The Income Tax Appellate Tribunal (ITAT) in a recent judgment pertaining to a Mumbai-based Pranav Construction has allowed the deduction of extortion money. "We have to take a practical view of such matters and it is common knowledge that extra moneys are received in cash by builders in order to incur certain expenses which could not be recorded", ITAT had observed.

LEGAL POSITION
Scope of AAR authority
The scope of the Authority for Advance Ruling (AAR) has been extended to certain notified categories of resident tax payers. The move will facilitate these tax payers toseek AAR's opinion before actually making investments or clarifying the legal position before venturing in new areas.

YELLOW METAL
Higher duty on gold
The finance minister increases the import duty on gold from Rs 220 per ten grammes to Rs 250 per ten grams. ``Importers of precious yellow metal can certainly afford to contribute a bit more to the national exchequer,'' he said.

CROSS-CHECKING
Modvat credit restricted
The finance minister restricted the availability of Modvat credit by five per cent of the duty paid in case of inputs used in the manufacture of excisable goods. However, no restriction is placed on the modvat credit in respect of capital goods. Over the years the scheme of modvat credit has been considerably liberalised. However, the amount of modvat credit availed has grown unexpectedly fast in recent years, suggesting misuse of the modvat credit scheme in the absence of a comprehensive computer net work for cross-checking modvatable invoices froma-flung ranges.

ALLOWANCES
Duty-free baggage
The finance minister increased the duty free allowance for baggage from Rs 6,000 to Rs 12,000 for passengers returning to India after as stay exceeding three days. This is need to increase the present limit to reduce delays in clearance of passengers. Besides, he proposed to extend free allowance of Rs 3000 to Indian residents returning from Nepal, Bhutan, Myanmar or China by air, after a stay exceeding three days.

TAX-FREE
Mechanism to ensure fund use
Under the existing provisions, there is no mechanism to ensure that the tax free funds raised by an infrastructure enterprise are actually used for infrastructure development within a reasonable time and are not used for any other purpose. The budget proposes to provide such a mechanism.

RAISED
Standard deduction
The budget has enhanced the ceiling for salaried class with an income of upto Rs 1 lakh from Rs 20,000 to Rs 25,000. Basic tax exemptionlimit for personal rates of taxation has been raised from Rs 40,000 to Rs 50,000. On the other hand, standard deduction with those earning salaries of over Rs 5 lakh has been removed.

INCREASED
Norms for filing returns
The list for determining criteria for filing income tax returns has included two more items - holding of credit cards and membership to expensive clubs. Mandatory income tax return scheme has been extended to 23 more cities taking the total to 35.

EXPENDITURE TAX
Room rent limit up
The limit of room rent in hotels for the purpose of attracting expenditure tax is proposed to be increased from Rs 1200 to Rs 2000 per day in the finance bill for fiscal 1998-99.

CONCESSIONS
Medical expenses
The ceiling of tax-free reimbursement of medical expenses has been enhanced from Rs.10,000 to Rs.15,000.