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THE TRIBUNE SPECIALS
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B U S I N E S S

Private banks evince interest in UWB
Mumbai, September 3
Private sector banks appear to lead the race for amalgamating the under-moratorium United Western Bank (UWB), itself a private sector entity, with themselves, if ICICI Bank’s move to consider the issue at its urgently-convened Board of Directors meeting tomorrow is any indication.

Murthy to head IT Vision Group
Bangalore, September 3
A month after saying he would have to check his diary before taking up Karnataka Chief Minister H D Kumaraswamy’s offer to head the state Vision Group on Information Technology (IT), Infosys Chief Mentor N.R. Narayana Murthy has taken up the offer.

IOC to invest Rs 30,000 cr
New Delhi, September 3
The IndianOil Corporation (IOC) has announced to invest Rs 30,000 crore in near future to emerge as a major petrochemical player in India.

Morgan Stanley pegs GDP growth rate at 7.6 per cent
New Delhi, September 3
Global investment banking and equity research major Morgan Stanley has raised its forecast for India's economic growth in the current fiscal following stronger than expected surge in first quarter corporate revenues, industrial production and automotive sales.

Interest on post office saving scheme taxable
Q. My queries are as under:

1. The interest on UTI ARS scheme was tax-free last year. Will it be taxed this year as Section 80L has gone or is it exempted under some other section?

2. Whether post office saving interest is tax-free or not?

3. Having Rs 30,000 accrued on 6 NSCs purchased in pervious years as interest. Should I purchase 6 NSC amounting of Rs 70,000 or Rs 1,00,000 to avail the maximum tax benefit?


A model displays a creation by Suneet Varma on the last day of Wills Lifestyle Fashion Week in New Delhi. India Fashion Week, which ended on Sunday, showcased some 30 shows from nearly 75 Indian designers.
A model displays a creation by Suneet Varma on the last day of Wills Lifestyle Fashion Week in New Delhi. India Fashion Week, which ended on Sunday, showcased some 30 shows from nearly 75 Indian designers. — AFP 

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Private banks evince interest in UWB

Mumbai, September 3
Private sector banks appear to lead the race for amalgamating the under-moratorium United Western Bank (UWB), itself a private sector entity, with themselves, if ICICI Bank’s move to consider the issue at its urgently-convened Board of Directors meeting tomorrow is any indication.

ICICI Bank’s Board of Directors will meet tomorrow to consider if an expression of interest should be submitted to the Reserve Bank of India for amalgamating UWB with itself.

Apart from ICICI Bank, another private sector bank, the Kerala-based Federal Bank is also reportedly interested in UWB. In fact, the southern private sector banking major is reported to have been eyeing UWB much before yesterday’s RBI move.

For both banks, it makes sense to amalgamate the Satara-headquartered UWB with themselves. For ICICI Bank, the largest player in the Indian private sector banking space, it provides an opportunity to add a further 230 UWB branches and consolidate itself tremendously in the sector.

ICICI Bank is already very strong in the western region and with the majority of UWB’s branches in Maharashtra, an amalgamation will enable it to enter interior Maharashtra, especially western Maharashtra, and catapult it to a very strong position in the region.

The same holds true for Federal Bank which, following a recent Supreme Court order, amalgamated the Ganesh Bank of Kurundwad, thereby expanding its footprint in Maharashtra. An amalgamation with UWB will, therefore, fit in with its strategy to consolidate itself further in the western region.

The Centurion Bank of Punjab (CBoP), too, could have emerged as a front-runner for UWB but it is presently negotiating for taking over south-based Lord Krishna Bank (LKB). The price for acquisition is reportedly in range of Rs 275 to 300 crore and hence it is extremely unlikely to evince an interest in UWB.

Expression of interest by foreign banks are not ruled out given that UWB is predominantly Maharashtra-centric, though it is present in 47 districts of nine states, it is unlikely that they will be seriously interested in amalgamating the bank with themselves.

Public sector banks already have a presence in the regions where UWB is present and hence a merger could throw up issues such as what to do with excess staff, branch re-organisation, staff redeployment, etc. These could prove thorny issues for PSBs and hence, while, their interest in UWB cannot be ruled out, their path too will not be easy.

Private sector banks, especially ICICI Bank and Federal Bank, on the other hand, have experience in handling such matters. ICICI Bank, has in the past, taken over Bank of Madurai, Anagram Finance and ITC Classic, while Federal Bank has recently amalgamated Ganesh Bank with itself.

For ICICI Bank with 630 branches and a capital adequacy ratio of 13.25 presently, this could be its first attempt to take over a bank under moratorium while Federal Bank has previous experience in the case of Ganesh Bank of Kurundwad.

The RBI, will, however, consider all schemes and conduct its own due diligence before taking a decision on proposals submitted to it. As its Executive Director Anand Sinha said yesterday: “We will take a decision which will be in the best interests of (UWB’s) depositors.” For the time being, however, private sector banks appear better placed to amalgamate UWB with themselves than their PSB and foreign banking counterparts. — PTI

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Murthy to head IT Vision Group
Tribune News Service

Bangalore, September 3
A month after saying he would have to check his diary before taking up Karnataka Chief Minister H D Kumaraswamy’s offer to head the state Vision Group on Information Technology (IT), Infosys Chief Mentor N.R. Narayana Murthy has taken up the offer.

Mr Kumaraswamy, whose father and former Prime Minister H D Deve Gowda had called Murthy a “land grabber”, had requested the Infosys Chief Mentor to head the state’s IT Vision Group while speaking on the 25th anniversary of the company at Mysore.

According to the Chief Minister’s office, Mr Murthy has written to the Chief Minister accepting the offer. He has commented that it would be a ‘privilege and pleasure’ to head the vision group. Biocon Chairperson Kiran Mazumdar Shaw, who heads a vision group on biotechnology, will continue to do so separately.

According to state IT Secretary Anup Poojary, the vision group will be meeting shortly to detail a time bound programme to promote the IT industry in the state as a run up to the state’s showpiece IT.in event being held next month. Mr Poojary said the vision group was expected to come out with ways and means to ensure the spread of the IT industry in secondary cities in the state.

The appointment is expected to give a boost to Karnataka’s appeal as a state that is still eager to attract new IT ventures. Besides this, the IT industry itself now has an influential voice on a government panel.

The Chief Minister has been trying to mend fences with Narayana Murthy ever since he took over the reins of the state seven months ago. Earlier, after being accused of doing nothing for the upcoming international airport project by Mr Deve Gowda, Infosys Chief Mentor had resigned from the post of non-executive Chairman of Bangalore International Airport Limited (BIAL). Even after a public appeal by the Chief Minister, the Infosys head had said that he would have to check up his diary to see whether he could take up the responsibility.

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IOC to invest Rs 30,000 cr
Tribune News Service

New Delhi, September 3
The IndianOil Corporation (IOC) has announced to invest Rs 30,000 crore in near future to emerge as a major petrochemical player in India.

Advice on subsidy

Subsidies on LPG and kerosene should be charged directly to the Budget and not loaded on the back of oil companies, Planning Commission Member Dr Kirit Parikh has said.

The Petroleum and Natural Gas Ministry could bid out available subsidies for LPG and kerosene to obtain the lowest price at which a given amount of these products could be supplied to a defined number of targeted beneficiaries or on the basis of the minimum subsidy at which these could be supplied in specified quantities and at specified price to the targeted number of beneficiaries, Dr Parikh said. — UNI

After the success of its linear alkyl benzene plant in Gujarat, country’s largest integrated paraxylene (PX), the company has recently commissioned purified terephthalic acid (PTA) plant at Panipat refinery.

“As part of the diversification into petrochemicals, a naphtha cracker polymers project is being implemented at Panipat at a cost of Rs 12,000 crore. Besides, go-ahead has been obtained for a 15 million metric tonnes per annum grassroots refinery cum petrochemicals project at Paradip in Orissa,” said Director (Refineries) Jaspal Singh.

The consultants are expected to submit a report whether the company should set up retail outlets through malls in cities, enter into tie-up with non-fuel retail majors for setting up retail chains at its outlets and to enter a strategic partnership with new players in retail business.

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Morgan Stanley pegs GDP growth rate at 7.6 per cent

New Delhi, September 3
Global investment banking and equity research major Morgan Stanley has raised its forecast for India's economic growth in the current fiscal following stronger than expected surge in first quarter corporate revenues, industrial production and automotive sales.

Morgan Stanley said it was raising its GDP growth forecast for the year ending March 2007 to 7.6 per cent, from 6.8 per cent previously, notwithstanding the expectations for a slowdown in growth rate during the second half of this year.

Growth trend in the corporate revenue, industrial production and automobile sales indicates towards a rebound in the quarter ended June, Morgan Stanley's India-based economists Chetan Ahyaand Mihir Sheth said in a report.

Re-accelerated growth trends in the first quarter has prompted an upward revision to GDP growth forecasts for this fiscal, they said.

However, the analysts have cut down their growth forecast for the agriculture segment to 2 per cent, from 3 per cent previously, primarily due to the erratic trend in the monsoon rainfall.

Morgan Stanley said weaker than expected agricultural growth would offset a part of the upside in non-agriculture growth.

The analysts expect the industry and services segments to register growth of 8.7 per cent and 9.2 per cent in FY 2007, as compared to its earlier estimates of 7.2 per cent and 8 per cent, respectively.

However, the analysts added that they were still looking for possible slowdown in the overall growth trend in the second half of current fiscal.

The aggregate corporate sales growth for the BSE 200 companies, excluding energy firms, sharply accelerated to a new high of 28 per cent year-on-year during the quarter ended June 2006, up from 18 per cent during the January-March quarter, the report said.

The industrial production data also points towards a re-acceleration in growth to a 10.1 per cent average in the quarter ended June from 8.7 per cent in the quarter ended March.

The automobile sector, which is one of the most economic growth-sensitive sectors, also rebounded sharply in the latest quarter.

The official GDP growth estimate for the June quarter, likely to be released on September 29, should corroborate this trend, the analysts said.

Morgan Stanley added that most of the acceleration in growth appears to be driven by domestic demand, as various indicators suggest a continued deceleration in export demand.

Robust domestic demand growth has been largely supported by a sharp rise in bank credit that rose to a new high of 33 per cent at the end of June, the analysts added.

The government has also been protecting the domestic demand by choosing not to pass on the full cost of higher oil prices to consumers, they said. — PTI

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Tax Advice
Interest on post office saving scheme taxable
by S.C. Vasudeva

Q. My queries are as under:

1. The interest on UTI ARS scheme was tax-free last year. Will it be taxed this year as Section 80L has gone or is it exempted under some other section?

2. Whether post office saving interest is tax-free or not?

3. Having Rs 30,000 accrued on 6 NSCs purchased in pervious years as interest. Should I purchase 6 NSC amounting of Rs 70,000 or Rs 1,00,000 to avail the maximum tax benefit?

— J.N. Gupta

A. The answers to your queries are as under:

1. According to the provisions of Section 10(35) of the Act, from assessment year 2004-05 and onwards, income in respect of units from the Administrator of the specified undertaking is exempt from tax. This provision would also apply to existing units issued by the Unit Trust of India which were issued in terms of Section 18 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act 2002. In case the units held by you are under the said scheme, the income received in respect of such units would be tax-free.

2. The interest earned under Post Office Saving Scheme is taxable.

3. Since you are entitled to a deduction of the accrued interest on National Saving Certificates under Section 80C of the Act, it would be worthwhile to buy National Saving Certificates of Rs 70,000 so as to avail the full amount of deduction available under that section.

Capital assets

Q. I own certain silver utensils which are used by the family on certain occasions. I intend selling them as the silver prices have gone up considerably and I would like to encash such an asset which is used only on certain occasions. What would be the position of capital gains on the sale of such silver utensils.

— Sunder, Hoshiarpur

A. The Bombay High Court in the case of Jayantilal A. Shah vs. K.N. Anantharama Aiyar CIT (1985) (23 Taxman 14) has held that silver utensils which are held by the assessee which are not in use ordinarily and normally but only on certain occasions are personal effects. Personal effects are excluded from the definition of capital assets. Accordingly, any gain earned on sale of such utensils will not be exigible to capital gain tax.

IT refund

Q. I am a regular tax payee. I have submitted my income tax return for the year 2004-05 in time during May 2005. As per my return submitted for this period, I am supposed to get a refund of Rs 5,340. I am a retired lady and have not received my refund so far. If I don't get the refund till March 2006 can I deduct this amount from my next year's income tax which I will have to pay for the year 2005-06.

Kindly advise me the tax liability for the year 2005-06. My total income will be as under:-

Income from pension Rs 92,850

Income from interest Rs 1,85,320

Total income Rs 2,78,170

My total savings will be as below:-

NSC Rs 70,000

Infrastructure Bonds Rs 30,000

Please also advise if there is any time limit by the Income Tax Department for the refund?

— Raj Kumari Sharma, Dharampur

A. The answers to your queries are as under:

1. It is not possible for you to adjust the refund receivable computed on the basis of your workings from the tax payable by you because of the difficulties which it can create in the demand register maintained by the Department. Further, the refund worked out by you may not be correct as per the calculation by the Department and, therefore, any adjustment by you may lead to additional tax and interest payable for Assessment Year 2006-07.

2. You have not clarified whether you are a senior citizen. The computations of tax have, therefore, been made on the basis that you are not a senior citizen. Your taxable income on the basis of figures given by you would work out at Rs 1,78,170. The tax payable by you on the said amount would be Rs 7,277. The Act does not provide any time limit for the grant of refund by the Assessing Officer.

However, there is a time limit for sending an intimation under Section 143(1) of the Act intimating the assessee about the sum payable on the basis of return filed by him. No intimation can be sent after the expiry of one year from the end of the financial year in which the return is made. In my opinion, therefore, an intimation with regard to the refund should also be sent within the aforesaid period along with a refund voucher.

Gift to brother

Q. I am at present employed in the UK. I intend to give about Rs 8 lakh to my elder brother (who is in India) as he is not well. This amount is proposed to be invested in MIS (P.O.) or RBI Relief Bonds jointly in the name of my brother (beneficiary) and father. However, my father is claiming deduction of Rs 40,000 from income tax under Section 80DDB. Kindly advise the formalities to be complied with for the purpose.

— Ram Parkash, Chandigarh

A. The gift to your brother can be made by executing a gift deed in London or the amount of Rs 8 lakh can be remitted with a letter expressing clearly therein that the amount is a gift to your brother. The letter should be addressed to your brother. To complete the gift, your brother must send an acceptance letter with regard to the gift. No tax would be payable by your brother in India on the gift so received.

Deduction under Section 80DDB being claimed by your father for the medical treatment of your brother will have no relevance with your gift. This is because the deduction is allowable for the amount actually paid by an assessee for the medical treatment of the specified disease or ailment for himself or a dependent.

The deduction would be available to him if he had actually paid such an amount and, therefore, if he continues to pay the amount for the treatment of your brother (who should be dependent on your father) a gift received from you will not make a difference with regard to the deduction allowable to him.

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BRIEFLY

CPI-IW up
Shimla, September 3
The All-India Consumer Price Index number for industrial workers base 2001-100 registered an increase of one point during July 2006 and stood at 124, Labour Bureau sources said. The index when converted to old base 1982-100 worked out at 574.12. The index recorded highest increase of four points in Nasik. The increase was attributed to hike in prices of wheat, groundnut oil, vegetables and fruits. — PTI

Petronet pact
New Delhi, September 3
Petronet LNG Ltd, India’s largest liquefied natural gas importer, today formed a joint venture with Gujarat-based Adani Group for setting up a Rs 1,150 crore solid cargo port in Dahej Special Economic Zone in Gujarat. Adani Petronet (Dahej) Pvt Ltd is a 50:50 joint venture company of PLL and Adani Group for implementation of the Rs 1,150 crore project. — PTI

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