|Monday, February 21, 2000,
Sinhas aim: how to rein in
Is tech-driven Long Boom a
All PAN allotments by April-end
IT meet today
FIIs still bullish
UTI launches Nifty fund
SKP to float two IT companies
MRTPC hauls up Sterlite
Sinhas aim: how to rein in
NEW DELHI, Feb 20 Rising non-Plan expenditure on account of the costly Kargil war, the general election, the Orissa cyclone and the slow pace of disinvestment in public sector enterprises have made it imperative for the Union Finance Minister, Mr Yashwant Sinha, to present a harsh Budget on February 29.
Although there is a feel good factor about the economy, especially the robust recovery in the growth rate, industrial output and exports, and a booming stock market, Mr Sinha, according to industry experts, has no soft option before him as he would have to find ways to raise resources to meet Government expenditure. In other words, reining in fiscal deficit will be the biggest concern of the Finance Minister.
The only consolation for the common man in such a scenario has been the statement of the Minister of State for Finance, Mr Dhananjay Kumar, that the Budget will be harsh in regard to expenditure control measures and not in terms of additional taxation of business or individual incomes.
The brighter side of the Ministers statement is that income tax rates are unlikely to go up further. However, the imposition of an across the board 10 per cent surcharge on income tax rates and corporate tax in the last Budget is unlikely to be withdrawn in the coming Budget.
The optimism that the Finance Minister is unlikely to tinker with direct and indirect taxation rates stems from the findings that a stable tax structure encourages better tax compliance.
In the absence of any scope in raising direct or indirect tax rates, there is a general feeling in industry circles that the Finance Minister would try to raise more resources by broadening the tax base, bringing more services into the tax net and raising user charges.
According to estimates, the expenditure in the current financial year will be Rs 2.13 lakh crore against the assured income of Rs 1.72 lakh crore. On the defence side, the expenditure has gone up to Rs 48,000 crore as against the allocation of Rs 42,000 crore.
On the indirect taxes side, the Finance Minister will have the scope of imposing Customs duty on over 700 items which are likely to be shifted to the Open General Licence scheme by April 2000.
According to the President of the Associated Chambers of Commerce and Industry, Mr Shekhar Bajaj, one option for the Finance Minister to raise resources was to widen the tax base. It is estimated that the accrual of revenue from service tax could be as much as Rs 20,000 crore per annum by 2003 if the Government brings more services into the tax net.
Raising of user charges, particularly in regard to electricity tariffs, water charges, state transport and postal services was another option before the Finance Minister.
There is general consensus in the industry that the Governments disinvestment processs should be speeded up by privatising more PSUs.
It is estimated that over Rs 100,000 crore could be mobilised through disinvestment and privatisation in the next three years. It has been suggested that the Government should bring down its equity in non-strategic PSUs to 26 per cent.
The Institute of Chartered Accountants of India has also suggested several measures to widen the tax base and increasing the tax revenue.
These include persons booking domestic and international air tickets costing more than Rs 5000 give their permanent account number while booking such tickets. This step would bring the high value transactions into the data system for appropriate scrutiny.
- Professionals listed under the Income Tax Act should be required to compulsorily obtain permanent account number.
- To bring the vast sums of unaccounted money earned by medical professionals into the legal accounting channel, a suitable deduction may be allowed as a social welfare measure to individuals provided they make the payment by crossed cheques. This would enable the department to identify the medical institution or the doctor receiving such payment.
- Tax should be deducted from the value of prizes distributed by many business houses in pursuance of various advertisement schemes.
- Commission and brokerage payments and service charged should be subjected to tax deduction provisions.
tech-driven Long Boom a possibility?
EVERY so often, an entrepreneur plants a new idea or desire in peoples brains. Think of Henry Fords Model T, helping put America (then the world) on wheels, or Apple with its start-up claim that personal computers would provide wheels for the brain. Evolutionary biologists like Richard Dawkins see such ideas as memes, the cultural equivalent of genes. They infect our brains, mutate, spread. And, every so often, they revolutionise what had once seemed to be the natural order of things.
Heres an interesting experiment. How about releasing the idea that the world is set for a Long Boom, running from 1980 through to 2020? You can hear protests from economists. Ridiculous! Incredible! Indeed, anyone who knows economic history knows that economic booms are aberrations, resulting from unusual combinations of contributory factors.
Most economic historians would also argue the bigger the boom, the greater the ensuing bust. But the very first line in The Long Boom, a new book from Peter Schwartz, Peter Leyden and Joel Hyatt (published by Perseus Books), explains: The Long Boom is a positive meme about a better future. The hope is that the idea will prove contagious, spreading and influencing what people do.
The internet is seen as providing fertile conditions for infecting perhaps 200m people, then as the print media pick up the story a billion or two more.
I have long been a believer in long-wave theories of economic expansion and contraction, so all of this reeks of heresy to me. But Schwartz has a strong track-record. He worked for Shells scenarios team, then founded the Global Business Network (GBN). So what persuades him that the Long Boom is, if not guaranteed, at least a real possibility?
New technology, for one. While most of us focus on how IT and the Internet will transform our worlds, Schwartz and his colleagues argue that three other technology clusters will drive further revolutionary changes. They are biotechnology, the development of fuel cells and other new energy technologies, and nanotechnology the process of manufacturing one atom at a time.
The only real barriers to the Long Boom, we are told, are political. So no problem there, then? Well, in the wake of what happened to Monsanto last year, presumably after the Long Boom went to press, and then to the World Trade Organisation (WTO) in Seattle, many people would see the prospect of a Long Boom as deeply unappealing particularly if it required further globalisation and Americanisation. So consider what the book dubs the Politics of the Long Boom.
The three biggest constraints on economic growth, it concludes, have been: political conflicts resulting from clashes between interests or ideologies; social stresses arising from economic gaps producing misery amidst wealth; and, finally and increasingly, ecological problems. All true, but who really sees politicians embracing this agenda? Well.
NEW DELHI, Feb 20 (UNI) The Income Tax Department will issue permanent account numbers (PAN) to all applicants by April end, Chief Commissioner of Income Tax Raj Narain has said.
The Department has started a special drive to issue all pending PANs and PAN cards to tax payers, Mr Narain told UNI here.
We had received 12.50 lakh applications for PAN cards and have as yet allotted numbers to 11.50 lakh people. The pending cases are because of some deficiency in their applications. We have sent letters asking clarifications, he added.
Around 20,000-25,000 of these are currently being processed and bulk of the work is over. The department is currently dispatching 10,000-15,000 cards a day. We hope to clear the entire backlog by april-end, Mr Narain added.
Meanwhile, the Income Tax Department has targeted to mop us Rs 58,000 crore as revenue from around the country by March 31, 2000, as part of its drive to widen and deepen the tax base through its one-of-six scheme. Delhi along would account for Rs 10,600 crore during the fiscal.
This years all India collection would be 27 per cent higher than the pervious years Rs 46,000 crore, while Delhi collections would be up 22.5 per cent from Rs 8,650 crore a year ago, Mr Narain said.
We have initiated
major steps to widen and deepen the tax base. We have a
tax base of a mere 1.8 per cent of the 100 crore
population. We have got a large middle class which should
pay taxes but is not actually doing so. In order to cover
them, we decided to introduce this one-of-six
NEW DELHI, Feb 20 (PTI) The government will tomorrow discuss with captains of infotech industry issues like tariff, regulatory mechanism, venture capital funding and other steps needed to attain the production target of $ 137 billion and exports of $ 60 billion by 2008.
MUMBAI, Feb 20 (PTI) Foreign institutional investors (FIIs) were still betting on equity investments (Rs 897.8 crore or $ 206.2 million), while the domestic mutual funds (MFs) are shying away to the debt market, according to figures available with SEBI for the week ended February 17.
Bse sensex witnessed a rise of 46.11 points to touch 5,835.15 points, during the period.
During the week, MFs have withdrawn Rs 281.87 crore from the equity market being net sellers for four days and net buyers for a day, but showed marked trend towards increased investments in debt market, by making net purchases of Rs 90.96 crore being net buyers for four days and net sellers for a day.
UTI launches Nifty fund
CHANDIGARH, Feb 20 The Unit Trust of India has launched the Nifty Index Fund, which is open ended. The initial offer is from February 14 to February 26,2000. The Fund will invest in the 50 companies of the S&P CNX Nifty in the same weightages as in this index.
The scheme is open to
resident individuals and institutions as well as to NRIs,
OCBs and FIIs. The minimum amount of investment is Rs
5,000/- with no maximum limit. Minimum additional
investments under a folio account is only Rs 1,000/-.
Sales during the initial offer period will be at par (Rs
10 per unit). The sale of units under the plan will
reopen on March 28. Sale/repurchase will then be made at
NEW DELHI, Feb 20 (PTI)
The inflation rate dropped to a nine-week low of
2.56 per cent for the week ended february 5 on account of
sharp fall in the prices of food articles including
vegetables and fruits. The 0.22 percentage points fall in
inflation from 2.88 per cent (Provisional) in the
previous week to 2.56 per cent in the current week was
aided by the decline in the indices of primary articles
and manufactured products. The annual rate of inflation,
however, was close to 5 per cent at 4.97 per cent during
the corresponding week last year.
float two IT companies
NEW DELHI, Feb 20 At a time when most eyeballs are transfixed on dot.com startups, precious few have evinced any interest in software development, possibly due to the mammoth task that this might prove to be, as it would mean taking on the big fish at their own game.
But given the huge latent potential within the IT sector for customised software development, it comes as no surprise that the four decade old Shree Krishna group has now undertaken a diversification into the field of information technology.
Primarily regarded as Asias number one manufacturers in the knitting industry, the Shree Krishna Group has now decided to throw its hat into the infotech arena, by incorporating two new companies, namely, Global Softech Limited and Cyber Infosys and Tech Ltd, for utilisation as their entry vehicles.
The seriousness of the group towards this hitherto untapped line of business can be gauged from the fact that an office area of nearly 50,000 square feet has already been procured. Importantly, the group has also identified three key areas for development of application software catering to the banking, insurance and hotel industry.
Another indicator of the Shree Krishna groups commitment to this venture is reflected in the investment of Rs 100 crore in the current fiscal, which has been earmarked for its foray into IT. In fact an initial investment of Rs 50 crore has already been made towards the intellectual seed capital for both the companies, coupled with the new machinery and interior designing of the office area, which boasts of a full-fledged gymnasium among other facilities for its staff, according to a spokesman of the company.
Thus, it seems that the
Rs 2,000 crore Shree Krishna group, which itself has a
fair financial track record with a consistent dividend
payout policy, might well be putting all its weight
behind this diversification into IT. And given their
impressive track record the company is confident of its
success in the new venture.
NEW DELHI, Feb 20 (PTI) The MRTPC has hauled up Sterlite Industries (India) Ltd for pegging discounts and sales commission to quantity offtake and directed it and mmtc Ltd not to enter into agreement preventing appointment of other selling agents. Passing the order, mrtpc Bench comprising members R K Anand and R L Sudhir said: There is no escape from the conclusion that the charge of adoption of and indulgence in restrictive trade practices within the meaning of the mrtp Act has been established against Sterlite Industries.
The advertisement issued by Sterlite Industries in the newspaper on the basis of which an investigation was taken up by the dg is quite clear and indicative of the objectionable trade practice of offering quantity-based discounts, the Bench said.
The Director General of investigation and registration had filed a complaint alleging that Sterlite Industries was indulging in restrictive trade practices by not offering discounts and commissions to its selling agents at a uniform rate but linking it to quantity offtake.
The dg also alleged that mmtc had an agreement with Sterlite Industries for storing, handling and marketing cc copper rods which imposed territorial restrictions on the latter from appointing selling agents in the States where MMTC was its agent.
Replying to the complaint, Sterlite Industries said discount linked to offtake was a trade feature pertaining to copper products and similar discounts were also being offered by other manufacturers of these products.
by R.N. Lakhotia
Q: I have opened a PPF/ULIP account in the name of my minor daughter. When these account will be due, my daughter will be major. My question is this, on the due date this amount belongs to my daughter or to me.I have purchased UTI MEP-92 in 1992. Now on July 17, 1999 I purchased bank units of Rs 5,000. The company sent me Rs 7,630 after deducting Rs 1000 of income-tax. My question is this, please clear me how I will show in the return of Rs 7,630. From my friends I came to know cost inflation index.
Narender Gupta, Rohtak
Ans: On the facts stated by you when the daughter becomes major and the amount is received from PPF etc. the same legally would still belong to you because the contribution was made by you. If you want that on maturity the amount should belong to your daughter who will be major on the dte of maturity of the PPF then the best answer is to gift away the existing balance in the PPF A/c, ULIP A/c etc. to your daughter right now. For calculating long-term capital gains the concept of cost inflation index has to be applied. At present the cost inflation index for the current financial year 1999-2000 is 389. The cost of your investment has to be increased for the purposes of arriving at long-term capital gains as per the concept of the cost inflation index.
Q: a) In a civil suit decreed against defendants/tenants, the trial court has granted mesne profits/damages for the unlawful occupation/use of the house property (commercial premises), w.e.f. the date of filing of the suit till such time as the tenants are evicted from the same. The mesne profits are granted @ Rs. x per sq. ft. per month. Kindly let me know if the above mesne profits/damages are subject to payment of any tax in the hands of the owners of the property, after the same are received? If not, under what Section of the I.T. Act 1961 does this exemption fall?
b) Also kindly quote some High Court judgements pronounced in similar cases, if any exist?
B.S. Bedi, Chandigarh
Ans: The mesne profits are not liable to income tax as capital gains. Recently there is a High Court decision on this point in the case of Achuthan Pillai & Co. v. CIT 238 ITR 458.
Q: Can income declared lower than as prescribed under Section 44-AD of Assessment Year 1997-98 in the case of a Civil contractor can be rectified under Section 154 by applying flat rate of 8 per cent as G.P. on gross payments, where the assessee maintains regular books of accounts and never opted for Section 44 AD.
Momik Engineers, Sangrur
Ans: The income which has been declared by the assessee lower than as prescribed by S. 44AB but for which the assessee maintains regular books of account, then such Income tax return cannot be rectified u/s 154 by applying a flat rate of 8 per cent profit specially because the assessee has maintained regular books of account.
Q: I am in service with a company. I have a PAN. Twice in the past I have filed Return.
I wish to withdraw money from following:
1. NSS (Total amount Rs 25,000/-).
2. MEP 92 & 93 (Rs 10,000 each).
I understand that the income tax etc. will be deducted at source on these.
Kindly let me know if I shall be required to show these withdrawal in my return.
Will these be any further tax on these as my company deducts the tax at source and I inform about these to the concerned official.
Sushil Kumar, Chandigarh
the withdrawal from NSS is in respect of NSS Scheme 1992,
then the withdrawn amount is not to be shown in the
income tax return. If, however, the amount withdrawn is
in respect of earlier NSS, then the same will be liable
to be shown as income tax return. No income tax will be
deducted at source in respect of NSS Scheme 1992.
Regarding MEP the calculation will have to be done in
respect of long-term capital gains after applying the
Cost Inflation Index. In case income tax is deducted on
the same you should claim the same while filing your
income tax return. In the income tax return the tax in
respect of long-term capital gains etc. will be payable
after calculating the Cost Inflation Index
by J.C. Anand
Sensex scales new heights
DURING the last fortnight, the stock market has been setting new records almost every second day. The Sensitive Index crossed 6000 points during the trading hours even though it closed at 5721.55 points on the last trading day last week.
SEBI imposed special margins on some scrips and placed a large number of scrips in the category of rolling settlement scrips. The market overflowed these docks. Even this fortnight, the market may maintain its buoyancy.The infotech shares are the king. The traders focus themselves only on these scrips. The other category of shares like Pharmaceuticals, the FMCG, the speciality chemicals are simply ignored. The market is in the grip of speculators. The small investor cannot invest in the infotech scrips on a long term basis, and only trades in them in small lots of 10 to 30 shares.
How long would the bubble last? A top management guru Dr Karl Erik Svelby is of the view that the fundamentally strong companies would be able to ride the storm but the pretenders riding piggy-back companies would collapse. The bubble would burst for such companies sooner or later. I see no reason for not booking partial profit even in companies like Wipro and Infosys and investing the gains in pharma and sound FMCG companies which have good brand image and are fundamentally strong.
Some multi-pharmaceutical companies like Glaxo (in spite of rather lean results declared last week), E. Merck, Novarties and speciality chemicals like BASF (which is quoting at a very low market price of Rs 110 per share), Colour Chem and FMCG like Rickett Colman (which is also quoting at a low and attractive market price), Nestle and Hindustan Lever are quoting low market prices. For the infotech shares, the small investor should look to investing in good mutual fund schemes specialising in this sector.
This fortnight will be important for a number of developments. The poll results of elections in Bihar, Orissa, Haryana and Manipur would be out on February 25. Then the Railway Budget and the Union Government Budget would be presented to the Parliament. The market does not expect any hike in income tax and corporate tax rates. The Finance Ministers warning that the Budget would be harsh is taken to mean that sharp cut would be made in subsidies and government expenditure. There may be, however, hike in petroleum products including the cooking gas.
The primary market has
also revived. In fact, the investors are mad after the
new issues, even though some of the offers are
substantially higher than the instrinsic worth of the
scrips. There is also a clamour for any scrip which bears
any link with infotech sector. This must be avoided and
every scrip must be judged by its present status rather
than its promised future accomplishments. In the past
too, many investors burnt their hands in subscribing to
newly floated public issues.
JCT Ltd, Thapar House, 124, Janpath, New Delhi issued me FDR No. NAR/027/103962 dt 23.12.96 for Rs 15,000 which was matured on 8.12.99. The FDR was sent through regd post on 20.11.99 for encashment. In spite of repeated reminders no payment is received up till date, from the company.
I hold, 100 fully paid secured non-convertible debentures of Essar Oil Limited vide Folio No 264936 and Certificate No 188680. The company has not paid me interest warrants for the period ending June 30,1999 and December 31, 1999 relating to part C debentures, despite of my repeated reminders till date.
Gyan Madan (Mrs)
I deposited Rs 35,000 with Hoffland Finance Ltd at the Patiala office for one year on 24-7-97 vide cheque No. 790155 of State Bank of Patiala. I was issued with the post dated cheques No. 728489 and 728490 for Rs 35,000 and Rs 8400, respectively, both dated 24-7-98 of Oriental Bank of Commerce, The Mall, Patiala, Saving A/c No. 3937. The cheques were presented to their banker by my banker but returned with the remarks,account frozen.
Lt Col. L.S.
I purchased 25 convertible debentures from M/s Oswal Chemicals & Fertilizers, Jalalabad, PO Shahjahanpur-242001. On conversion I was entitled to receive 250 equity shares whereas I received only 150 shares. Despite many reminders to companys registered office at Shahjahanpur as well as to its administrative office at 12th floor Gopal Tower, 25 Rajindra Place, New Delhi-110008 I have not heard anything from them.
by Ashok Kumar
Another U-turn awaits ITC
TV 18 recently debuted on the Indian bourses, and how !!!!! At ten times its IPO price of Rs 180. I remember only too well, sitting in one of the restaurants at the Taj and telling Raghav Bahl, the promoter and Managing Director of Television 18, that his offer seemed underpriced. His response was that he wanted to leave a slice of the cake for the companys shareholders. Well, as things stand, it seems the shareholders have got not just the slice, not even the cake itself, but the entire bakery. ITC is a company, whose shares I would never buy personally, given the fact that I am strongly averse to smoking and its obvious ill-effects. I keep advising all those who care to listen give up smoking and if you still need the kick, pick up shares of ITC. Of course, over the last few months, the ITC shares itself got a kick in the pants, what with there being signs that cigarette smoking could be on the wane (mercifully) in India. So, what does ITC do? Well, the obvious solution of the day! Launch a dot com venture with the attendant hype and hoopla, and they presto, ITCs shares are back on track at the bourses.
As the Bombay studio guest on CNBCs Bazaar show, I had joked all that is now left to be done is for Hindustan Lever to announce a dot com venture and then, there may be no stopping the Sensex surge as one of the reasons why the surge has been less (?) swift than it would have otherwise been is that the upswing at the counter of Infy has been offset by the sluggishness at the counter of HLL, the index heavyweight. So, as I said, keep an eye out for a dot com venture from the HLL stables. Perhaps then, some of the absurd predictions about the Sensex level by the end of Y2K may actually materialise. But having said that, it is imperative to evaluate the cost-effectiveness of such dot com ventures. Perhaps, such an evaluation may well suggest that the euphoria surrounding these ventures have more to do with hype than any fundamental reason. So, do not be awfully surprised if another U-turn awaits the share price of ITC once the immediate euphoria wears off.
There is a school of
thought that some operators keen on picking up a
substantial chunk of the shares of Zydus Cadilla and
Elder Pharmaceuticals. And how are they going about doing
this? By putting the fear of God into the minds of other
potential investors by pressing continuous sales at the
counter of the newly listed Indian pharma company,
Glenmark Pharmaceuticals. Are Glenn Saldhana, Pankaj
Patel and Jagdish Saxena listening? Any takers?
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