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B U S I N E S S

Solan to have cement plant
Pact between HP Government, UP firm signed
Shimla, July 10
The Himachal Pradesh Government and Jai Prakash Associates, Lucknow, signed a memorandum of understanding (MoU) yesterday for setting up a 2 million tonne per annum capacity cement plant based on the lime stone deposits in Baga Bhalag area of Arki, Solan district.

Budget not path-breaking
A
fter five long years we have had a Budget speech by someone who knows what he is talking about. The nature of our finances and the pattern of previous commitments give a Budget planner a very little flexibility.

Honda City, Accord prices increased
New Delhi, July 10
Honda Siel Car India (HSCL) has hiked prices of its ‘‘City’’ and ‘‘Accord’’ models following the announcement of a 2 per cent cess on all major tax heads for education.

Steel duty hike to hit small units
New Delhi, July 10
The small scale sector has not been given a fair deal in the Budget, the Laghu Udyog Bharati has said. National President of the Laghu Udyog Bharati Balwant Rai Gupta said the budgetary allocations for the small scale sector were inadequate.



EARLIER STORIES

 

Investor guidance

Benefit under early retirement option
Q:
I have opted for an Early Retirement Option (ERO) from a private sector bank in July 2003 and am faced with following issues in filing my IT return for AY 2004-05:
1) I have read newspaper reports about the ITAT Bangalore ruling on additional benefit for VRS amounts above Rs 5 lakh, u/s 89 of the IT Act.

Aviation Notes

Time to take firm stand on airports
U
ntil a few days ago, the Delhi and Mumbai airports plan was submerged in tailspin. Now it has become murky and non-starter as Minister of State for Civil Aviation Praful Patel has been issuing contradictory statements. He says one thing today and exactly the opposite the next day. 
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Solan to have cement plant
Pact between HP Government, UP firm signed
Tribune News Service

Shimla, July 10
The Himachal Pradesh Government and Jai Prakash Associates, Lucknow, signed a memorandum of understanding (MoU) yesterday for setting up a 2 million tonne per annum capacity cement plant based on the lime stone deposits in Baga Bhalag area of Arki, Solan district.

Mrs Renu Sahni Dhar, Additional Chief Secretary(Industries) on behalf of the state government and Mr Manoj Gaur, Managing Director on behalf of Jai Prakash Associates signed the pact in the presence of Industries Minister Ram Lal.

An official release said here today that a total investment on this plant would be more than Rs 500 crore and the plant be ready for production within five years. The project would generate permanent employment for about 1,000 and during erection of the plant this number is estimated to be 2,000. Besides indirect employment, avenue to thousands of people in the area would also be created.

The company has agreed for arranging employment for one member each of the displaced families as per qualification during the construction period and subsequently on regular basis when the unit commences production. At least 80 per cent of the total employment generated would be earmarked for Himachalis and among these 80 per cent, first preference would be given to the oustees.
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Budget not path-breaking
Mohan Guruswamy

After five long years we have had a Budget speech by someone who knows what he is talking about. The nature of our finances and the pattern of previous commitments give a Budget planner a very little flexibility. Interest takes away a tad over 28 per cent, salaries and pensions about 10 per cent, direct subsidies nearly 11.5 per cent, defence another 12 per cent and so what is the Finance Minister really left with? The artistry is in the speech and in seeming to create something new with the old template. This Mr. Chidambaram has done exceptionally well.

But his Budget is not without music. For the first time in over two and half decades an attempt was made to correct the adverse trend of Central assistance to Bihar. Bihar gets a special package of Rs.3,350 crore. It is a small package in relation to the deprivation Bihar has suffered, but a big first step. What Bihar’s 13 ministers in the NDA government didn’t do in five years, Mr. Laloo Prasad seems to have achieved in 40 days!

Mr. Chidambaram has, by levying a 2 per cent cess for education, added over Rs. 4000 crore to the HRD kitty. This increase will kick-in in the future. This year the HRD budget increased by about Rs.1,000 crore to Rs.10,625 crores, which means that we are looking at an outlay of almost Rs.15-16,000 crore next year. If this happens it will be no mean achievement. The UPA government would then have truly beaten a new path.

Another pleasing note is sounded by the new income tax free regime for new agro-industries.

The proposed capital expenditure as a percentage of the total Budget is an improvement over last year. This year the government proposes to spend Rs.53,747 crore or 11.24 per cent as opposed to Rs. 44,131 crores or 9.35 per cent last year. But in this matter in particular the proof of the pudding lies in the eating. Each year as the financial year draws to a close there is a frenzy of programme cutting and the capex ratio suffers. One hopes that things will be different this year?

Having said this much, I will venture that this is still not a path-breaking Budget. At times it tries to be much too clever. What does a guarantee of a job for 100 days for every family mean, when the problem is that the rural and unskilled worker is assured of a job for only about 180 days a year? That still leaves him/her with the task of fending for the rest of the family for another 185 days. Proposing 100 days is typical of the mindless tokenism bureaucrat’s love. One would have thought that a government that has so many eminent economists, the Prime Minister downwards would have been more intelligent about this?

The author is a former Adviser in the Finance Ministry
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Honda City, Accord prices increased

New Delhi, July 10
Honda Siel Car India (HSCL) has hiked prices of its ‘‘City’’ and ‘‘Accord’’ models following the announcement of a 2 per cent cess on all major tax heads for education.

The ‘‘City EXi’’ will now cost Rs 6.47 lakh (ex-showroom, Delhi) instead of Rs 6.25 lakh earlier, company sources said late last night.

The other ‘‘City’’ model which used to sport a price tag of Rs 6.97 lakh will be priced at Rs 7.2 lakh.

The ‘‘Accord’’ with manual transmission will be priced at Rs 14.79 lakh from Rs 14.69 lakh while the car with automatic transmission has been priced at Rs 15.50 lakh from Rs 15.15 lakh earlier.

The hike in prices follow the education cess announced by Finance Minister P Chidambaram in the Budget.

Maruti Udyog hiked the price on July 8 while Hyundai Motor India will take a call on prices by the month end. General Motors India has also said it would jack up the price which will be to the tune of 2 per cent by the end of July while Mahindra and Mahindra has also joined the bandwagon. — PTI
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Steel duty hike to hit small units
Tribune News Service

New Delhi, July 10
The small scale sector has not been given a fair deal in the Budget, the Laghu Udyog Bharati has said.

National President of the Laghu Udyog Bharati Balwant Rai Gupta said the budgetary allocations for the small scale sector were inadequate.

Expressing shock and disappointment on the proposed increase in excise duty from 8 per cent to 12 per cent on steel, Mr Gupta said the additional burden would adversely affect the SSI units.

The cost of raw material would increase and it would provide unnecessary competition to SSI from large scale industries and multinational companies, he said.

The dereservation of 85 more items from the reserve list for SSI is another matter of concern for the small scale sector. It was expected from the government to increase the number of items reserved for SSI, it has rather dereserved 85 items from the list to the astonishment of this sector, he said.

Chairman of the All-India Manufacturers’ Organisation said the Budget was likely to give much-needed inputs to manufacturing activity in the country.

However, the Budget fell short of expectations when it came to generating employment as envisaged in the Common Minimum Programme (CMP).
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Investor guidance

Benefit under early retirement option
by A.N. Shanbhag

Q: I have opted for an Early Retirement Option (ERO) from a private sector bank in July 2003 and am faced with following issues in filing my IT return for AY 2004-05 :

1) I have read newspaper reports about the ITAT Bangalore ruling on additional benefit for VRS amounts above Rs 5 lakh, u/s 89 of the IT Act. What exactly is this benefit and is it applicable to all types of EROs, which in my case is not an “Approved VRS scheme” by the IT authorities (in case of PSU banks, it is an approved one as I understand). So whether any benefit u/s 89 is applicable to me at all? I also received an amount of Rs 1,77,564 from LIC under its Superannuation scheme, on which a TDS of Rs 53,269 was deducted. Is this amount eligible u/s 89 for tax benefit?

2) Since AY 2001-02 I am carrying forward a Long Term Capital Loss (LTCL) arriving out of sale of House Property, which was computed based on indexation method. In December 2003 (AY 2004-05) I have incurred a Short Term Capital Gain (STCG) arising out of sale of Employee Stock Option Plan shares of my earlier employer bank. Can I set off this STCG against the LTCG I am carrying forward?

3) Post ERO, I have also made Long Term Capital Gain (LTCG) out of liquidation of investments held in Growth Schemes of Mutual Funds (the amount received was invested in Monthly Income Plans of Mutual Funds). Can this LTCG be set off against any of the STCG or LTCL as mentioned above?

4) I have invested the lumpsum money received during ERO in Post Office MIS and MIPs of mutual funds. While the interest received from Post Office MIS is eligible for deduction u/s 80 L, what is the treatment for the monthly amount received as Capital Appreciation from the MIPs?

5) Post ERO I started business consulting on my own. Since there is incidence of business income do I get time till August 31, 2004, to file my return for 2004-05 or do I have to necessarily file the return by June 30, 2004 since there was salary income for part of the year?

6) Lastly, can I club the business loss incurred post ERO, with the lumpsum income received (as part of ERO) and claim a refund of part of TDS (deducted by the past employer while paying the ERO lumpsum)?

Anand Palkar, Mumbai

Ans: 1. Your information is correct. Madras and Maharashtra high courts have observed that in the case of payments received by those employees who have accepted VRS, Sec. 89 for compensation on Termination is applicable. Rule 21A(4) admits this benefit if the service is continuous for not less than three years and the unexpired term of employment is not less than three years, However, it is reported that some of the ITOs do not allow this benefit. Since VRS benefit is not available to you (the ERO not being an approved VRS scheme) you may be entitled to benefit u/s 89. Sec 89 claims to protect those employees who have been blessed with salary in arrears (or advance). More often than not, the employees extract this from their blood-sucking vampires (read as employers) after protracted negotiations or litigations in a court of law. The exchequer surely must participate in this bonanza even though the income belongs to the years gone by. But this will hurt the employees who have fought for their rights. Hence the eyewash, which offers relief on salary received in arrears or in advance is computed in the manner laid down in Rules 21A and 21AA. Accordingly —

A) Calculate tax payable on the total income, including the additional salary, of the year in which the same is received.

B) Calculate the tax payable on the total income, excluding the additional salary, of the year in which the additional salary is received.

C) Calculate the difference between the tax at ‘A’ and ‘B’.

D) Compute the tax on the total income after including the additional salary in the relevant previous year to which such salary relates.

E) Compute tax on the total income after excluding the additional salary in the previous year to which such salary relates.

F) Arrive at the difference between tax at ‘D’ and ‘E.

G) The excess, if any, of tax computed at ‘C’ over that at ‘F; is the relief admissible u/s 89. No relief is admissible if tax computed at ‘C’ is less than the that at ‘F’. In such a case, it is pointless to apply for relief.

2. Long Term Capital Loss (LTCL) cannot be setoff against Short Term Capital Gain (STCG).

3. LTCG be set off against any STCL or LTCL.

4. In the case of POMIS, the monthly income as well as the terminal bonus @ 10 per cent is eligible for deduction up to Rs. 12,000 u/s 80L aggregated with income from other specified schemes. Dividend from MIPs is tax-free in the hands of the investors, though there is a dividend distribution tax @ 12.8125 per cent collected directly from the MFs. On redemption of the units, provisions of capital gains become applicable.

5. For every person whose accounts are required to be audited, or for one who files the returns under 1-by-6 rule, the last date for filing returns is 31st October. It is 31st July in all other cases. For you, the last date is 31st July.

6. Yes, business loss can be setoff against salary income. 
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Aviation Notes

Time to take firm stand on airports
by K.R. Wadhwaney

Until a few days ago, the Delhi and Mumbai airports plan was submerged in tailspin. Now it has become murky and non-starter as Minister of State for Civil Aviation Praful Patel has been issuing contradictory statements. He says one thing today and exactly the opposite the next day.

Because of uncertainty in the government, the Delhi and Mumbai airports remain congested and do not bring smile on foreign tourists and NRIs. Shocking nothing is being done to render airports friendly except issuance of statements and more statements by politicians.

As it stands at present, the most-utilised two international airports will not go private because there are protests from within the Airports Authority of India (AAI) and also one or two political parties.

Because of uncalled for uncertainty and procrastination even expansion plans for these two airports continue to remain on drawing board causing further confusion among airlines and other users. Why can’t the government take a firm decision so that the required progress in this vital area can be undertaken. The time has come when the government and authorities concerned assert, as advocates Prime Minister Manmohan Singh.

Unlike private operators, who are endeavouring to spread wings by seeking foreign support, the plight of Air India and Indian Airlines remains unchanged. Plans remain unaltered in buying new aircraft. Boeing and Airbus Industries continue to indulge in ‘PR’ exercise by reducing their prices in a bid to sell their product.

Jet and Air Deccan seek collaboration of Tamasek Holdings Private Ltd, Singapore’s state-owned investment company. 
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BRIEFLY

Forex reserves cross $ 120b
Mumbai, July 10
After witnessing a decline in the previous week, India’s foreign exchange reserves grew by $ 671 million to cross $ 120-billion mark for the week ended July two. The country’s foreign exchange reserves rose from $ 1,19,407 million to $ 1,20,078 million during the period under review, according to the Reserve Bank of India’s weekly statistical supplement released here today. — PTI

Toyota centre
Mumbai, July 10
Auto major Toyota is planning to set up a research and development centre in India. Reacting to the Budget announcement about the 150 per cent tax concession to auto R&D centres, Toyota-Kirloskar Motor deputy managing director K K Swamy said the company plans to set up a R&D centre. However, he did not specify when the centre would be set up. — UNI

Yellow Pages
Chandigarh, July 10
Chandigarh Yellow Pages 2004-2005 is being updated by Manu Multimedia for its XIth edition which is likely to come to the market by the end of July. This book contains 400 business categories in all fields, which are useful for all type of business, and industries. — TNS

TV 18 shares
Mumbai, July 10
The RBI today notified that no further purchases of equity shares of Television 18 Ltd should be made on behalf of FIIs, NRIs and Persons of Indian Origin through stock exchanges in India without its permission. This is due to TV 18 reaching the trigger limit of 24 per cent of its paid-up capital, an RBI release said here. — PTI

HPCL inks pact
Mumbai, July 10
HPCL has signed an MoU with Chevron Texaco and Advanced Refining Technologies LLC to sponsor research activities in hydroprocessing at Indian Institute of Technology, Kanpur. The R&D activities to be undertaken under the collaborative effort are expected to lead to improved design of hydroprocessing facilities — PTI
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