract the exemption;

(ii) the educational institution need not be affiliated to any university or board, in fact a society need not itself be imparting education and it is enough if it runs some schools or colleges;

(iii) The educational institution must exist solely for educational purposes and not for purpose of profit; but merely because there is a surplus, it cannot be said that the educational institution exists for profit;

(iv) An entity may have income from different sources; but if a particular income is from an educational institution which exists solely for educational purposes and not for purpose of profit, that income would be eligible for exemption.

It may be mentioned that in contrast to section 11, the exemption is in respect of the whole of the income of the assessee and not restricted to such income applied or accumulated for charitable purposes under section 11 and in this view the scope of section 10(22) is much wider than that of section 11-vide Birla Vidhya Vihar Tru st v Saraswath Poor Students Fund (1984) 150 ITR 142 (Karn).

I am a person of 68 years of age and my income from profession is approximately Rs 5000 per month.

My other incomes are: Bank Interest, 30000; Dividends, 10000; Income from property, 50000; (net after admissible expenses); Total Income: 150000. What would be my tax liability for the assessment year 1998-99?

R D Mahajan, Delhi

Total Income, 1,50,000; Less Exemption u/s 80L, 15,000 —- 1,35,000; Tax on Rs 1,35,000 -- 17,000; Less rebate u/s 88B, 10,000; Net tax payable 7,000This comes to roughly 4.6 per cent of the total income of Rs 1,50,000If a sum of Rs 35,000 is invested in Public Provident Fund or NSC's (VIIIth issue) are purchased for this sum, the tax liability would get reduced to zero.

Can an assessment for income tax in Kerala in the status of a Hindu individual be made?

R Subramanian, Ernakulam

With effect from 1.12.1975 it is not permissible for revenue to continue to make assessment in the status of Hindu undivided family in Kerala after commencement of the Kerala Joint Hindu Family System Abolition Act, 1975, with effect from 1.12.1975.

Several Division Benches of the Kerala High Court have consistently taken the view that after the commencement of Kerala Joint Hindu Family System (Abolition) Act, 1975, it is not permissible or open to the income tax department to continue to make assessment in the status of the Hindu undivided family.

I am a partner in a firm with 25 per cent share in profit and losses. I withdrew from the firm with effect from 1.4.95. The gift tax officer has issued me a notice for filing gift tax returns on the ground that I have foregone my share in the firm without a corresponding benefit or consideration and therefore I am liable to gift tax on the value of foregone share and hence I should file a return of gift tax. Is his view correct?

Don De-silva, Panjim

No. There are a number of decisions where no liability for gift tax has been said to arise on withdrawing from a firm (See D C Shah v CGT (1981) 134 ITR 492 (Kar) & CGT v J N Marshall (1979) 120 ITR 613 (Bom). The reason for this view is that a retiring partner loses his right to share in future profits and as such the share forgone ceases to have any value.

I am a director in a company having substantial interest in the company as per the provisions of the I-T Act. The Company decided to dispose of some transport vehicles and I purchased these from the company on written down value. However on the date of sale, the market value of these vehicles was much higher than the written down value. Is any income tax angle involved in such a transaction?

R K Mehta, Mumbai

Yes. The difference between the fair market value and the price paid is benefit liable to tax in view of section 2(24)(iv). For invoking this section it is not necessary that the director should be an employee of the company.

The intention of the legislature is to tax any benefit if it is received by a director or by a relative of the director or such person, who is having substantial interest in the company, irrespective of the fact whether the director is an employee or the benefit received is in the nature of capital or there is any direct receipt in the transaction or whether there is any detriment to the company or not in the transaction or whether section 52(2) was held to be not applicable in the case of the company, since there was no extra consideration actually passed, under the provisions of section 2(24 (iv) as deemed income.

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