section 10(33),40A(2), 40A(3), 145

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arjun (Querist)
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10 December 2008 Dear Sir/Madam,

I have following Income Tax Queries:

1) A closely held pvt. ltd. company redeemmed its listed mutual funds invetments, whether it would be exempt from tax u/s. 10(33)?

2) How to value closing stock of Share broker? Would AS-13 be applicable?

3) During the year company paid Rs. 35000 in cash of outstanding bal. of 45000 (single bill)creditor, whether 35000 would be disallowed or Rs. 45000?

4) During the year company paid Rs. 25000 in cash against bill of Rs. 25000. The purchase made from relative. The Amount dissallowed u/s 40A(2)Rs. 8000? What would be amount dissallowed u/s 40A(3)?

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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10 December 2008 1) 10(33) covers only US64. So mutual fund redeemed by you are not exempt under this section.

3). Rs. 35000 is disallowed.

4). Rs. 25,000 will be disallowed u/s 40A(3).

srinivasan pooranalingam

srinivasan pooranalingam (Expert)
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10 December 2008
1. Yes, the gain arising from redemption of units is exempt u/s. 10 (38) of the IT Act, 1961.

2. Lower of cost or net realizable value, if it is held as stock-in-trade. If it is held by the share broker as an investment, the valuation of which should be done in accordance with AS-13 on "Investments"

3. Rs. 35,000 shall be disallowed

4. After disallowing Rs. 8,000/- u/s. 40 (A) (2), the remaining bill amount is Rs. 17,000/-. Section 40(A) (3) would not attract in this case, as the payment towards the bill amount has not exceeded Rs.20,000/-