Mentoassociates.com – Legal Articles

1.What are capital assets?
A.Capital assets are properties of any kind held by a person whether or not connected with his business or profession.

2.What is capital gain?
A.Any profit or gain arising from transfer of capital asset is capital gain.

3.Which are the two types of capital gains?
A.Short term capital gain and long term capital gain.

4.What is Short term capital gain?
A.Capital gain accrued by the transfer of a capital asset (shares or securities within one year and other properties within three years of acquisition) is called short term capital gain.

5.What is long term capital gain?
A.Capital gain accrued by the transfer of a capital asset (shares or securities after one year and other properties after three years of acquisition) is called long term capital gain.

6.How is capital gain calculated?
A.Capital gain = ( full value of consideration received on transfer)- ( cost of acquisition of capital asset + cost of improvement of capital asset+ expenditure incurred  in connection with transfer of capital asset).

7.What are the ways to minimize the incidence of capital gain?
A.The ways to minimize the incidence of capital gain are (i) by investing in capital gain bonds (ii) by reinvesting in residential properties.

8) What is the rate of income tax on a short term capital gain?
The short term capital gain is calculated along with the other sources of  income of the assessee and is subjected to a maximum  tax rate of  30%.

9) What is the rate of income tax on a long  term capital gain?
The long  term capital gain is subjected to a tax rate of  20%.

10) What are the transfer related expenditures which can be minimised from the sale value of an asset for the calculation  of capital gain?
a.Brokerage charges
b.Stamp duty and registration fee
c.Travel expenses

11) What is the formula to find the indexed cost of acquisition of a capital asset in the case of long term capital gain?

Cost of acquisition= Cost of purchase x CII(Cost Inflation Index) of current  year
—————————————————————
CII of Purchase year

12) Are cost of acquisition and cost of improvement indexed in the case of a short term capital gain?
No.

13)What are the exemptions of agricultural land from capital gain?
Capital gain from sale of agricultural land is exempted from tax subject to the following conditions:
a.Land should have been used by the assessee or his parents for agricultural purposes for the last two preceeding years.
b.The assessee shall purchase agricultural land within 2 years from the date of transfer and shall not sell the same for three years .
c. If the assessee does not purchase the agricultural property within 2 years, he may deposit the capital gain in the CGAS(Capital Gain Account Scheme) of the specified bank.

14) How can  long term capital gain from transfer of a residential unit minimised?

a.As per section 54, if the assessee within a period of two years after the transfer  or one year before the transfer  of the property purchase a residential house, then the capital gain tax will be exempted.

b.If the assessee within a period of three  years after the transfer   of the property construct  a residential house, then the capital gain tax will be exempted.

c. The assessee shall not transfer the new house within a period of three years from the date of its purchase or construction.

d. If the capital gain cannot be reinvested as above them the same shall be deposited in CGAS to claim exemption.

15)  How can  long term capital gain from transfer of a non residential asset minimised?
a.As per section 54F, if the assessee within a period of two years after the transfer  or one year before the transfer  of the property, purchase a residential house, using the net consideration, then the capital gain tax will be exempted.

b.If the assessee within a period of three  years after the transfer   of the property construct  a residential house, using the net consideration,  then the capital gain tax will be exempted.

c.However the assessee shall not own more than one residential house.
d. The assessee shall not transfer the new house within a period of three years from the date of its purchase or construction.
e. If the net consideration cannot be reninvested as above then the same shall be deposited in CGAS to claim exemption.

1. What are the circumstances in which a partnership firm is compulsorily dissolved?

A. A firm is dissolved-
       a) By the adjudication of all the partners or of all partners but one as insolvent or,
       b) By the happening of any event which makes it unlawful for the business of the firm to be carried on or for the      partners to carry it on in partnership.

2. What are the contingencies on the happening of which a partnership firm is dissolved?
 
A. Subject to contract between the partners a firm is dissolved –
a) If constituted for a fixed term, by the expiry of that term
b) If constituted to carry out one or more adventures or
    undertakings by the completion thereof.
c) By the death of a partner.
d) By the adjudication of a partner as an insolvent.

3. What is meant by partnership at will?
A. Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is said to be at will.

4. How can a partnership at will be dissolved?
A.Where the partnership is at will the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

5. For a partnership at will when is the firm treated as dissolved?
A. The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.

6. What are the circumstances in which a court can dissolve a partnership firm?
A. At the suit of a partner, the Court may dissolve a firm on any of the   following grounds, namely:
a) That a partner has become of unsound mind.
b) That a partner, other than the partner suing, has become in any way    permanently incapable of performing his duties as partner.
c) That a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business.
d) That a partner, other than the partner suing, willfully or persistently commits breach of agreement relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conducts himself in matter relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him.
e) That a partner, other than the partner suing has in any way transferred the whole of his interest in the firm to a third party.
f) That the business of the firm cannot be carried on save at a loss.
g) On any other ground which renders it just and equitable that the firm should be dissolved.

7. What is the extent of liability of partners for acts done after dissolution?
A. After the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution until public notice is given of the dissolution.

8. What are the instances where the authority of the partner to bind the firm and mutual rights and obligations of the partner continue even after dissolution?
A. After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise.
                 
9. Can a partner carry on similar business using firm’s name?
A. After a firm is dissolved, every partner or his representative may in the absence of a contract between the partners to the contrary, restrain any other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up.

            Provided that where any partner or his representative has bought the goodwill of the firm, the said partner can use the firm name.

10. What is meant by goodwill of a firm?
•It is the value of reputation and connection which a firm establishes over time due to its integrity, efficient services to customers, quality of its products, industry etc.
•It is a commercial rather than a legal term.
•Supreme Court has held that the goodwill is an intangible asset of a firm. It is the whole advantage whatever it may be of the reputation, and the connections formed with the customers together with the circumstances which make the connections durable. 
 

11. Can a partner who has bought the goodwill of the firm, use the firm name after dissolution of firm.
A.Yes.

12. What happens to a partnership firm of 2 partners when one of the partners resigns?
A. It gets dissolved.

13.Under what circumstance the individual asset of a partner becomes a partnership firm asset?
To be treated as partnership firm property, the individual property of a partner needs to be explicitly agreed by the partner to be brought in as a partnership asset.
Even if a partner uses his personal property to do business of the firm, it does not become a property of a firm unless he specifically agrees to do so.

1) How are children affected by Divorce?
Ans) A Divorce cuts off the relationship between the husband and wife. But no Divorce order can cut off the relationship between the parents and the children. Socially and emotionally, children of divorced parents will have trauma and injury. Irrespective of the custody of children with one parent after Divorce, the other parent will have an access and visitation rights over the children.

2) How to file for a Divorce?
Ans) A Divorce needs to be filed in a jurisdictional family Court, preferably with the assistance of an expert family lawyer. The following points need to be kept in mind before filing of a Divorce petition.
a)Whether the particular court has jurisdiction.
b) Whether any waiting period is there before approaching the court.
c) Whether the petition is under the correct provision of Law.
d) Whether sufficient grounds are urged in the petition.
e) Whether sufficient documents are produced along with the petition.
f) Whether the prayer is properly worded.

3) What are the documents required for a Divorce petition?
Ans) The following are the basic documents required for a Divorce petition in India:
a) Marriage photo
b) Marriage invitation card
c) Marriage certificate (if the same is registered)

4) How long does it take to get a Divorce in India?
Ans) A mutual consent Divorce petition may take about one month if the waiting period of 6 months is dispensed by court. If waiting period is not dispensed, it may take about 7-8 months.
             For a contesting Divorce petition, it may take about 1-1 ½   years to conclude. An exparte Divorce proceeding may conclude within 6-9 months.

5) What is an exparte Divorce petition?
Ans) On filing of a Divorce petition, the Court will issue a notice to the other party for appearance. After the receipt of the notice, if the other side does not appear in the court, the court declares the matter as exparte. Thereafter the matter will proceed purely in a one sided manner and the Court will pass the decree accordingly.

6) How can I find out if a Divorce has been filed?
Ans) By enquiry in the family register of a family court one can find out whether the Divorce has been filed or not.

7) How long should I wait to remarry after Divorce?
Ans) One has to wait for the appeal period to remarry after the decree of Divorce. In India the appeal period is normally 90 days.

8) Are fathers entitled for the custody of children during Divorce?
Ans) A Divorce proceeding normally ends with a decision on the custody of the children. With whom the welfare of the children is best protected, is the yard stick that decides the custody of the children. As per most of the Indian personal Laws, father is the natural guardian of the minor. However mothers are usually preferred by Indian Courts to give the custody of the children. However this does not rule out entitlement of the father to get the custody of the children in appropriate cases.

Registration of an FIR is not mandatory for a person to approach the court of law for an order of anticipatory Bail. There are various citations of Supreme Court and High Courts in this regard.   Even in the absence of a pending criminal complaint against a person, if such person has an apprehension of arrest, he can approach the Sessions court or High court for an order of Anticipatory Bail. The apprehension of arrest may be elicited from the facts and circumstances of the matter, conduct of respondent police, the acts and communications of the potential complainant etc. On the whole, the applicant must convince the court, primarily that there is every likelihood for a criminal complaint to be lodged against him and the probability of respondent police arresting him based on the said complaint.

             An applicant cannot expect a blanket order from the court granting Anticipatory Bail. The applicant need to specify in his application the probable sections under which his opponent  may file a complaint against him,  which is even more difficult in comparison to a scenario where the complaint is already registered against him. This is because, if a complaint is already registered against the applicant, then the applicant as well as the court,  both are  convinced as to what are the sections which constitute the alleged offence. However in a case where the FIR is not yet registered, it is left to the mental exercise of both the applicant as well as the court to figure out the probable offence.
                                  
             The requirement of spelling out the exact provisions of the offence in an application for Anticipatory Bail may cause a technical difficulty for the applicant.  For instance if a court grants anticipatory bail to an applicant for an offence punishable under certain penal sections, his opponent can still trap him by lodging a complaint under some other sections. This dilutes the effect of the result got by the applicant. However the applicant is entitled to file for a fresh anticipatory bail and the obtainment of previous anticipatory bail will definitely be a plus factor while considering the second bail application.

             Similarly in matters where the FIR is not yet registered, courts have a tendency to grant anticipatory bail for limited periods like 45 days, 60 days etc. This again puts the applicant into some inconvenience, as his opponent may wait for the period to elapse for filing a complaint against him. In such a scenario the applicant can file one more application and obtain an anticipatory bail. The earlier anticipatory bail will definitely assist him in the obtainment of a new anticipatory bail. 

Prize chit means any transaction under which a person collects monies in one lump sum or in installments by way of contributions or subscriptions in respect of any savings, mutual benefit, thrift, or any other scheme or arrangement or the income accruing from investment or other use of such monies for all or any of the following purposes, namely:-
(i) giving or awarding periodically or otherwise to a specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or in hand, whether or not the recipient of the prize or gift is under a liability to make any further payment in respect  of such scheme or arrangement ;
(ii) refunding to the subscribers or such of them as have not won any prize or gift, the whole part of the subscriptions, contributions or other monies collected, with or without any bonus, premium interest or other advantage by whatever name called, on the termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional chit.

The act bans prize chits and money circulation schemes or enrolment as members or participation therein. If any body indulges in such activities they shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both.

If an offence under this Act is committed by a Company, every person who, at the time the offence was committed was in charge of and was responsible to the  company for conduct of business of company as well as the company shall be liable for prosecution. The offences punishable under this act shall not be tried by a court inferior to that of a Chief Metropolitan Magistrate. All offences punishable under this act are cognizable offences

A police officer not below the rank of an officer in charge of a Police Station has the power to enter any premises connected with the promotion / conduct of any price chit or money circulation scheme, in contravention of provisions of this act. The Police Officer has also the power to search the said premises and the persons present there. He has the power to take into custody persons found in such premises and produce them before judicial magistrate. The Police Officer has also power to seize things used for such price chits or money circulation schemes.

If a newspaper contains any material connected with any price chit or money circulation scheme, the State Government has the power to forfeit the same.

Nothing contained in this act applies to price chits or money circulation schemes promoted by the Central Government, Company owned by a State Government, Banking Company and Charitable or Educational Institutions notified in this behalf by the State Government.

The copyright Act, 1957 amends and consolidates the Law relating to copyright in India. Copyright shall subsist throughout India for the following classes of works.
a) Original literary, dramatic, musical and artistic works.
b) Cinematograph films,
c) Sound recording
Copyright means the exclusive right to do or authorize the doing of any of the following acts in respects of a work or any substantial part thereof, namely:
a) In the case of literary, dramatic or musical work, not being a computer program:-
1.To reproduce the work in any material form including the storing of it in any medium by electronic means;
2.To issue copies of the work to the public not being copies already in circulation;
3.To perform the work in public, or communicate it to the public;
4.To make any cinematograph or sound recording in respect of the work.
5.To make any translation work;
6.To make any adaptation work;
b) In the case of computer program:-
1.To do any of the acts specified in clause a.
2.To sell or give on commercial, rental or offer for sale or for commercial, rental any copy of the computer program, provided that such commercial rental does not apply in respect of computer program where the programme itself is not the essential object of the rental.

The author of a work shall be the first owner of copyright therein. The owner of the copyright in an existing work or the prospective owner of the copyright in a future work may assign to any person the copyright either wholly or partially provided that in the case of assignment of copyright in any future work the assignment shall take effect only when the work comes into existence. The author of a work may relinquish all or any of the rights comprised in the copyright in the work by giving notice in the prescribed form to the Registrar of copyrights.

Copyright shall subsist in any literary, dramatic, musical or artistic work (other than a photograph) published within the lifetime of the author until sixty years from the beginning of the calendar year next following the year in which the author dies.

In the case of a literary, dramatic, musical or artistic work (other than a photograph) which is published anonymously or pseudonymously, copyright shall subsist until sixty years from the beginning of the calendar year next following the year in which the work is first published.

In the case of a photograph, copyright shall subsist until sixty years from the beginning of the calendar year next following the year in which the photograph is published.

In the case of a cinematographic film, copyright shall subsist until sixty years from the beginning of the calendar year next following the year in which the film is published.

In the case of a sound recording, copyright shall subsist until sixty years from the beginning of the calendar year next following the year in which the sound recording is published.

The profession tax in Karnataka is levied through the ‘Karnataka Tax on Professions, Trades, Callings and Employments Act 1976’, in the state of Karnataka. All taxes levied under the said Act are known as profession tax. The state of Karnataka is empowered to levy and collect the tax on professions, trades, callings and employment. Every person who exercise any profession or calling or is engaged in any trade or holds any appointments (public or private) is liable to pay the profession tax.

People who have attained 65 years of age are exempted from paying profession tax. If the person exercise a profession for a period less than 120 days in an year, then he is not liable to pay profession tax in that year. The liability is on the employer to deduct the tax from the salary or wage of the employ and to pay the tax to the Government.

Every employer who is liable to profession tax shall obtain a certificate of registration from the assessing authority.

Every employer shall furnish to the assessing authority, within 20 days of the expiry of a month, a statement showing the salary and wages of his employees and the profession tax deducted by him during the preceding month. Every such statement shall be accompanied by a treasury challan, in proof of the payment of the full amount of tax due mentioned in the statement.

Every employer who has a registered certificate shall furnish the returns to the assessing authority in the prescribed form within 60 days of the expiry of the year.

If the assessing authority is not satisfied that the return filed by an employer is correct and complete, then the assessing authority has the power to assess the amount of tax payable by the employer and pass necessary orders in this regard. However the assessing authority shall given an opportunity of being heard to the employer before coming to his decision.

If an enrolled person or a registered employer fails, without reasonable cause, to make payment of any of tax within the required time or date, the assessing authority may impose upon him a penalty not exceeding fifty percent of the amount of tax due.

Any person or an employer, who without sufficient cause, fails to comply with any of the provisions of this Act, or the rules framed there under shall, on conviction, be punished with fine up to 5000 rupees .When an offence is committed by a company, every person who at the time the offence was committed, was in charge and was responsible for the company for the conduct of the business of the company shall be deemed to be guilty of the offence.

The assessing authority has the power to permit any person charged with an offence to compound the offence on payment of a sum not exceeding double the amount of the tax. Compounding can be permitted either before or after the institution of the prosecution.

Local authorities are not entitled to levy any tax on professions, trades, callings and employments.

Mortgage is the transfer of an interest in an immovable property. The interest may be transferred for the purpose of:
a.Securing the payment of money advanced.
b.Securing the payment of money to be advanced by way of loan.
c.Securing the payment of an existing or future debt.
d.Securing the performance of an engagement which may give rise to a monetary liability.

The person who transfers the interest in the immovable property is the mortgagor, the person to whom the interest is transferred is the mortgagee .The instrument, if any, by which the transfer is effected is called mortgage deed. There are various types of mortgage like simple mortgage, mortgage by conditional sale, usufructuary mortgage, English mortgage, Anomalous mortgage, mortgage by deposit of title deeds etc.

In a simple mortgage, the possession of the mortgaged property is not delivered by the mortgagor. However, in the event of the mortgagor failing to pay the mortgage money, according to the contract, the mortgagee shall have a right to sell the mortgaged property and to realize the mortgage money from the sale proceeds. In a usufructuary mortgage, the mortgagor delivers the possession of the property to the mortgagee. The mortgagee can retain the possession till payment of the mortgage money by the mortgagor. The mortgagee can receive the rents and profits, accruing from the property, and appropriate the same in lieu of interest or in payment of mortgage money.

In a mortgage by deposit of title deeds, a person delivers to a creditor or his agent documents of title to an immovable property with intent to create a security thereon. A mortgage where the principle money secured is more than Rs 100/- can be effected only by a registered instrument. However this is not applicable in the case of mortgage by title deeds.
A mortgagor has a valid right called right to redeem. This means that, at any time principle money has become due, the mortgagor has a right on payment of the mortgage money, to require the mortgagee:

a) to deliver to the mortgagor,  the mortgage deeds and all documents relating to the mortgaged property in his possession.
b) to deliver possession of mortgage property to the mortgagor and to retransfer the  mortgaged property.

A mortgagor who has executed two or mortgages in favour of the same mortgagee, shall be entitled to redeem any one of such mortgage separately, or any two or more of such mortgages together.If any accession or improvement has happened to the mortgaged property during the possession with the mortgagee, then the mortgagor will be entitled to such accession and improvements upon redemption.

TDS stands for Tax deducted at source. Normally payment providers withhold some amount of tax from payments such as salary, commission etc, before the payment and remit such tax to the government. If an asssesee’s income is below the taxable limit and if payment provider insists on tax deduction, then the assesee can file the necessary forms and avoid the tax liability.
The tax deducted at source should be remitted by the deductor to the Government within the time period allowed. To pay the tax deducted into the Government account, a separate Tax Deduction Account Number (TAN) needs to be obtained by the deductor.
Non remittance or misuse of the tax deducted at source is an offence. It may be punishable by imprisonment up to 7 years. The person who deducts tax is liable to issue TDS certificate in form 16 or 16A to the assessee, who can include the same during his tax payment.
Some of the incomes which are liable for tax deducted at source include Salaries, Interest on securities, Dividends, winnings from lotteries or cross puzzle or horse race, Payment to contractors and sub-contractors, Insurance commission, Payments to non resident or sports association, Deposits under NSS, Payments on account of repurchase of units by mutual fund or UTI, Commission on the sale of lottery tickets, Commission or brokerage, Rent, Fee for professional or technical services, etc.

There is a huge demand from public for Bangalore Development Authority (BDA) sites, directly allotted or for second purchase. A site allotted by BDA which is a governmental authority inspires confidence and trust in the mind of public. In this article let us see the formalities for obtaining a site from BDA.
The eligibilities for applying for a BDA site are that the applicant should have minimum 15 years domicile in Karnataka and should be more than 18 years old. For officers belonging to All India Services of Karnataka cadre the domicile period required is a minimum of 2 years. Persons whose family members or dependents own a site or house allotted by BDA or a Co-operative Society or KHB or other government agencies are not eligible to apply for allotment of sites.
Abound 50% of the sites are reserved for backward tribes, SC/ST people, defense personnel, State and Central government employees, public sector employees, physically handicapped and for those who have excelled in the field of arts, science or sports. Rest 50% is meant for general public.
Applicants are selected based on seniority, category, number of earlier attempts, age factor etc. The allottes are given 60 days time period to pay the sital value without interest. After 60 days time period, the amount can be paid with interest.  For alottees belonging to SC/ST and defense personnel, 3 years time period is given for payment of sital value.