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RBI’s moratorium timely, say bankers
Mumbai, July 25

Leading bankers today welcomed the Reserve Bank of India action on putting the Global Trust Bank under moratorium by saying that it was a “timely action.” While contacted, Chairman of Bank of Maharashtra S K Basu said from Pune that there was nothing to be worried about as the RBI had stepped in at the right time.

Customers throng a branch of Global Trust Bank (GTB), in suburban Mumbai, following Reserve Bank of India’s moratorium. Customers throng a branch of Global Trust Bank (GTB), in suburban Mumbai, following Reserve Bank of India’s moratorium. 
— PTI photo

Govt moots death penalty for spurious drug-makers
New Delhi, July 25
The government is seriously contemplating to amend the Drugs and Cosmetics Act to introduce a provision of death sentence to curb the growing the menace of spurious and sub-standards drugs in the market.

MARKET SCAN

Adopt wait-and-watch tacticsby
J.C. Anand

The Union Finance Minister has rolled back some aspects of the transaction tax which is now more favourable for traders on the bourses. According to the Business Standard’s analysis, the government is likely to collect considerably lower than the earlier transaction tax proposals.

  • Scrips to watch

TAX ADVICE

Be clear on 65 years age norm
by S.C. Vasudeva

Q: Please refer to the column Tax Advice in The Tribune dated July 5, 2004. Under Section 88, who ever attains the age of 65 years any time during the previous year is eligible for rebate as a senior citizen.




A model displays a costume designed by a student of National Institute of Fashion Design
A model displays a costume designed by a student of National Institute of Fashion Design (NIFD) during a fashion show in New Delhi on Saturday. — PTI




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RBI’s moratorium timely, say bankers

Mumbai, July 25
Leading bankers today welcomed the Reserve Bank of India (RBI) action on putting the Global Trust Bank (GTB) under moratorium by saying that it was a “timely action.”

While contacted, Chairman of Bank of Maharashtra S K Basu said from Pune that there was nothing to be worried about as the RBI had stepped in at the right time. He said the bank was one of the hi-tech, well-networked bank, and the depositors were widely based.

When asked about the interest of Bank of Maharashtra to take over this bank, he said, “It is too early”. However, he would not mind to get into the asset quality and viability of the GTB merging with Bank of Maharashtra.

During the moratorium period which will end on October 23, 2004, the RBI would consider various options including amalgamation of the bank with any other bank and ensure that the public deposits were protected.

Bank of Rajasthan chairman P K Dayal said the Global Trust Bank had been facing chronic problems of high non-performing assets for the last two and half years and RBI action was a welcome step. He said that there would not be any problem for depositors to get back their money in due course of time. However, shareholders might lose their investments in the bank because of wiping out of the share capital and the reserves of the bank.

GTB needs a capital of Rs 1,500-crore for meeting the backlog of bad loans.

Mr R.C. Agarwal, Joint General Secretary of the All-India Bank Officers Confederation (AIBOC), said though it was a timely action yet was an eye-opener for the public, the government and those who advocate about the privatisation in the banking sector.

Unions’ demand

Bank unions today asked the government to take adequate measures to protect the depositors money in private banks in the wake of RBI’s decision to place the Global Trust Bank (GTB) under moratorium for three months.

“We are not at all surprised by what happened in GTB as such banks are liberal in sanctioning loans and lax in recovery,” Mr V.K. Gupta, Delhi Convenor of the United Forum of Bank Union, the umbrella organisation of nine unions said.

The Joint Secretary of the All-India Bank Employees Association, Mr Ramandand, in a statement said the government should nationalise “these private banks and save the masses from being looted.”

Demat accounts

Setting at rest ambiguities on the scope of the three-month moratorium imposed on the bank, the Reserve Bank of India today said demat accounts and safe deposit lockers of customers in the bank will operate as usual.

It also assured to make arrangements to provide adequate cash at GTB branches for permitted withdrawals. RBI, said in a statement today, that “the demat accounts and safe deposit lockers of customers will be allowed to be operated as usual”.

Reiterating that the objective of the moratorium was to protect the interests and safety of funds of depositors, the central bank said it was taking necessary steps to ensure the return of normalcy.

All branches of the private sector bank would continue to remain open during their normal working hours to help customers make withdrawals upto Rs 10,000 permitted under the moratorium order.

Meanwhile, Securities and Exchange Board of India (SEBI) today said broking firms holding clearing accounts with Global Trust Bank, which has been placed under a three-month moratorium by the Centre, will not face any problem in settlement of trades.

The market regulator is also expected to take a view on suspension of trading of GTB’s scrip by tomorrow. — Agencies
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Govt moots death penalty for spurious drug-makers
Manoj Kumar
Tribune News Service

New Delhi, July 25
The government is seriously contemplating to amend the Drugs and Cosmetics Act to introduce a provision of death sentence to curb the growing the menace of spurious and sub-standards drugs in the market.

A bill in this regard is likely to be presented in the Parliament next month, when both the House reassemble on August 16.

An expert committee headed by Dr R.A. Mashelkar has recommended to amend the penal provisions of Drugs and Cosmetics Act in this regard and introduce strict punishment, including death sentence, for manufacturing or selling spurious and adulterated drugs.

The Union Minister of Health and Family Welfare, Dr A Ramdoss, informed the Lok Sabha last week that Ministry would soon bring out a necessary bill based on the recommendations of the committee.

In fact, the previous government had also introduced a bill in this regard, but due to the dissolution of the Lok Sabha early, the bill lapsed. The government is now contemplating to introduce new bill in the ongoing Budget session next month.

The Mashelkar Committee had noted that out of total drugs consumed in the country, spurious drugs varied from 0.24 to 0.47 per cent. Adulterated and misbranded drugs varied from 8.19 to 10.64 per cent.

The committee has proposed to set up special courts to try offences of spurious and adulterated drugs, besides making the offence non-bailable and cognizable.

The committee has also proposed to impose minimum penalty of imprisonment up to 10 years, extending up to life imprisonment, besides a heavy fine to the sellers and manufactures of spurious and adulterated drugs.
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MARKET SCAN

Adopt wait-and-watch tacticsby
J.C. Anand

The Union Finance Minister has rolled back some aspects of the transaction tax which is now more favourable for traders on the bourses. According to the Business Standard’s analysis, the government is likely to collect considerably lower than the earlier transaction tax proposals. The stock exchange indices have firmed up.

There are, however, other factors which are unfavorable for the stock market. The first is the failure of the monsoon which is lower by 12 per cent than the normal. There are drought like conditions in many parts of the north and west India. This is bound to adversely affect the agricultural production, which contributes 25 per cent of the GDP. This will also depress the industry and the operation of the corporate sector. Secondly, corporate results for the second quarter are likely to be much lower than those in the first one. Thirdly, the stock market has not been displaying the kind of strength and positive reaction to the announcement of excellent results declared by the companies like Tisco, Wipro and many others. Already there are indications that the market is slowing down.

Under these circumstances, it is not a fit time to make investments in the stock market. One distinct exception is the investment in debt mutual funds for they are no longer subject to the levy of transaction tax.

Scrips to watch

Should investors invest in the equity market this time? I would say the investors should mark time and wait. I expect the stock market to drift lower during the next 4 to 6 months due to the impact of scanty monsoon on the economy, which would adversely affect the performance of the corporate sector, particularly fertilisers, pesticides, tractors and even fast-moving consumer goods. Pharmaceutical, infrastructure and information technology sectors are likely to be less affected.

Investors should, however, watch the scrips like Tata Investment Corporation, L&T and Tisco. Tisco is still-cum-bonus and the record date is August 12, 2004. Tata Investment Corporation is an investment company under the excellent management of the Tata group. Its equity capital is Rs 22.97 crore with a premium reserve of Rs 5421 crore and general reserve of Rs 37 crore. The NAV of Rs 10 face value share was Rs 235 on March 31, 2003. Preference for this company is because of its trusted management, strong fundamentals and sure prospect of a bonus issue during the next year or a year later. Another reason is that the evolution of long-term capital gains tax will reduce the future tax liability of the company.

L&T scrip is excellent for investment around Rs 750 per share for its Rs 2 face value share. Last year, it declared a dividend of Rs 16 per share. Against the equity capital of Rs 25 crore, it has free reserves of over Rs 2,500 crore. This makes it a sure candidate for a bonus issue next year.
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TAX ADVICE

Be clear on 65 years age norm
by S.C. Vasudeva

Q: Please refer to the column Tax Advice in The Tribune dated July 5, 2004. Under Section 88, who ever attains the age of 65 years any time during the previous year is eligible for rebate as a senior citizen. Now please check:

i) Page 16 of the article written by Mr A.N. Shanbhag. A senior citizen means an individual whose 65th birthday falls during the year is entitled for claim.

ii) Please refer Nabhi’s page 79 — It states a senior citizen means an individual who is aged 65 years or more any time during the relevant previous year.

iii) Then by Mr R.N. Lakhotia which says an assessee being an individual resident in India, who is of 65 years of age any time during the previous year.

These different version has created doubt in the minds of The Tribune readers. Kindly clarify, my birth date is March 15, 1941. I shall complete 64th year on March 15, 2005. Since my birthday of 65th year in 2005, will I be entitled to get rebate for financial year 2004-05 (A.Y. 2005-06).

— G.S. Dhaliwal

A: As per the provisions of Section 88 B of the Act, an individual resident in India, who is 65 years of age or more at any time during the previous year shall be entitled to a deduction of Rs 20,000 from the amount of income tax payable by him. Since your date of birth is March 15, 1941, you complete 65 years of age on March 15, 2006. Accordingly, you can claim the rebate under the aforesaid section from financial year 2005-06.

Gift to brother

Q: I want to gift some money out of my savings to my brother. Will I have to pay any gift tax, or will my brother as the recipient, have to pay the tax. Secondly, can I deposit money into my brother’s PPF account? Is it taxable?

— H.S. Dhaliwal

A: The answers to your queries are given as under:

i) You can gift money to your brother out of your savings. You are not liable to pay any gift tax on the same. However, if the amount that you propose to gift exceeds Rs 25,000 and the date of gift is on or after September 1, 2004, your brother will have to pay tax on the amount, which is in excess of Rs 25,000.

ii) It is advisable that you do not deposit the money directly in your brother’s PPF account. You can either give him a loan or a gift (subject to point (a) above) which he should deposit in his bank account from where he can deposit the amount in his PPF account. Please also note that your brother must have taxable income below Rs 5 lakh to enable him to claim the rebate.

Long-term gain

Q: Can I offset the LTCG of the assessment year 2004-05 against LTCL of the assessment year 1998-99? The LTCL of assessment year 1998-99 has not been shown (taken) in the subsequent assessment years’ Income Tax returns.

— Tarsem Jain

A: You will be entitled to set off the long term capital loss of assessment year 1998-99 with the long-term capital gain provided the following conditions are satisfied:

i) Your return for A.Y. 1998-99 was filed within the time prescribed u/s 139(1) of the Act.

ii) You had mentioned in that return i.e. for A.Y. 1998-99 that the loss is being carried forward u/s 74 to be set off in the subsequent years.

Form 15G

Q: My total gross salary income Rs 90,000 per year. I have some fixed deposit in some bank’s institutions, the interest on which is about 25,000 per year. My total savings is about 22,000, so if included income from other sources to salary income, income tax on that is nil. (After deducting house rent exemption and standard deduction). I want to seek clarifications on the following points:

i) Can I submit Form 15G to the bank for not to deduct tax at source.

ii) What is the limit upto which Form 15G can be submitted.

iii) Is the submission of Form 15G an undertaking, “Not to deduct tax at source,” as I included interest income in my gross income in Return.

iv) Can tax be deducted at source on the interest income below Rs 5,000 in a bank.

— Chetan Kumar

A: The answers to your queries are as under:-

i) You can submit Form 15G to the bank if your aggregate income from the following sources does not exceed Rs 50,000

a) Dividends other than dividends from domestic companies

b) Interest on securities

c) Interest other than interest on securities

d) Repayment of deposits under the NSS Scheme

e) Income in respect of units

ii) The said form has to be submitted at the time of, or before receiving the amount either directly or by credit to your account.

iii) Form 15-G is a declaration that is furnished by an individual who claims certain receipts without deduction of tax at source.

iv) As per the provisions of Section 194A of the Act, interest below Rs 5,000 is exempt from the provisions of deduction of tax at source.
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