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ONGC, Cairn reach pact on Rajasthan pipeline
New Delhi, January 14
In a significant development, the ONGC and Cairn India Ltd have reached an agreement to build a $340-million pipeline to transport crude oil found in Barmer district of Rajasthan to Gujarat.

WB, Ficci warn against full rupee float
New Delhi, January 14
The World Bank and FICCI have warned the government against full float of the rupee without putting in place necessary safeguards.

TRAI gets nod to revise cable TV prices
New Delhi, January 14
Broadcast tribunal TDSAT has allowed regulator TRAI to revise prices of cable TV channels for 2007, while dismissing a petition filed by a Pune-based consumer group against any hike.



EARLIER STORIES

 
Sourav Ganguly hands over the keys of Tata Indica Xeta car to the Tata Teleservice contest winner Rupanon Roy in Kolkata
Sourav Ganguly hands over the keys of Tata Indica Xeta car to the Tata Teleservice contest winner Rupanon Roy (left) in Kolkata on Sunday. — PTI

Tatas may revise Corus offer
London, January 14
With the deadline set by British regulators approaching fast, the market is abuzz with hopes of a fresh offer from India's Tata Steel for Anglo-Dutch steelmaker Corus this week, a media report said here.

Market Update

Pick up mid, small caps
Last week turned out to be an action-packed one. Amidst high volatility the market saw significant falls on three consecutive days starting Monday.

Tax Advice

Income from gifted money taxable in donor’s hands
Q. I retired from government service on 31.03.2006. In October 2005, I withdrew 90 per cent amount of Rs 5 lakh from my GPF account. I issued cheque in favour of postmaster for investing this amount in name of my wife under MIS.





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ONGC, Cairn reach pact on Rajasthan pipeline

New Delhi, January 14
In a significant development, the ONGC and Cairn India Ltd have reached an agreement to build a $340-million pipeline to transport crude oil found in Barmer district of Rajasthan to Gujarat.

"The Petroleum Ministry has blessed the idea of including the pipeline cost in the field development plan for the Rajasthan fields. Like the cost for developing Mangala, Bhagyam and Aishwariya fields, the pipeline investment will also be shared between Cairn and ONGC in a 70:30 ratio," an ONGC official said.

Cairn-ONGC will first build a 340-km line to the IOC’s Viramgam pipeline terminal in Gujarat. Viramgam is connected by pipelines to IOC's Koyali, Panipat and Mathura refineries, which will be the potential customers of Rajasthan crude. A smaller pipeline can be built to the coast, or Jamnagar where Reliance Industries and Essar Oil have refineries.

The pipeline construction will take 12-18 months.

The official said the ONGC planned to get its subsidiary, MRPL, de-nominated as the official receiver of crude oil found by Cairn Energy in Rajasthan and instead sell it to refiners.

"To include the pipeline cost in FDP, the delivery point for crude oil will be shifted from field storage facilities to a location at or near the coast," he said, adding that the operator gets to recover cost incurred on field development through sale of oil before the government gets its statutory dues.

Cairn/ONGC were in talks with various refiners to sell the Rajasthan crude, which will be sold at a slight discount to Brent crude oil, he said. When contacted, Cairn spokesperson David Nisbet said: "We are involved in ongoing discussions with the government and third parties."

The official said the waxy Rajasthan crude could be processed at Reliance's existing 33- million-tonne Jamnagar refinery or its upcoming 29-million-tonne refinery at the same site, Essar's Vadinar refinery, IOC's expanded Koyali refinery in Gujarat or Panipat refinery in Haryana.

Earlier, it was envisaged that the ONGC would build a Rs 8,000-crore refinery at Barmer to process the crude. In the interim period to building of the pipeline, it was to lay a pipeline to Mundra from where the crude was to be shipped to its subsidiary — Mangalore refinery.

The ONGC has since changed its mind and is no longer interested in building the refinery as northern India will have excess capacity once HPCL's Bathinda refinery comes up.

Cairn plans to begin production from Mangala, Bhagyam and Aishwariya fields, the first three of the 19 discoveries in the Rajasthan block that established ultimate reserve of 3.6 billion barrels, in first half of 2009. The initial production will be about 100,000 barrels per day and peaking to 150,000 bpd in 2010. — PTI

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WB, Ficci warn against full rupee float

New Delhi, January 14
The World Bank and FICCI have warned the government against full float of the rupee without putting in place necessary safeguards.

"Past experience, especially the East-Asian crisis, calls for better management of risks," World Bank and FICCI said in a joint study titled Developing Markets for Long-Term Finance.

While acknowledging India's readiness to go in for full capital account convertibility, the study said the government would have to ensure compliance of sound risk management practices before moving in this direction.

The government would also have to meet global standards relating to capital adequacy norms, banking supervisions and mechanism for close monitoring and regulation of short-term exposure and reduced dependence on one-way inflows, it said.

India faces three key challenges as it moves to the next generation of financial market reforms. It includes developing long-term local currency debt markets and new financial instruments to serve the needs of firms and households, World Bank acting Country Director for India Fayez Omar said.

He also said the third challenge was developing the necessary markets and mechanisms, such as derivatives and securitisation, which could enhance the risk-bearing capacity of the economy and maintain stability.

The study emphasised that sustaining economic growth at 8 per cent and making it more inclusive would depend on augmenting the supply of long-term funds, especially for the infrastructure sector. — PTI

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TRAI gets nod to revise cable TV prices

New Delhi, January 14
Broadcast tribunal TDSAT has allowed regulator TRAI to revise prices of cable TV channels for 2007, while dismissing a petition filed by a Pune-based consumer group against any hike.

"TRAI is free to consider, if it requires, to pass some orders on revision of rates," Telecom Disputes Settlement and Appellate Tribunal Chairman Justice Arun Kumar said.

Dismissing the appeal filed by 'Grahak Hitvardhini Sarvajanik Sanstha' in 2005 against TRAI's order of a 4 per cent hike beginning 2006, Mr Kumar said as 2006 has ended, "TRAI has to consider the matter of revision of rates afresh".

He also observed that the issue of the TRAI jurisdiction to regulate tariff for cable and broadcasting industry was pending before Delhi High Court. — PTI

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Tatas may revise Corus offer

London, January 14
With the deadline set by British regulators approaching fast, the market is abuzz with hopes of a fresh offer from India's Tata Steel for Anglo-Dutch steelmaker Corus this week, a media report said here.

The stock market is anticipating a new proposal from Tata Steel that would trump the £5.9 billion offer from Brazil's CSN, British newspaper 'The Observer' said.

The report cited unnamed sources as saying that a new bid was possible this week although under a timetable set by the UK Takeover Panel, Tatas can do so until the end of January.

"Some observers believe he (Ratan Tata) is preparing to increase his offer to 550 pence a share, well above the 515 pence bid from CSN Chairman Benjamin Steinbruch," it said.

Tata's advisers were working to finalise a fresh bid, but the decision would rest with Mr Ratan Tata himself, it added.

A deal with either Tata or CSN would create the world's fifth largest steel-maker with a combined output of about 24 million tonnes a year.

The report also quoted unnamed analysts as saying that Mr Tata had large expansion plans in India and Asia, and that it might have less reason to forge a tie-up with Corus than CSN, which is a regional player. — PTI

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Market Update

by Lalit Batra

Pick up mid, small caps

Last week turned out to be an action-packed one. Amidst high volatility the market saw significant falls on three consecutive days starting Monday. It bounced back with a vengeance on the last two trading days with Sensex registering whopping gains of over 700 points. The gain in the last two days were on the back of strong industrial production data for November 2006, firm Asian and US market and short covering in derivatives. The Union Cabinet’s approval for the change to a banking law — to give the RBI more flexibility for lowering the statutory liquidity ratio requirement (SLR) — propelled banking scrips last Friday. The promulgation of an ordinance empowering the RBI to cut the SLR below the floor of 25 per cent of the net demand and time liabilities (NDTL) was approved by the Cabinet.

The results season has once again kicked off with Infosys, HDFC Bank and UTI Bank declaring results above the market expectations. Going forward the results of the biggies like Reliance, ICICI Bank, SBI, Bajaj Auto hold the key to the markets. Expectations from the Budget would also start getting factored into the stocks and would influence the movement of the indices. Investors should, however, not get carried away by the momentum of the market and should exercise caution at these levels, especially while investing in the large-cap stocks. Though I feel that the indices may gain some more ground, booking profit in the large-cap stocks and entering some beaten down mid or small caps may be a good idea.

Global Broadcast News

Global Broadcast News (GBN) owns and operates one of India’s leading 24-hour English language news and current affairs channel, CNN-IBN, which was launched in December, 2005 within a short span of one year it has emerged as a market leader in English news genre with a market share of 37.55 per cent according to the TAM viewership data.

The company is coming out with an IPO in the range of Rs 230 — Rs 250. The issue proceeds will be used for expansion into Hindi news by investment in BK Fincap Private Limited, repayment of a loan of the company and for general corporate purposes. The issue is open and will close on Thursday (January 18).

The new initiatives of the government like CAS & DTH will be a boon for the sector in the form of higher subscription revenues.

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Tax Advice

by S.C. Vasudeva

Income from gifted money taxable in donor’s hands

Q. I retired from government service on 31.03.2006. In October 2005, I withdrew 90 per cent amount of Rs 5 lakh from my GPF account. I issued cheque in favour of postmaster for investing this amount in name of my wife under MIS. Now she is earning interest every month since October 2005. This interest is being deposited by the post office in her saving account. Please advise if the interest earned by her is to be clubbed with my income or not.

Further, I am to receive about Rs 5 lakh on account of gratuity and leave encashment. I want to gift this amount to my wife, sons and daughter-in-laws.

Please advise me regarding the process to be adopted by me to save me from any tax liability.

Devinder Singh, Amritsar

A. The amount of interest earned by your wife will have to be clubbed with your income on account of the fact that the funds deposited with the post office were provided by you.

Any gift made to your son, wife and daughter-in-law would not involve any income tax liability in the hands of donor or donee. However, the income arising from the amount gifted by you to minor son, wife and daughter-in-law will be clubbed in your income in view of the provisions contained in the Act. I may add that income on the interest so clubbed shall, however, be taxable in the hands of the donees.

Tax deducted at source

Q. I opened an SCSS account in SBI in April 2006. But Bank did not deduct TDS on interest earned by me till 30.06.2006. I want that the bank should deduct TDS. Please guide me as to how I instruct the bank to deduct TDS on my SCSS.

— Adarsh Nagae, Jalandhar

A. It is incumbent upon the bank branch to deduct tax at source on the interest payable to you if the amount of interest exceeds Rs 5,000. If the bank has not deducted tax at source, the bank will have to bear the consequences in the shape of penalty as well as interest.

I am not very sure that the bank would go in accordance with your directions as the bank may not like to go against the law. However, in case you are a senior citizen and your income is below taxable limit applicable to senior citizens, you may apply to the bank in Form 15H, which will enable the bank to avoid the deduction of tax at source in your case.

Eligibility of FDRs

Q. Kindly clarify the following points: (1) In the tax proposals for 2006-07, it is proposed that investment made in FDRs with nationalised banks for five years or more will also be taken into account under Section 80C for tax exemption. Has this provision been finally approved and such deposits made during the financial year 2006-07 will be so accounted for? (2) If the income of a senior citizen for the financial year 2006-07 is Rs 2,82,000 and he invests Rs 1 lakh in the schemes covered under Section 80C. Will he be required to file income tax return or not, as the net income will be below Rs 1,85,000 (exemption limit for senior citizens)?

— B.L. Kanga

A. Section 80C of the Act has been amended so as to include the making of the term deposit for a fixed period of not less than five years with a scheduled bank in accordance with the scheme framed and notified by the Central Government. However, this benefit is within the overall limit of Rs 1 lakh. This amendment is applicable for the assessment year 2007-08 relevant to the financial year 2006-07. In view of a proviso added to Section 139(1) of the Act by the Finance Act 2005, you will have to file the return as your income without allowing deduction under Section 80C of the Act (being part of Chapter VI-A) would exceed the maximum amount which is not chargeable to income tax.

Income below limit

Q. Kindly clarify whether an assessee is supposed to file the income tax return even if his/her income comes within the permissible limit after retirement/becoming senior citizen. If not, please further clarify if the assessee is supposed to inform his respective authorities that he is not filing the returns as his income has come within permissible limit after retirement/becoming senior citizen.

— G.R. Mahay, Jalandhar

A. In accordance with the provisions of Section 139 of the Income Tax Act, 1961 (the Act), every person if his total income during the previous year exceeded the maximum amount which is not chargeable to tax, is required to furnish a return of his income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. In view of the above requirements, in case the total income without claiming any deduction under Section 10A or Section 10B or Section 10BA or Chapter VI-A of the Act of various assessees exceeds the maximum amount which is not chargeable to income tax, you will have to file return of income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. The Act does not include any provision which requires the filing of any information in case an assessee’s income is not taxable on account of such income being below taxable limit without claiming deductions/exemptions as aforesaid.

Tax liability

Q. I joined ULIP-1971 in 1991 for a target amount of Rs 60,000 and the annual contribution was Rs 4,000 for a period of 15 years. The investment matured in February 2006, and I received Rs.1,61,661.14. The statement of account provided by the UTI shows Rs 29,031.45 as long-term capital gain (LTCG) and Rs 4500.01 as short-term capital gain (STCG). Is the maturity amount free from tax liability? If not, how much will be my tax liability on the said amount and how to calculate it keeping in view the inflation.

— Ashok Kumar, Panchkula

A. On the basis of statement of account received from the UTI, you will have to declare LTCG of Rs 29,031.45 in your income tax return as well as the STCG of Rs 4,500.01 and pay the tax on the basis of the rates specified by the Finance Act 2006. The maturity amount includes the amount contributed by you towards the purchase of units. The capital gain is computed on repurchase of such units which were purchased on your behalf out of the contribution received from you. Accordingly, the amount of capital gain (both long term and short term) is taxable and the balance being return of capital will not be taxable. I may add that the statement of UTI would have definitely considered the indexed cost of the units purchased every year out of your contributions and therefore, no further inclusion is required in your total income except for the aforesaid two sums of the long-term and short-term capital gains.

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