SPECIAL COVERAGE
CHANDIGARH

LUDHIANA

DELHI



THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Higher equity clause to propel airlines
New Delhi, January 20
Seeking to make airline operators financially stronger, the government has decided to increase the subscribed equity capital required to set up a scheduled airline with five large aircraft from Rs 30 crore to Rs 50 crore.

Left asks govt to check inflation
New Delhi, January 20
With inflation at a two-year high at 6.12 per cent, the Left parties, which prop up the Manmohan Singh government, are putting pressure to ban futures trading in foodgrains and reduce the petroleum goods’ rates to control spiralling prices.

Canadian bowl for Haryana basmati
Chandigarh, January 20
The Haryana Government will export superfine quality basmati rice to Canada.

Banks directed on loan to minorities
New Delhi, January 20
The UPA government has directed all banks to provide preferential loans to minorities and would ensure its implementation through proper administrative machinery.

A lion dance troupe performs with Ronald McDonald at the opening of a McDonald's drive-thru outlet built next to a gas station in Beijing on Friday. US fast-food giant McDonald's, in cooperation with China's largest oil refiner Sinopec, will open two stores a week in China until 2008, with a focus on drive-in windows at gas stations to take advantage of the nation's auto industry.
A lion dance troupe performs with Ronald McDonald at the opening of a McDonald's drive-thru outlet built next to a gas station in Beijing on Friday. US fast-food giant McDonald's, in cooperation with China's largest oil refiner Sinopec, will open two stores a week in China until 2008, with a focus on drive-in windows at gas stations to take advantage of the nation's auto industry. — AFP photo


Brazilian top model Gisele Bundchen displays a creation by designer Colcci at the Autumn-Winter 2007 collection of the Rio Fashion Week in Rio de Janeiro late on Friday
Brazilian top model Gisele Bundchen displays a creation by designer Colcci at the Autumn-Winter 2007 collection of the Rio Fashion Week in Rio de Janeiro late on Friday. — AFP photo

EARLIER STORIES

 

ICICI Bank net up 42 pc
Mumbai, January 20
A substantial jump in fee-based income backed by an impressive performance on the net interest income and international business fronts have helped ICICI Bank grow its net profit 42 per cent in Q3 FY 07 at Rs 910 crore as against Rs 640 crore previous year.

PNB ups rates
New Delhi, January 20
Facing growing credit needs, country’s second largest public sector bank PNB today said it would raise interest rates on fixed large deposits by 0.25 per cent to 8.25 per cent from January 22.

Aviation Notes

Hurdles stare A-I, Indian merger proposal
Regardless of ‘assurances’ of job security and benefits/perks to staff, Minister of State for Civil Aviation Praful Patel’s ‘dream-scheme’ of merging two national carriers, Air-India and Indian, to rise as one entity has been hit by dense fog.

Investor Guidance

No lock-in period for selling inherited property

Q: I have recently inherited a house in India. I am settled in the US and don’t see any probability of returning back to India. Consequently, I would like to sell the house and get the money transferred here in the US. However, one of my friends told me that there is a 10 year lock-in period for inherited property? Does this mean that I would have to wait for 10 years before I can sell the house? If so, in the meanwhile, can I rent it out and transfer the rental income to the US?

  • Portfolio management

  • No rebate on loan for plot

  • Deduction on home loan

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Higher equity clause to propel airlines

New Delhi, January 20
Seeking to make airline operators financially stronger, the government has decided to increase the subscribed equity capital required to set up a scheduled airline with five large aircraft from Rs 30 crore to Rs 50 crore.

The subscribed equity capital for those airlines owning five small aircraft like turboprop ATRs and Dorniers are also being doubled from Rs 10 crore to Rs 20 crore, official sources said today.

The new norms would be applicable to all airlines with retrospective effect, with the carriers having planes like Boeing 737s or Airbus A-320s or larger ones required to inject Rs 20 crore additionally into their subscribed equity base.

The norms are related to the weight of the aircraft, with the 737s and 320s weighing over 40,000 kg and ATRs weighing much less than that.

However, the existing airlines would be given a year's time to pump in the money into their subscribed equity capital base.

A gazette notification on the matter is likely to be issued soon, the sources said, adding that the decision would become effective from the day the notification is issued.

Civil Aviation Minister Praful Patel has been maintaining that the financial bottom-line of the airlines should be strong and the entry of non-serious players should be avoided as the industry was highly capital intensive.

The decision is aimed at ensuring that there was no recurrence of the situation in early 1990s when several private airlines shut shop due to debt burden and other financial problems.

In effect, the move would imply that airlines like Indian, which has a fleet of 74 aircraft, including four ATRs and two Dorniers, would have to pump in over Rs 200 crore to meet the new norms. Indian has a subscribed equity of Rs 107 crore.

The same would apply to Jet Airways, which has a 60 aircraft fleet, including eight ATRs and a paid-up capital of Rs 86 crore.

The only airlines, which would not be affected are liquor baron Vijay Mallya's Kingfisher and low-cost carrier SpiceJet.

While the former has 23 aircraft — 19 Airbus and four ATRs and a capital of Rs 372 crore, the latter has 10 Boeing 737s with an equity capital of Rs 185 crore.

Most other airlines would have to pay up additionally for every five aircraft inducted, the sources said.

They said all existing airline operators would have to abide by the new rule, but they would be granted one year to fulfil the conditions.

The sources said the entry norms were strengthened because the entire aviation industry scene had changed in the past two-three years. The current norms, stipulating equity capital of Rs 30 crore and Rs 10 crore, have been in vogue since March 1, 1994. — PTI

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Left asks govt to check inflation
Tribune News Service

New Delhi, January 20
With inflation at a two-year high at 6.12 per cent, the Left parties, which prop up the Manmohan Singh government, are putting pressure to ban futures trading in foodgrains and reduce the petroleum goods’ rates to control spiralling prices.

“The inability of the government to improve the supply situation by augmenting production and cracking down on hoarding is responsible for the continuing increase in prices of food items,” the CPM politburo said.

Expressing concern over the rising rate of inflation, the party said the increase in the overall inflation rate is driven by spiralling prices of primary articles, mainly food items. Increase in fuel prices and some manufacturing inputs like metals and cement have also contributed to the inflationary trend. The poorer sections are being particularly hit because of the rise in the prices of pulses, vegetables and cereals.

The Left demanded the UPA government to take concrete steps to check price rise. The party asked the Manmohan Singh government to immediately ban futures trading in essential commodities as recommended by the Standing Committee on Food, Consumer Affairs and Public Distribution. It also urged to reduce prices of petrol and diesel in view of the drop in international crude prices to $50 a barrel and revise the ad valorem duty structure on oil imports.

Demanding a crackdown on hoarding by invoking the provisions of the Essential Commodities Act, it asked the government to strengthen state intervention in procurement and distribution of essential commodities.

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Canadian bowl for Haryana basmati
Tribune News Service

Chandigarh, January 20
The Haryana Government will export superfine quality basmati rice to Canada.

An assurance to export the rice variety to Canada was given by the Haryana Chief Minister, Mr Bhupinder Singh Hooda, to the Premier of Ontario, Mr Dalton McGuinty. Mr McGuinty, along with the members of a business delegation, called on the Chief Minister, here today.

Mr Hooda talked to the delegation about the path followed by Haryana to gradually become one of the most prosperous and progressive states of India. From an agriculture-based economy, the state was turning into a hub of IT, automobile manufacturing and other industrial activities, he said.

Mr McGuinty requested the Chief Minister to visit Ontario in Canada to strengthen the mutual cooperation between the two states. The Chief Minister accepted the offer and said he would visit Canada to tap the possibility of investment in Haryana.

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Banks directed on loan to minorities
Tribune News Service

New Delhi, January 20
The UPA government has directed all banks to provide preferential loans to minorities and would ensure its implementation through proper administrative machinery.

Cabinet Secretary B K Chaturvedi said here that under the initiative taken by the government, a proper administrative device would be adopted and banks would be made answerable if they did not give loans to the minorities.

Generally, the banks have a tendency to go only in profit making segment, but by the new directive they would not have to focus on areas dominated by minorities. If they were unable to disperse the loans to minorities, they would be answerable to the government, he said.

The decision is based on the Sachar Committee report.

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ICICI Bank net up 42 pc

Mumbai, January 20
A substantial jump in fee-based income backed by an impressive performance on the net interest income and international business fronts have helped ICICI Bank grow its net profit 42 per cent in Q3 FY 07 at Rs 910 crore as against Rs 640 crore previous year. — PTI

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PNB ups rates

New Delhi, January 20
Facing growing credit needs, country’s second largest public sector bank PNB today said it would raise interest rates on fixed large deposits by 0.25 per cent to 8.25 per cent from January 22. The bank will hike rates on deposits of Rs 15 lakh to less than Rs 5 crore, which has maturities of two to 10 years, it said in a press note. — PTI

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Aviation Notes

by K.R. Wadhwaney

Hurdles stare A-I, Indian merger proposal

Regardless of ‘assurances’ of job security and benefits/perks to staff, Minister of State for Civil Aviation Praful Patel’s ‘dream-scheme’ of merging two national carriers, Air-India and Indian, to rise as one entity has been hit by dense fog. The visibility of merger coming about before the end of March 31, 2007, as announced by the minister, is so inadequate that even staunch supporters of the move have been caught napping.

Judging from the existing scenario and realities that have emerged, keen aviation followers are of the firm belief that the proposal will not materialise in near future as the Group of Ministers (GoM) has asked the ministry to secure a ‘go-ahead clearance’ from the staff and the unions concerned, which have had a very dominating existence in two national carriers.

The leaders of most of the unions continue to hum the old tune that merger of the two national carriers will be counter-productive in long runs. They reiterate that ‘wishy-washy’ single entity will add to the common employees woes instead of bringing them relief. “The weight of about 35,000 employees and international complimentary passages to them, in addition to exorbitant salaries and perks is too heavy for the airline to bear the burden”, three experienced officials said.

Apart from union leaders, many among GoMs are apprehensive whether the merger would improve operations on both international and national routes. “No job loss is one thing but to increase the operations for the airlines to become a profit-making entity is another”, said A-I and Indian officials.

To all these misgivings, the minister has gone on record saying: “The merger will enable an integrated and domestic foot print, thereby significantly enhancing customer propositions and allow easy entry into one of the three global alliances”. He also said that merger would provide maximum flexibility to achieve financial cushion”.

During the last week, Mr Patel had made many lofty statements. He also said that the merger will come about within 10 weeks. There is no reason not to take him on his words. This being the case, he should reveal intimate details about the merger:

1. What will be the name of the single-entity airlines?

2. Where will the headquarters be — Delhi or Mumbai?

3. Who will be the CMD?

4. Has Indian CMD Vishwapti Trivedi consented to be number two until the stay of the CMD V. Thulasidas?

5. Will Trivedi be made CMD when Thulasidas moves to the ministry as full-fledged secretary?

6. Will there be golden handshake?

7. Will there be separate unit like ground-handling and cargo?

8. If the staff members refuse to move there, will there be compulsion?

9. Who will design new uniform of the cabin crew — Indian designers or foreign designer and

10. Will the aircraft logo be changed in one go or in phases?

There are hundreds of other questions which need to be answered. 

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Investor Guidance

by A.N. Shanbhag

No lock-in period for selling inherited property

Q: I have recently inherited a house in India. I am settled in the US and don’t see any probability of returning back to India. Consequently, I would like to sell the house and get the money transferred here in the US. However, one of my friends told me that there is a 10 year lock-in period for inherited property? Does this mean that I would have to wait for 10 years before I can sell the house? If so, in the meanwhile, can I rent it out and transfer the rental income to the US?

— Navin

A: There was never a 10 year lock-in period imposed for inherited property. Which means that you can immediately sell the house and repatriate the money abroad after payment of due taxes. The 10 year lock-in was imposed for property bought using local funds. However, recently the same has also been done away with and now there is no lock-in period on any property, whether inherited or otherwise.

Portfolio management

Q: My query is regarding the tax rules applicable on gains from PMS (Portfolio Management Schemes).

Does the amount of tax be decided when we redeem the PMS?

Or do we pay STCG / LTCG tax based on the churning of portfolio by the PMS Manager?

Is the tax rate as applicable to equityoriented mutual funds?

— Ravindra

A: In the case of a Portfolio Management Scheme, the company that manages the portfolios (referred to hereinafter as the Portfolio Manager) undertakes transactions on behalf of its clients. The clients’ monies are pooled in the pool account of the Portfolio Manager and transactions are undertaken there from on behalf of the clients. In this regard, the Portfolio Manager merely acts in a fiduciary capacity with regard to the client’s funds and all rights, liabilities and obligations relating to securities transactions are essentially that of the client. For this service, the Portfolio Manager charges an agreed fee to the clients for rendering portfolio management services.

The Portfolio Manager ordinarily purchases or sells securities separately for each client. However, in the event of aggregation of purchases or sales for economy of scale, interest allocation is done on a prorata basis. In other words, the Portfolio Manager may hold the securities belonging to the portfolio account in its own name on behalf of its clients (if the contract so provides) and in such an event the records of the Portfolio Manager and its report to the client indicate that the securities are held by it on behalf of the portfolio account.

This is in conformation with the guidelines issued by SEBI vide Securities And Exchange Board of India (Portfolio Managers) Regulations, 1993 as amended from time to time.

The rates of tax depend upon the view taken by the authorities as to whether this is a business or investment activity of the investor. We strongly feel that this should be construed to be investment activity since the person does not spend any time on decision taking process.

No rebate on loan for plot

Q: I have purchased a plot in December 06 in my own name to construct a house in 3-4 years time out of my own savings and a loan taken by my husband from a national bank (70 per cent of the cost of plot)

a) Whether my husband is entitled to get deduction of the interest to be paid u/s 80C subject to overall monetary limit of Rs 1 lakh per year.

b) Can the amount of Rs 96,000 spent on registration and other authorised charges be split and clubbed with interest on loan to be paid year after year.

— Bhawna, Panchkula

A: If the housing loan is in the name of your husband and the house belongs to you, he cannot claim the tax benefit for the loan. Had you purchased the property in your own name, realise that you have not purchased a house but a piece of land and, therefore, you would not have been able to claim the benefit.

The deduction u/s 80C and the interest u/s 24 are allowed only when the income from house property becomes chargeable to tax. In other words, the construction should be complete, the flat should be ready for occupation and the municipal annual value is known.

The interest for the years prior to the year in which the property was completed, shall be deducted in equal installments for the year during which it was completed and each of the 4 immediately succeeding years. Unfortunately, there is no corresponding provision for the capital repayment.

Deduction on home loan

Q: Please provide me the clarity on the following:

I know we can claim deduction on both ‘Interest on home loan’ as well as ‘House rent paid’ if we are residing in another state due to the office place is in that other state. But is there any restriction on claiming both in NCR (National Capital Region) as if I am staying in Delhi and my work place is also in Delhi and my house for which I am claiming interest on home loan for the house in Faridabad/Gurgaon or Noida/Greater Noida. Is there any case law/section to support that.

— Atul Sharma

A: An employee living in his own house or where he does not pay any rent is not eligible for HRA exemption u/s 10(13A). As per Explanation (ii) to Rule-2A, salary received in arrears or in advance for periods other than the current year, as well as salary received for periods during which the rental accommodation was not occupied during the current year are not to be taken into account for this exemption, even if these are taxed on receipt basis.

U/s 80GG, an assessee, including an employee not getting HRA, is entitled in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence, a certain deduction of rent paid by him.

The deduction is not available if any accommodation is i) owned by the assessee or his spouse or minor child or the HUF of which he is a member at the place where he normally resides or has his office, employment, business or profession or ii) owned by him at any other place and occupied by him (income claimed to be nil).

You will find that interest on home loan is not covered by both the abovementioned Sections. However, if the loan is taken for a self-occupied house, it would not be possible to claim deduction u/s 80GG.

The authors may be contacted at wonderlandconsultants@yahoo.com 

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