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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

Indo-Pak trade talks begin tomorrow
Islamabad, March 25
Pakistan's stance on granting India the most favoured nation status in the light of SAARC countries ratifying a regional free trade area is among issues expected to be taken up during bilateral talks on economic cooperation from Monday.

A girl accompanied by her parent speaks to a communications robot 'Hello Kitty Robo' presented by Japan's business design laboratory during the two-day robot exhibition at a departmental store in Tokyo on Saturday. The robot is available at a price of 4,50,000 yen ($3,850).
A girl accompanied by her parent speaks to a communications robot 'Hello Kitty Robo' presented by Japan's business design laboratory during the two-day robot exhibition at a departmental store in Tokyo on Saturday. The robot is available at a price of 4,50,000 yen — AFP

ONGC to get carbon credit
New Delhi, March 25
Oil and Natural Gas Corporation has become the first government organisation to receive approval for getting carbon credit under the Kyoto Protocol for clean development mechanism projects.

UTI MF ties up with SBI
New Delhi, March 25
UTI Mutual Fund and the SBI have entered into a strategic tie-up for the distribution of UTI MF schemes. Under the agreement, the SBI will offer the entire bouquet of UTI MF's schemes across the bank's
selected branches.

GM to launch mini car
Kochi, March 25
Auto Major General Motors India is harbouring "definite" plans to launch a mini car that would be "competitively priced" and would aim to get a market share of 10 per cent, a top official of the company said today.

Indo-Gulf trade to cross $20 b mark
New Delhi, March 25
India’s trade with the Gulf Cooperation Council countries will exceed $20 billion during the current financial year 2005-06, excluding oil imports, equalling India’s trade with Europe.

Aviation Notes

Uncertainty hogs Jet-Sahara deal
The biggest aviation deal between Jet and Sahara has expectedly come unstruck so far. Many reasons are being advanced for the deal getting grounded.




A model presents a traditional ensemble by Tunisian designer Fawzia Brahem during Handicraft Week in Tunis.
A model presents a traditional ensemble by Tunisian designer Fawzia Brahem during Handicraft Week in Tunis. — AFP


EARLIER STORIES

 
  • Two runways

Investor guidance

Business loss cannot be offset against salary income
Q: I am a salaried person. My income includes salary + long-term capital gains + short-term capital gains.

  • Equity MF

  • Infosys shares

  • Nabard bonds

  • Applicant’s death

  • MF scheme

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Indo-Pak trade talks begin tomorrow

Islamabad, March 25
Pakistan's stance on granting India the most favoured nation (MFN) status in the light of SAARC countries ratifying a regional free trade area is among issues expected to be taken up during bilateral talks on economic cooperation from Monday.

Indian Commerce Secretary S.M. Menon and his Pakistani counterpart Arif Ali Shah, who head the Joint Working Group (JWG) set up two years ago, would meet here on March 27 and 28 to hold the third round of talks on economic cooperation listed under the Composite Dialogue process.

Though officials of both sides maintain that the parleys would cover bilateral trade, the talks are taking place in the backdrop of SAARC Secretariat's announcement this week that South Asia Free Trade Area (SAFTA) has finally been ratified by all SAARC countries, which is expected to have a big impact on the Indo-Pak trade.

The issue of Pakistan granting India the MFN status as a reciprocal gesture in the light of ratification of SAFTA was also expected to figure in the talks.

India has already sought clarification from Pakistan over reports that Islamabad would continue to trade with India with the negative list of products despite SAFTA ratification.

The JWG met few times in the past, but made very little progress in the face of Pakistan's reluctance to publicly open up its markets for Indian products and investment linking it to "tangible progress" on political issues like Kashmir.

Pakistan has complained of high Indian tariff regime and demanded a level-playing field for its products in the Indian market.

Pakistan cabinet ratified SAFTA last month amid reports that Commerce Ministry headed by Humayun Akhtar Khan recommended strongly against it on the ground that it would end up opening Pakistan's markets to India in a big way under the regional multilateral arrangement. — PTI 

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ONGC to get carbon credit
Tribune News Service

New Delhi, March 25
Oil and Natural Gas Corporation (ONGC) has become the first government organisation to receive approval for getting carbon credit under the Kyoto Protocol for clean development mechanism (CDM) projects.

ONGC is expected to earn good quantity of carbon credits from the CDM projects.

Its six CDM projects selected for carbon credits include gas flaring reduction projects pertaining to different ONGC assets in Mumbai High, Neelam & Heera, Ankleshwar, Ahmedabad, Mehsana and Cauvery Assets. In addition to these six CDM projects, three more projects are expected to receive approval of Designated National Authority (DNA) shortly.

A company press statement issued here today said, other projects of ONGC which are in the pipeline for the CDM approval include Hazira Gas Plant, Coal Bed Methane, Wind Power, Mumbai High Heat Recovery and Tripura Power Project.

Commenting on the development, ONGC Group Chairman Subir Raha, said, the company would undertake more CDM projects, particularly the carbon dioxide sequestration & energy efficiency projects, besides adoption of cleaner technologies for environmental protection.

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UTI MF ties up with SBI
Tribune News Service

New Delhi, March 25
UTI Mutual Fund and the SBI have entered into a strategic tie-up for the distribution of UTI MF schemes. Under the agreement, the SBI will offer the entire bouquet of UTI MF's schemes across the bank's selected branches.

Mr U.K. Sinha, CMD, UTI AMC, said, “The tie-up with the State Bank of India, who are also our sponsors, endorses the commitment of two giants of the financial market to the retail investors of this country. With this tie-up customers will get easy access to invest in various schemes of UTI MF closer to their doorsteps at the branches where they do their banking transactions.” 

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GM to launch mini car

Kochi, March 25
Auto Major General Motors India is harbouring "definite" plans to launch a mini car that would be "competitively priced" and would aim to get a market share of 10 per cent, a top official of the company said today.

"The company is committed to launch a mini car," which would compete with Alto, Santro and Maruti 800, General Motors India, Vice-President (Corporate Affairs), P Balendran, said here after launching Chevrolet Aveo in the Kerala market.

Mr Balendran did not specify when the "mini car" would hit the road, but said it would "definitely come" and the intention was to get by 2010 a 10 per cent share of the international market, he said.

Declining to give any hint on the price of the car, he said it would be "competitively priced." The Aveo, which has been launched in Mumbai and Chennai, is the first of the three new Chevrolet products debuting in the first six months of this year and would soon be joined by the Aveo U-VA and Optra SRV by June-July.

The new sedan, to be built at GM's manufacturing facility in Halol, in Gujarat, redefines the small car segment, he said. — PTI 

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Indo-Gulf trade to cross $20 b mark
Tribune News Service

New Delhi, March 25
India’s trade with the Gulf Cooperation Council (GCC) countries will exceed $20 billion during the current financial year 2005-06, excluding oil imports, equalling India’s trade with Europe.

The Union Minister of Commerce and Industry, Mr Kamal Nath, while addressing the second India-GCC Industrial conference in Muscat said during 2004-05, India’s exports to GCC countries were $10 billion and imports were $7 billion, excluding oil imports.

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Aviation Notes

by K.R. Wadhwaney

Uncertainty hogs Jet-Sahara deal

The biggest aviation deal between Jet and Sahara has expectedly come unstruck so far. Many reasons are being advanced for the deal getting grounded. However, amidst murky weather and under-current, the two ‘main players’ have extended the deadline for as long as three months for the DGCA’s (Director-General of Civil Aviation) approval to come about.

The stipulated Rs 120 crore of the Rs 2300 crore has already been given by Jet to Sahara. In the event of the deal not materialising, Jet has to pay another Rs 30 crore as Rs 150 crore has been fixed as break-up fee.

The deal that appeared straight-forward at one stage, does not seem simple. Many irritants still remain, although several of them have been sorted out by the advocates/ advisers of two parties.

Who will outwit and outmanoeuver is difficult to say at this point of time. Suffice it to say that both star-players, Naresh Goyal and Subrata Roy, are shrewd and calculative chessboard operators where money is the target.

The extension of the deadline until June 24 has had a very negative effect on the airline industry, particularly in domestic skies, where uncertainty is playing havoc. In open skies, an openness of mind is far more vital than moves on chess-board.

Two runways

The Indira Gandhi International Airport’s two runways, main and subsidiary, have been in operation for years. But, surprisingly, the Airports Authority of India (AAI) has come out with a gimmick that one runway will be utilised for landing and another for taking-off to reduce congestion and hovering over the airport.

The fact of the matter has been that Air Traffic Controllers (ATCs) have been responsible for lengthing queues in skies by holding commanders at varying levels and distances with intentions which are not exactly ‘professional’.

The Indian ATCs are as competent as any in foreign country. But, they are overworked with meagre emoluments as compared to salaries of commanders and captains. They deserve better facilities so that they do not indulge in practices which are unethical.
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Investor guidance

by A.N. Shanbhag

Business loss cannot be offset against salary income

Q: I am a salaried person. My income includes salary + long-term capital gains (LTCG) + short-term capital gains (STCG). I indulge in day trading sometimes. Under which category, this income comes. Last year, I had included this income as “Business income” and paid taxes at normal rates. In this financial year, I have a trading loss of about 25,000. Can this loss be offset against any other income, including STT paid on these transactions? Which section of the IT Act provides for this?

— Milind Kamath

A: Business loss cannot be offset against salary income. STT is not to be claimed as expense in business.

Where the total income of an assessee includes business profits arising from securities transactions, he shall be entitled to a rebate u/s 88E. The rebate shall be equal to the amount calculated by applying the average rate of tax on taxable income and would be limited to the STT paid. To claim such rebate, the assessee has to furnish evidence of payment of STT along with the return of income in Form-10DB for purchase and sale of equities and Form-10DC for sale of a unit of an equity oriented MF scheme.

Needless to state that STT rebate will not be allowed also as a deduction. Consequently, in the case of business losses, the STT cannot be carried forward or refunded.

Equity MF

Q: I would request you to inform me, about tax on:

1 Shares and equity MF sold within one year? What if the sold amount (gain and principal) is reinvested in another equity?

2. ELSS sold after three years?

— Madhukar Trambak

A: Shares and equity MF sold within one year as you know are short-term capital gains taxed at10 per cent. You cannot save tax on short-term capital gains by investing in another equity/MF.

ELSS is nothing but an equity-oriented fund and the tax laws applicable to an equity fund would apply. This means that long-term gains (holding period of over 12 months) would be tax free.

Infosys shares

Q: On April 16, 2004, I bought five Infosys shares at Rs 5,488 per share. On July 6, 2004, 15 bonus shares were allotted to me. In 2005, I offered the entire 20 shares to the company under the ADR scheme. But only two shares were taken on June 17, 2005, and I received Rs 5,734 and the balance of 18 shares were re-credited to my demat account. Can I book loss on this ADR sale and whether it can be set off against any other capital gains, which has suffered the STT or any other income? Also since the balances of 18 shares were re-credited can it be taken as a fresh acquisition or the original date of acquisition stands good?

— Nirav

A: Let us simplify the transaction. You originally bought five Infosys shares at Rs 5,488 per share. The 15 bonus shares you get would be valued at cost zero. Out of this, Infosys bought two shares and returned the rest to you. So what has ipso facto happened is that you have sold two shares out of your first acquisition (under the FIFO method) to Infosys. The sale price minus the cost of the original shares will be your capital gain or loss. Since the transaction is not carried out on a stock exchange, the long-term capital gains on the same will not be exempted. Therefore, the long-term capital loss can be used for set-off. The rest of the 18 shares would be held by you as usual. These cannot be taken as fresh purchase. In other words, look at the entire transaction as you having sold two shares to Infosys in an off-market transaction.

Nabard bonds

Q: I have recently sold my property in Mumbai that I had bought in May 1985. I would like to know whether I could invest the amount in some kind of mutual funds and still save tax since the Nabard bonds and the other two bonds that save capital gains tax offer very poor returns?

— Arnav Palande

A: Unfortunately, you cannot invest in any MF scheme to save capital gains tax. Investment only in the bonds of Nabard, NHAI, NHB, REC and Sidbi within six months from or investment to purchase a residential house within one year before or two years after or construct a residential house within three years from the date of transfer will entitle you the exemption. Incidentally, the 54EC bonds offer very attractive returns. It is not evident because the investor only focuses on the coupon or the interest rate. True that the interest is just 5.5 per cent. However, you should not lose sight of the fact that there is an upfront discount of 20 per cent on account of the capital gains tax saved. In other words, on a capital gain, of say, Rs 100, your net investment is just Rs 80 whereas you earn a return on Rs 100. On account of the lock-in being just three years, the tax adjusted equivalent returns on these bonds work out to almost 12.20 per cent per annum.

Applicant’s death

Q: All my questions are on the 8 per cent GoI Taxable Saving Bond, 2003, scheme:

If the sole applicant dies before the six-year period, can the nominees / nominee, terminate the savings bonds in between and claim the money (irrespective of whether the saving bond is cumulative or non-cumulative)? Or they have to continue compulsorily for six years? And will not the get the monies before the six-year period.

Is there any way to get the money before the six-year period, if the first applicant dies before that period? To ensure this, will it make difference if the second and the third names are mentioned “as nominees” or should be mentioned as applicants (under anyone or survivor option) to ensure that after the death of the first applicant, the second and the third person gets the monies at that time, irrespective of whether six years period has matured or not.

Kindly enlighten me regarding the same as I am personally facing this problem and do not know whether I should mention the names the second and third persons in nominees or as second and third applicants.

— Chetan

A: On death of the single holder, the bonds are transferred in the name of the nominee for the balance period. The nominee, now the holder, will be able to withdraw on maturity only. The new single holder can nominate someone.

It is preferable to have second and third applicants with anyone or survivor option.

MF scheme

Q: Kindly let me know which option is better in Mutual Fund Scheme, growth or Dividend (RIP). I am a long-term investor and would like to invest in equity schemes as well as sector schemes for at least five to seven years.

— Mahesh Sonavane

A: With long-term capital gains being tax-free, there is no difference between dividend reinvestment plan and growth. However, the equality of both plans depends upon the tax laws being the same as they are now. For example, if long-term capital gains are made taxable, reinvestment plan is more beneficial. However, if distribution tax is levied on equity dividend, then the growth plan is more beneficial.

The dividend and growth options are equivalent from taxation point of view. For obvious reasons, growth is better than dividend in a rising market. We do not recommend dividend reinvestment plan since at total redemption, at least one reinvestment will be short-term in nature.
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