-- Prakash Devatha, MUMBAI

The 10 per cent relief bonds may be attractive to you, but as far as I am concerned, they have lost their erstwhile glitter. In the wake of the possibility of earning around 12 per cent per annum by way of pure growth on which the concessional tax treatment of long-term capital gains is available, it has now become possible to reduce the tax liability to nil level (taking advantage of Secs. 54EA or EB), irrespective of the size of your investible funds. Obviously, the rate of 12 per cent after-tax is better than 10 per cent tax-free. All that you have got to do is to use Sec. 54EB to save tax on long-term capital gains. Incidentally, the ceiling of Sec. 88 has been increased to Rs 70,000with Rs 10,000 specially reserved for infrastructure instruments and more importantly, the rate on RBs has been reduced to 9 per cent.

I have purchased under Power of Attorney a flat of GDA in Vaishali in February 1994. Its yearly installment of Rs 14,000 consists of Rs 8,000 interest and Rs 6,000 towards part payment of the capital borrowed. The receipt of GDA would be in the name of the original allottee. Am I entitled to set off the interest paid by me of Rs 8,000 against my other income? Can I claim tax rebate of Rs 6,000?-- S Goyal, NEW DELHI

The payments made by you as a PA holder are on behalf of the original allottee and therefore, you cannot claim both these benefits. Even the original allottee cannot claim these benefits because he has not incurred the costs and the contribution has not been made out of his income chargeable to tax.

A few years ago my mother expired, leaving an ancestral house with some land. When she was alive, she had expressed her desire on many occasions to me,to my brother, many family members and friends that she would like to bequeath the house to my brother and his family. This was a reasonable wish since I have enough assets of my own and comparatively, my brother is not as affluent. Unfortunately, she expired without putting this wish formally in a will. After her demise, I have let my brother and his family use the house for all these years. The property still stands in my mother's name since no one in the family did feel the need to get it transferred. The property is now worth around Rs 35 lakh and my brother is interested in selling it. I am afraid that I will have to pay gift tax on Rs 17.5 lakh since I feel that legally, I have half the share in the property. Your comments please.

-- R Jacob, MUMBAI You are very lucky. The Finance Act 98 deleted the gift tax clause. No need to worry any longer. You may, however, have to pay capital gains tax as and when the house is sold. I suggest that you make an affidavit and declare that you have nointerest in the house and even if you have, you gift it to your brother.

May I request you to throw some light on Morgan Stanley MF for their public issue on 1.1.94 wherein they collected more than Rs 900 crore.

Although five years have passed, they have paid nothing to the investors and keep constant silence and enjoy. At present NAV of their scheme might not be more than Rs 5. In this respect, neither RBI nor Sebi are taking any action and nobody appears to be bothered. The poor investors are in doldrums.

-- Kanaiyalal Deora, MUMBAI

At the launch of Morgan Stanley issue, I had commented ``why go for a foreign make when an indigenous product of equal quality, if not better, is available''. Neither RBI nor Sebi can take any action in this matter as there is no scam or fraud. The market has been in an unprecedented rut for the last four years and many equity-based schemes launched during 1994-95 have performed poorly.

However, please note that Morgan Stanley MF is managed by capableprofessional persons doing their job sincerely. You will be happy to note that the NAV of the scheme is Rs 11.21 as on 5.2.99, and it is on the way to recovery. Selling the units in the market would be a folly since the market quote is lower than the NAV. I feel that it is advisable to wait till its maturity which falls on 31.12.2008.

For calculating long-term capital gains, the assessee is given the choice to substitute fair market value as on a particular date for the acquisition cost -- Sec. 55(2)(b)(i). This date was revised the first time from 1.4.64 to 1.4.74 and again in the budget of February 1992 from 1.4.74 to 1.4.81 for calculating capital gains from 1.4.1992 onwards. At the time of this change, the difference between 1.4.81 and 1.4.92 was 11 years which has now become 18 years.

One of the reasons for this method of substitution of acquisition cost is to give some fiscal benefit to very long-term investors. However, there is another important reason: The difficulty of co-relating veryold records both at the assessee's end and in the IT department. An assessee, if he has 18-year-old records, may calculate the cost, but is the department in a position to check this? Will 18-year records be readily available? In case of landed property, a valuation of fair market value as on a day 18 years back can be open to question. Assets such as shares may have been acquired in different lots at different times including rights and bonus, and need detailed records to calculate the cost. Obviously this rule is difficult to implement and results in differences between the assessee and the department. It can also lead to revenue leakage.

It is suggested that the substitution date should be revised every year, say eight-year-old date. It is reasonable to expect that eight years' records can be tallied with department's records when required. Thus, with effect from April 1, 1999, or for the year 2000-01, the assessee can substitute the market value of assets as on 1.4.91, for the year 2001-02, thevalue as on 1.4.92 and so on. This will result in simpler and correct assessments and reduce chances of manipulation. The loss to revenue, if any, will be marginal as indexation in any case increases the old acquisition costs to the extent of inflation.

-- V Nevatia, SION Thank you very much for a good suggestion. I hope the authorities would take quick action.