Monday, July 3, 2000,
Chandigarh, India



ED to file 31 complaints against Harshad
MUMBAI, July 2 — The Enforcement Directorate has said that it had ample evidence to show that "big bull" Harshad Mehta, his brothers and associates had allegedly received several crores of rupees through hawala transactions and used the money in the scam.

Tax holiday for software sought
NEW DELHI, July 2 — Assocham has advocated inclusion of "computer software" in the tax holiday provision of the Income Tax Act as its non-inclusion prevented software manufacturing industries in backward states from availing any relief.

Octroi burden on power to hit industry
POWER tariff hike has remained a central theme of discussion in Punjab. Baby in the shape of hike has been delivered. From industry’s point of view it is rather healthy but for PSEB it is inimical. The most crucial point missing in the final outcome is the octroi of power.

Visitors sit and admire the “Fantasy Landscape” designed by German Bayer AG in 1970 for a furniture fair, which has been partially reconstructed and is on display in the newly-opened Vitra Design Museum in Berlin on Sunday
Visitors sit and admire the “Fantasy Landscape” designed by German Bayer AG in 1970 for a furniture fair, which has been partially reconstructed and is on display in the newly-opened Vitra Design Museum in Berlin, on Sunday.— Reuters photo


Task force on WTO for fertilisers
NEW DELHI, July 2 — The government has constituted a high-level task force to study the impact of the World Trade Organisation agreements on the fertiliser industry.


ED to file 31 complaints against Harshad

MUMBAI, July 2 (PTI) — The Enforcement Directorate (ED) has said that it had ample evidence to show that "big bull" Harshad Mehta, his brothers and associates had allegedly received several crores of rupees through hawala transactions and used the money in the scam.

ED counsel Arun Gupte on June 30 filed an application before the Additional Chief Metropolitan Magistrate Usha Iyer praying it would shortly file 31 complaints against Mehta and others for alleged violation of Foreign Exchange Regulation Act (FERA).

The ED urged that until then the court should not hear its pending complaint against Mehta, his brothers, Ashwin, Hitesh and Sudhir and associates Niranjan Shah and Jivraj Java on the alleged charge of swindling $ 6 lakh in the scam.

The pending complaint and the 31 others sought to be filed have common evidence and documents and hence these matters should be either clubbed or heard simultaneously, the ED counsel pleaded.

Harshad’s lawyer Mahesh Jethmalani and Pranav Badheka have objected to the ED’s plea saying that they don’t agree with averments made in the prosecution’s application and that they should be heard before the court gives its ruling.

The court has allowed Harshad to file a reply on July 5.

In the pending complaint, ED has alleged that shares worth Rs 1.11 crore were bought by Mehta with $ 4 lakh which was allegedly hawala money. These shares have been attached. Besides, there were instances to show the use of the remaining $ 2 lakh.

ED’s application for deferring the hearing of pending complaint comes in the wake of Supreme Court ruling that the hearing of the complaint should be expedited as Jivraj Java had sought permission to visit abroad for business which the SC refused.

However, Java secured the permission from the Mumbai High Court to go abroad on a business tour for three months. Accordingly, he has already left the country after seeking exemption from the court.

ED pleaded that in view of this development, the SC order did not hold good and hence the trial need not be expedited. As regards the three-month limit imposed by the Mumbai HC on Java’s stay abroad, ED submitted the period could also be extended by obtaining the permission of the court.

Java and Shah have not objected to ED’s plea to defer the pending trial against them. Both of them were represented by their lawyers.

However, Shah’s lawyer, Rizwan Merchant, sought exemption for his client until the disposal of ED’s application on the ground that he apprehended danger to his life in view of media reports that he had been kidnapped.

ED’s cases are based on raids carried out by Income Tax Department at certain places, including Java’s premises.Top


Tax holiday for software sought

NEW DELHI, July 2 (PTI) — Assocham has advocated inclusion of "computer software" in the tax holiday provision of the Income Tax Act as its non-inclusion prevented software manufacturing industries in backward states from availing any relief.

"Since the words "computer software" does not appear in the provisions of Section 80-IB of the IT Act, some of the assessing officers do not consider an industrial undertaking set up for manufacture of software in industrially backward states for relief from paying tax," Assocham said in a communication to the Central Board of Direct Taxes (CBDT).

Section 80-IB provides for a five- year tax holiday for industrial undertakings set up in industrially backward states which start manufacture or production of "articles or things" up to March 31, 2002.

This interpretation, besides giving a rise to litigation also hampered growth and development of the computer software industry in the country.

The chamber has asked the CBDT to issue immediate clarification with "retrospective effect" that the words appearing in the Section will include computer software also.

"Since an industrial undertaking engaged in manufacturing computer software is eligible for tax holiday under Section 10A and 10B, there is no justification for denying such relief to such an undertaking under the provision of Section 80-IB," the chamber release added.Top


Octroi burden on power to hit industry
By P.D. Sharma

POWER tariff hike has remained a central theme of discussion in Punjab. Baby in the shape of hike has been delivered. From industry’s point of view it is rather healthy but for PSEB it is inimical. The most crucial point missing in the final outcome is the octroi of power. For industry it is a sort of dual power tariff as the quantum of octroi is increasing with speed. It was started with 2 paisa per unit and now for Ludhiana, say, it is 2 per cent of the power tariff. Its burden is over 7 paisa per unit which will gradually grow.

Apart from the burden this is highly discriminatory in nature. Industry of a particular line is dispersed, some lies within city while other lies out side. So this leads to unequal competition which is a sure recipe for making units sick. Already some industry is exempted from duty on power. So these two factors put together will lead to chaos in industry.

Punjab Government should withdraw this octroi on power. All the same the rate of octroi on power can be hiked for domestic sector. This is justified on the ground that this sector is exempted from house tax where as industry is paying house tax as well.

Punjab government is quite insensitive to industry’s plight. It is just not aware that statistics of planning commission show decline in growth and compared to other states Punjab is a laggard. Some specific cases of its gross in-sensitiveness are worth mentioning.

When Central Government put ban on inter-state movement of Furnace Oil, L.D.O. and H.P.S. the industry almost came to halt with heavy losses as this put an extra burden of 18% by way of sales tax.

Industry pleaded with the State Government that these oils being basic inputs should be exempted from tax at first stage. Final product is taxed at first stage. So it is a clear case of dual taxation. So nobody bothered even after daily reminders. Industry was even willing to pay 4 per cent sales tax which is additional revenue to State Government. Even this was not accepted. Ultimately industry put pressure on Central Government and sought relief.

State Government’s insensitiveness is unique. It is often said that businessman always wants relief. No. Industry has asked the State Government to put for instance corrugated zinc coated steel sheets under first stage sales tax mode. This will fetch substantial revenue to the state. But no decision has been taken on the other hand many items of use in industry have been brought under first stage mode leading to double taxation.

Packing materials have been brought under first stage mode. This is a clear instance of double taxation as packing is part of the final product.

Sales tax barriers have become a big hurdle for industry. Many glaring excesses are discernible. Sales Tax staff seem to be under strict instructions to collect revenue target wise. Section 6-A of sales tax act provides for heavy penalty if the driver is found to over take the barrier. This provision is being invoked increasingly although it is well nigh impossible cross the barrier without submitting documents. This aspect can neither be proved or disproved. This practice should be suspended as it is gross injustice with the dealers. The government can depute more force at the barriers to check overtaking.Top


Task force on WTO for fertilisers

NEW DELHI, July 2 (PTI) — The government has constituted a high-level task force to study the impact of the World Trade Organisation (WTO) agreements on the fertiliser industry.

Tiser secretary A.V. Gokak, would study and evaluate the provisions of the agreement on agriculture and other WTO agreements which can have an impact on the fertiliser sector in the context of removal of quantitative restrictions, an official statement said here today.

The group which also comprises IFFCO Managing Director U.S. Awasthi, Fertiliser Association of India (FAI) Director General Pratap Narayan and CII Director General Tarun Das, has been directed to submit its report within three months.Top


K.R. Wadhwaney

New jumbo to step up competition

AFTER prolonged discussions Airbus Industrie has decided to manufacture 555-passenger double decker jumbo (A3XX). The aviation analysts opine that the aircraft will have market for it as some of the affluent airlines have already expressed the desire to possess it.

Converted into a corporation from the four-nation European consortium, the launching of super jumbo will intensify the competition between Airbus Industrie and Boeing .

As Airbus Industrie manufactures super jet to help passengers fly in quick time from one destination to another, Boeing has decided to modernise the 747 family which has so far served the air passengers community well.

Airbus Industrie officials wear optimism that the new version will be a success. "We have received approval from the shareholders, airlines and flying community", said a senior official of the manufacturer, adding that: "It is a real double-decker, which will be much appreciated by the public".

According to Airbus Industrie engineer, the passenger capacity can be increased without much problem. With minor changes, two airports in Delhi and Mumbai will be able to meet the needs of the A-3XX. The AAI has already been briefed on the requirements for the super jumbo.

The existing runway, length will be good enough to handle landing and take-off for A-3XX-100. The new aircraft will throw open several new concepts and facilities for the flyers.

Internet facilities

Air India has modernised its "Maharaja" lounge for passengers who can send e-mails and also surf the Net while enjoying their drinks. The facility, now in operation at Chhatrapati Shivaji International Airport (Mumbai) will soon be available at Dehli. The Mumbai lounge has a library and also a music corner among other facilities.

Transisting passengers at the Mumbai airport can contiune to avail of the facilities, such as gymnasium, which has a tread mill jet, an exercise cycle and some other physique developing gadgets.

Tatas may enter

After JRD Tata Ratan Tata is now keen to re-enter in the market despite two setbacks in the recent past.

The Tatas have already formed a panel to study on the airline projects. There are many other companies which have shown interest in Air India and Indian Airlines.

The analysts feel that the entry of the Tatas will provide much-needed boost to the Indian aviation industry, which is passing through a lean phase. Top


Q: Whether the repayment of NSC VIII issue after 6 year i.e. maturity period is liable to income-tax of the whole amount or principal/interest portion only.

Please clarify with section of Income Tax Rules applicable in this regard.

— Sohan Lal, Patiala

Ans: The principal amount in respect of NSC VIIIth issue on maturity is not liable to Income-tax. However, the interest amount becomes taxable in different years on accrual basis.

Q: I am 75 years old, have 7 marla double storey house in Chandigarh. It is self occupied.

2. My monthly pension is only Rs. 1034 and no other income.

3. Kindly advise if I am required to apply for PAN.

4. If yes, will I be required to file IT Return every year if I have no taxable income.

— A.K. Sharma, Chandigarh

Ans: You are not required to apply for PAN. You are also not required to file your Income-tax return even when you have fulfilled an economic indicator.

This is because of the fact that the provisions relating to occupation of immovable property exceeding a specified floor area as also the condition of being a subscriber to a telephone do not apply to a senior citizen. Hence, on the facts stated by you, you will not be liable to file your Income-tax return.

Q: I am a government employee and my total gross salary will be approximately Rs 2 lakh. I do not want to pay any tax. Kindly advise how to go about it.

— Upinder Singh, Gurdaspur

Ans: On your gross salary of Rs 2 lakh you will be required to pay Income-tax which will be deducted at source by your employer. However, to save tax on this income you may make investment in pension scheme of LIC so as to get complete tax exemption upto Rs 10,000 as per Section 80 CCC. You can also make payment for medical insurance premium which is allowed as a deduction to the extent of Rs 10,000 per annum. Similarly, you should make investment to the tune of Rs 80,000 during the year in various investment instrument so as to get the benefit of tax rebate on Rs 80,000 @ 20 per cent.

By adopting these strategies, you will be able to save substantial amount of Income-tax. If you have taken any loan on your residential house you will also be eligible to get tax deduction in respect of interest on loan to the extent of Rs 1,00,000 in a financial year provided the loan is taken after 1st April, 1999.

Q: Is it compulsory to attach copies of fixed deposit receipts, Kisan Vikas Patras and Municipal Tax Receipts with the Income-tax return.

— G.S. Saini, UNA (H.P.)

Ans: It is not compulsory to attach the copies of Bank Fixed Deposit or Kisan Vikas Patras with your Income-tax return. However, it is always better to enclose with the Income-tax return a copy of the bank certificate evidencing the interest on the bank fixed deposit. Similarly, it is better to enclose the copy of house tax with your Income-tax return to avoid any disallowance of the claim made by your for payment of house tax.Top


J.C. Anand

ABB Alstom — a promising investment

LAST week’s corporate reports indicate that automobile sector is in deep distress. One report is that Maruti is likely to report a 30 per cent drop in its net profit. Slackening demand has farced Bajaj Auto to cut its working day schedule from six to five days a week. The share prices of the automobile sector companies are dropping. Maruti has lowered the sale price of almost all its models.

Gujarat Alkalies has reported a loss of Rs 78 crore for the accounting year 1999-2000 and it may not fare much better even during the current year in spite of the rise in the international price of caustic soda.

The tea sector too is performing poorly. Eveready Industries’s net profit has come down drastically by over 75 per cent to Rs 8.51 crore from Rs 34.84 crore in its accounting year ended March 31,2000. The dividend rate has been cut to 20 per cent.

These three sectors had been included in the list of sectors which as this column had advised, should be avoided for investment. Even the first quarter results of these companies are likely to be unencouraging. The second quarter results may even be worse.

There was much conflicting news about Larsen & Toubro last week. This bluechip company was stagnating with its equity share quoting around Rs 220-230 on the stock exchanges. This was partially due to poor results in the accounting year 1999-2000 but also due to the company’s announcement that it would be demerging its cement units only by the end of the next calendar year, and not earlier as indicated in an announcement.

Last week a leading financial daily reported on its front page that Larsen & Toubro would consider the demerger of its cement units in its meeting of the Board of Directors scheduled to be held on July 4. This new pushed up the share price of the company to Rs 266. But the company has denied the report. This rolled back share price to Rs 244-46 at the close of trading last week. There is, however, some indication in some circles that some preliminary action may be taken to initiate action for the proposed demerger. The report of the meeting should be awaited before any purchase or sale is done in the shares of this company.

I would like to bring to the notice of investors the prospects of ABB Alstom Power India, a bluechip company in the making. This company was formed recently by ABB and Alstom on the golbal basis. In India, ABB demerged its power generating units and made it a part of ABB Alstom Power. The new company is the world leader in all forms of power generation in the world and its Indian subsidary is the leader in power generation in India. Its is also now reported that ABB has sold off its equity in the company to Alstom and the company, which remains the world leader, may be renamed as Alstom Power.

ABB Alstom Power India reported a loss of Rs 268,246 thousands for the accounting year ended December 31, 1999. But the company carries a backlog of order amounting to Rs 6,320 million. It has also booked more orders in the current year. It is expected to perform very well during the current year. Not many companies can compete with in the area of power generation.

At present, the company’s share is placed in the BSE-B2/NSE list on the stock exchanges and is quoting in the Rs 34-36 range. It is only a question of time when it is placed in the B1 list and its share price appreciates by 50 to 70 per cent.Top


from Ashok Kumar in Mumbai

Keep watch on Havell’s performance

Q: Please comment on the long-term prospects of Daurala Organics. Should I consider a fresh investment in this scrip?

Daurala Organics Ltd (DOL) was promoted by DCM Shriram Industries. Of the total equity, 35 per cent is controlled by the promoter group and the public holds about 55 per cent of the equity. The company’s mainstay products are glycine chlo ride and dpenyl glycine chloride hydrochloride (DPCGH). Daurala Organics has developed some complex chemicals on its own and stands next only to the DSM group in manufacturing the chemicals.

Globally, it is the only other producer besides the Dutch giant, the DSM group, to produce this chemical. DOL has received export orders from buyers seeking alternate source of suppliers other than the DSM group. Ranbaxy and Orchid Chemicals have tied up with Daurala for lifting over 50 per cent and 10 per cent, respectively, of the total production of this chemical.

It has a strong backing from Shriram Industries. The company posted sales and net profit of Rs 37.5 crore and Rs 0.6 crore, respectively, thus yielding an EPS of Rs 0.3 and a GPM % of 10.2. In the first half ended September, 1999, the sales and net profit figures stood at Rs 23.4 crore and Rs 0.6 crore, respectively. The company carries a high financial risk as its debt equity ratio is more. Despite losses in the past, DOL has not defaulted on its debt repayments. Besides, interest costs are likely to reduce starting this year, leading to a direct improvement in the bottom line. In view of the turnaround, better product quality and its standing in the industry, one may place his bets on this company with a two to three years perspective.

Q: Can you comment on the future of Havell’s India?

Havell’s India is considered a market leader in miniature circuit boards (MCBs). The company operates mainly through three divisions which produce electrical items. The first is the switchgears division. This alone contributes more than half of Havell’s annual turnover. Power cables is the other division of the company. Energy meters is the third division. The company’s growth strategy is centred on acquisitions and tie-ups in different synergistic electrical product lines. Towards this end, the company has so far made several acquisitions of sick units and has also entered into joint ventures with multinationals from the UK and Germany.

After a sharp decline in the year before, the company fared reasonably well during the year that ended in March 1999, wherein it recorded sales and net-profit Rs 70.1 crore and Rs 2.5 crore respectively thus yielding an EPS of Rs 4.8 and a GPM % of 5.7. The half-year that ended in September 1999, the sales and net profit figures stood at Rs 39.8 crore and Rs 1.5 crore, respectively, translating into an OPM % of 10.4. However, one needs to note that the balance sheet at the end of the last financial suggests that more than 20 per cent of the company’s turnover was locked up in debts and would continue to bloat the company’s interest burden, thereby shrinking its margins. One more cause of concern is the dilution of the company’s focus as it is trying its hands at too many electrical products through different foreign tie-ups.

The power cable industry is still in recession and thus Havell’s power cable division is eating into the profits of the company’s other operations. However, the encouraging factor is that the company has been able to fetch an order from Dorman Smith of the UK to supply MCBs. Overall, the company’s fundamentals appear satisfactory and a watch over its future performance is recommended.

Q: What is the future of Bayer Diagnostics India Ltd. Should I continue to remain invested?

Bayer Diagnostics India Ltd is a part of Bayer, Germany. The Indian arm offers a wide range of products varying from very modern diagnostic instruments used in pathological laboratories, hospital wards and physician clinics, to simple blood glucose level monitoring instruments for the home care segment. BDIL also offers consumables such as reagents and strips for a variety of test profiles.

In the instrumentation segment, the company imports hardware machines, from the parent. For these machines, the demand in India may remain stable. In this segment also, self-testing instruments at home for diabetes, blood pressure, glucose, etc, presents a high potential growth area.

One more factor driving the future growth of BDIL is Bayer AG’s acquisition of Chiron Diagnostics Inc. Chiron Diagnostics, is also one of the best known suppliers of clinical laboratory systems, including immunoassay and nucleic acid diagnostic systems used to detect Hepatitis-C and AIDS. Also introduction of newer products from the parent’s stable should help the company registrer healthy growth in the future. In view of the sops given to the pharma companies involved in R&D activities, we recommend to remain invested in this counter with a long-term perspective.Top


Sterlite Ind restructuring by Sept
NEW DELHI, July 2 (PTI) — Sterlite Industries said today that the proposed corporate demerger of the company into separate telecommunication and metal entities would be completed by September this year and added that its three telecom subsidiaries would become part of the communication spin-off post restructuring. "The company has three wholly owned subsidiaries — Sterlite Telecom, Sterlite Telelink and Sterlite Telecables.

Whirlpool hopes to break even this year
NEW DELHI, July 2 (PTI) — Whirlpool is hoping to break even in its Indian operations this year on the strength of booming exports, tight cost management and aggressive brand building. The company, which posted a Rs 2.5 crore net profit for the first quarter ended March 31 this year, is looking at 20 per cent sales revenue growth and claims to be the largest exporter of white goods from India.

Finolex Cables posts 24 pc growth
PUNE, July 2 (PTI) — Finolex Cables has registered a 24 per cent growth in turnover to Rs 576 crore in the financial year ended March 2000. The growth in turnover was aided by Finolex’s two main product lines — Jelly Filled Telephone Cables and Light Duty Electrical Cables, the Deputy Managing Director of the company Mr Deepak Chhabria said in a release here today.Top


* Zee Telefilms has been firming up in the backdrop of genuine fund based buying, reports a prominent fund manager.

*Buy Hindustan Lever, which is soon going to announce stock split, suggests a leading financial analyst.

*Large funds as well as speculators have turned aggressive buyers of the Wipro scrip; a well-known market analyst recommends accumulating this share in small lots.

* The price momentum in Pentamedia Graphics can be attributed to heavy institutional buying at this counter, points out a veteran financial analyst.

* Immediately dilute your holdings in HCL Infosys, asserts a renowned financial researcher.

* Buy Satyam Infoway, which got listed on BSE few days back, avers a leading punter.

* Sell SQL Star International, asserts a leading portfolio advisor, who has a negative outlook on this scrip.

* Speculators are expected to accumulate Atco Industries, as they find this stock very attractive at the current price, informs a Mumbai-based broker.

* An expected hike in the offer price for BSES, by Reliance Industries will see a huge bout of buying at this counter, opines a market expert.

* Keeping in mind the strong fundamentals of Vikas WSP, one could continue to hold on to their investments in this company.

* HPCL is one scrip, which is perceived to be overvalued at the current valuation, therefore enter this counter only at a further drop in its price, opines a recognised portfolio analyst.

* According to a leading fund manager Reliance has been attracting large volumes and some more fireworks are expected at this counter.

* Sierra Optima has once more drawn investor attention, comments a renowned punter.Top


CHANDIGARH, July 2 (TNS) — Motorola, yesterday introduced a new dual band cellular phone Talkabout T2688. The phone is designed to be rich on technological features, low on size and weight parameters without being heavy on the pocket.

J & K Bank
SRINAGAR, July 2 (PTI) — Jammu and Kashmir bank plans to diversify into insurance, mutual fund and depositories business apart from launching credit cards. The bank is in the process of floating an asset management company for its foray into mutual funds, bank’s Chairman and Managing Director M.Y. Khan told reporters here yesterday.Top

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