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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

IRDA slashes third-party vehicle premium
Mumbai, January 28
The Insurance Regulatory and Development Authority (IRDA) has reduced third party premium on all categories of vehicles, including goods carriers, from 150 per cent to 70 per cent with retrospective effect from January 1, 2007, a transporters' body said today.

GVK consolidates power, airport & road projects
Mumbai, January 28
Hyderabad-based infrastructure major GVK today announced consolidation of its assets in power, airport, road and mining under one company, GVK Power and Infrastructure Ltd. 

CPM wants EPF talks to continue
New Delhi, January 28
The CPM today asked the government to continue to talk to the trade unions to resolve the contentious issues like EPF and pension to find a way out.

Essar Chem, Eastman to invest $125m
Mumbai, January 28
Essar Chemicals Ltd will invest more than $125 million along with its joint venture partner, the US-based Eastman Chemical Company, to set up an oxo plant at Vadinar, Gujarat.

RCom gets nod to hive off tower biz
Mumbai, January 28
Paving the way for a new entity, shareholders of Reliance Communication voted for hiving off of the tower business amid reports that US firms are interested in picking up equity in the new company that could be valued up to $5 billion.

A model displays a creation made from Indian silk at a fashion show in Mumbai. The sale proceeds from the event, organised to showcase the rich tradition of ethnic silk, would go to weavers from Assam.— AFP photo

A model displays a creation made from Indian silk at a fashion show in Mumbai. The sale proceeds from the event, organised to showcase the rich tradition of ethnic silk, would go to weavers from Assam.


Ford no longer ‘fida’ on Abhishek: Ford India has terminated its
Ford no longer ‘fida’ on Abhishek: Ford India has terminated its 
much-touted brand endorsement deal with film star Abhishek Bachchan. The car-maker has decided not to extend the December 2005 deal, which came up for renewal last month.

EARLIER STORIES

 

Market Update
Invest in PFC IPO at cut-off
by Lalit Batra

Last Week, stock-specific activity dominated the markets. Amidst the flow of buoyant results, Sensex and Nifty closed at their historic all-time highs. Sensex gained 100 over the week to close at 14282.72 while Nifty closed at 4147.70, up 57.55 points over its previous Friday closing.

Tax Advice
Revenue stamp not needed to acknowledge gift from son
by S.C. Vasudeva

Q. I received Rs 16,000 and Rs.10,000 from my son by account payee cheques on June 21, 2006, and July 2, 2006. Now my son has written a letter to me that these both cheques amount of Rs 26,000 is a gift for me. While accepting gift on his letter is it necessary to affix Re1 revenue stamp. The amount of gift of Rs 26,000 will be included in my income as a taxable income.

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IRDA slashes third-party vehicle premium

Mumbai, January 28
The Insurance Regulatory and Development Authority (IRDA) has reduced third party premium on all categories of vehicles, including goods carriers, from 150 per cent to 70 per cent with retrospective effect from January 1, 2007, a transporters' body said today.

The vehicle owners who have paid 150 per cent premium can take refund of 80 per cent from the respective insurance companies, the Maharashtra Heavy Goods Vehicles Owners' Association (MHGOVA) said in a press note here.

"The third party premium rates were hiked on January 1, 2007, these rates were very high for goods and other commercial vehicles," MHGVOA's Honorary General Secretary Mohinder Singh Ghura told PTI.

The All India Motor Transport Congress (AIMTC) had called for a nationwide transport strike from January 20 to demand reduction in the insurance premium rates.

"Finally, the intervention of Finance Ministry officials led to a successful negotiation between AIMTC and IRDA to bring down the rates by 80 per cent," said Mr Ghura.

Even the vehicle owners who have taken comprehensive policy are entitled for refunds on premium already paid as they have paid excess third party premium, the release said. The revised premium for goods vehicles with gross vehicle weight (GVW) not exceedding 7,500 kg has been revised to Rs 5,580 from Rs 8,000; for GVW exceeding 7,500 kg but below 12,000 kg premium has been revised to Rs 5,920 from Rs 8,000; for GVW exceeding 12,000 kg but below 20,000 kg premium has been revised to Rs 6,090 from Rs 9,000.

For GVW exceeding 20,000 kg but below 40,000 kg premium has been revised to Rs 6,260 from Rs 9,000; for GVW exceeding 40,000 kg the premium has been revised to Rs 6,770 from Rs 9,000, the press note added. — PTI 

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GVK consolidates power, airport & road projects

Mumbai, January 28
Hyderabad-based infrastructure major GVK today announced consolidation of its assets in power, airport, road and mining under one company, GVK Power and Infrastructure Ltd (GVKPIL).

As a result of this consolidation, Mumbai International Airport Pvt Ltd (MIAL), which operates Chhatrapati Shivaji International Airport here, and GVK Jaipur Expressway Pvt Ltd -- operating the six-lane toll road on the Golden Quadrilateral -- will merge under GVKPIL.

"The consolidation will align all GVK infrastructure companies under one roof thereby enabling GVK to position itself as an integrated infrastructure company to leverage emerging opportunities in this sector," GVK Chairman G.V. Krishna Reddy was quoted as saying "It will also provide better realisation of value for our investors," he said.

The Board of Directors of GVKPIL and the Board of Bowstring Projects and Investments Private Ltd as well as the Board of Green Garden Horticulture Private Ltd in separate meetings held today approved amalgamation of Bowstring and Green Garden with GVKPIL.

Bowstring and Green Garden, both closely held unlisted companies, hold equity stakes in various power and infrastructure projects of GVK.

As per the scheme of amalgamation approved by the respective Boards, there will be a share exchange ratio of 133 equity shares of the face value of Rs 10 each of GVKPIL for every four equity shares of the face value of Rs 10 each of Bowstring.

Similarly a share exchange ratio of 153 equity shares of the face value of Rs 10 each of GVKPIL for every four shares of Rs 10 of Green Garden was approved. — PTI

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CPM wants EPF talks to continue

New Delhi, January 28
The CPM today asked the government to continue to talk to the trade unions to resolve the contentious issues like EPF and pension to find a way out.

"Let the government talk to the workers' representatives ... Let them negotiate and decide and come to an understanding", senior party leader Sitaram Yechury said here.

Replying to questions on the issue, he said some way forward was being found in the process of merger of two state-owned carriers - Air-India and Indian-- as the employees had been called for talks.

Mr Yechury said his party's stand on EPF and pension had been made clear to the government on several occasions before. It was now for the government to talk to the trade unions to find a way out, he said.

The EPF Board yesterday failed to clinch the contentious issue of interest rate for the current fiscal for its four crore subscribers but rejected the Finance Ministry's proposal to invest 5 per cent of the EPF money in the equity market.

Left trade unions fear that a crash in the stock market would ruin the hard-earned money of the EPF subscribers and that was one major reason for them to oppose the Finance Ministry's proposal.

The government had cut the rate to 8.5 per cent for 2005-06 from 9.5 per cent in 2004-05 as investment in government-run special deposit scheme (SDS), which gave only an 8 per cent interest. — PTI 

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Essar Chem, Eastman to invest $125m

Mumbai, January 28
Essar Chemicals Ltd will invest more than $125 million along with its joint venture partner, the US-based Eastman Chemical Company, to set up an oxo plant at Vadinar, Gujarat.

The two companies have signed an MoU to this effect and have completed the feasibility study for the production of oxo and oxo derivatives to cater to the domestic market, Essar Chemicals said here.

Both Essar Chemicals, part of the $6 billion Essar Global Limited, and Eastman Chemical, a Fortune 500 company, would have an equal stake in the company that will handle the new chemical business.

Essar Group Director Anshuman Ruia said the joint venture with Eastman was a first step in the value chain integration of Essar's refining business, he said. —PTI

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RCom gets nod to hive off tower biz

Mumbai, January 28
Paving the way for a new entity, shareholders of Reliance Communication voted for hiving off of the tower business amid reports that US firms are interested in picking up equity in the new company that could be valued up to $5 billion.

The demerger of wireless towers and related infrastructure, approved by the shareholders yesterday, for transferring to another subsidiary, Reliance Telecom Infrastructure Limited, would enhance financial flexibility and cost efficiency, Reliance Communication said.

After a decision by the Board, group Chairman Anil Ambani said "this is the first of a series of initiatives we will be taking to remain asset light and enhance our competitiveness, ultimately leading to unlocking of further value for the benefit of our nearly 2 million shareholders."

Reliance Communication said in a statement that the equity shareholders met yesterday and approved a scheme of transfer of the wireless towers to RTIL with an overwhelming majority. — PTI

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Market Update
Invest in PFC IPO at cut-off
by Lalit Batra

Last Week, stock-specific activity dominated the markets. Amidst the flow of buoyant results, Sensex and Nifty closed at their historic all-time highs. Sensex gained 100 over the week to close at 14282.72 while Nifty closed at 4147.70, up 57.55 points over its previous Friday closing.

The third-quarter results announced so far have been good. The result season is in its last lap and the market will now start looking for Budget cues soon for attaining further direction.

I feel this year is going to be the year of mid-cap and small cap stocks and investors should look to invest in well-researched mid and small cap stocks. In case the investors do not have access to any such research, they should invest through mutual funds.

Power sector firm

Investors with a long-term perspective may subscribe to the IPO of the PFC. The issue is open from January 31 to February 6. The price band for the issue is Rs 73 — Rs 85.

The PFC is a leading power sector public financial institution and a non-banking financial company providing fund and non-fund based support for the development of the Indian power sector. It is a nodal agency to channel investments into the power sector.

At present, state, Central and local municipal power sector utilities, power departments, private and joint power sector utilities and power equipment manufacturers are PFC’s clients.

The company has a net interest margin of 3.43 per cent, which is good considering the fact that it lends to one of the most troubled sectors of the economy. The NPA level of the company is less than 1 per cent and CAR is at 18 per cent. The company also follows the escrow mechanism which safeguards its interests.

The company’s IPO in the price bands discounts its earnings 10.4 to 12.2 times, which appears rich, but given the fact the Indian economy is set to witness a surge in the power sector and given the government’s resolve to enhance and improve the state electricity boards’ health bodes well for a player like the PFC. Investors with two-to-three-year perspective may invest in the IPO at cut off.

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Tax Advice
Revenue stamp not needed to acknowledge gift from son
by S.C. Vasudeva

Q. I received Rs 16,000 and Rs.10,000 from my son by account payee cheques on June 21, 2006, and July 2, 2006. Now my son has written a letter to me that these both cheques amount of Rs 26,000 is a gift for me.

While accepting gift on his letter is it necessary to affix Re1 revenue stamp. The amount of gift of Rs 26,000 will be included in my income as a taxable income.

What will be tax liabilities.

My income for F.Y. 2006-07 will be as under:

Pension = Rs.1,20,000

Bank Interest = Rs.42,000

Gift from son = Rs.26,000

Total = Rs.1,88,000

I have a joint FD account with my son and mine is first name. If I will get a FD of Rs.26,000 of gifted amount, is it objectionable or not. I am a senior citizen.

— L.S. Chawla, Bathinda

A. The answers to your queries are as under:

The gift can be accepted by a simple acknowledgement letter and there is no need to affix any revenue stamp on such letter.

The amount of gift would not be treated as your income and the same is not taxable. Since you are a senior citizen you have no tax liability in respect of your total income of Rs.1,62,000, the same being less than Rs.1,85,000, the maximum amount up to which tax is not payable by a senior citizen.

It will be better if the fixed deposit of Rs.26, 000 is in your name and your son is made a nominee, which would serve the same purpose.

Interest on KVP

Q. I am a senior citizen and have income of Rs 1.75 lakh from pension and other sources. I gave Rs.1.80 lakh as gift, by cheque, to my daughter-in-law, in November, 2002, of which she purchased KVP from PO. Maturity period of these KVPs is seven years eight months. Kindly advise:

How is the yearly income of interest on KVPs is to be worked out? Will the lock-in period of 2 ½ year have any impact on this.

Whether the income of interest earned on these is to be taxed in the hands of the donor?

If so and if this has not been done so far, then how should it be accounted for now, and in future years up to maturity.

— R.N. Sharma, Panchkula

A. Income in respect of KVPs, which were purchased by your daughter-in-law out of the gift of Rs.1.80 lakhs received from you, would be taxed in your hands. Income in respect of such KVPs is required to be worked out in accordance with the table as given here under:

Purchased from March 1, 2002 to February 28, 2003

Rate of Maturity

Interest value of

KVP

(Rs 1000)

1 year 7.25 per cent 1074

2 years 7.25 per cent 1153

2 years,

6 months 7.25 per cent 1195

3 years 7.75 per cent 1256

3 years,

6 months 7.75 per cent 1305

4 years 8.25 per cent 1382

4 years,

6 months 8.25 per cent 1439

5 years 8.75 per cent 1534

5 years,

6 months 8.75 per cent 1602

6 years 8.75 per cent 1672

6 years,

6 months 9.25 per cent 1800

7 years 9.25 per cent 1883

7 years,

6 months NA 2000

8 years NA NA

8 years,

7 months NA NA

The income is includible in your hands because of the provisions of the Section 64 of the IT Act, 1961, (the Act) which provide that in computing the total income of an individual there shall be included all such income as arises directly or indirectly to the son’s wife of such individual from assets transferred directly or indirectly after June 1, 1973, to the son’s wife by such individual otherwise then for adequate consideration. If the interest has not been included in your return you should take steps to revise your earlier returns so as to rectify the error. The lock in period will not have any effect on the taxability of the interest.

Cash at home

Q. Please answer the following question and oblige:

I am a senior citizen. I have PAN card. My income is pension + PO interest is Rs 12,5000. Is it necessary or me to file the Income tax return or not when my income less than Rs 1,85,000.

How much cash can I keep in hand at home.

For what period the filed returns should be preserved.

— Hans Raj, Dhuri

A. The answers to your queries are as under:

In accordance with the provisions of the Section 139 of the Act, your income being below the maximum amount on which tax is not chargeable in case of senior citizens, you are not required to file your Income-tax return.

You can keep any amount of cash at your house provided you are able to prove the source thereof and the purpose for which it has been kept.

In accordance with the provisions of the Act, the assessment can be reopened for a period of not more than six years from the end of the relevant assessment year. You may thus keep your IT records for a period of eight years, which would be more than the required period.

Loan on education

Q. I am a Punjab Government employee. My salary details for the year 2006-07 are as under:

Gross Salary: Rs 4,25.000

G.P. Fund: Rs 61,000

LIC: Rs 5,645

GIS: Rs 1,440

Pension Scheme: Rs 10,099

Tuition: Rs 7,290

Payment of interest of bank loan of education:Rs 2,000 per month from August 2006, onwards.

Please calculate my tax liability and also specify in details:

Deduction under Section 80C

Deduction under Section 80D

Deduction under Section 80G

Tax liability for the income earned as interest on saving bank account.

— Ashwani Kumar Ahluwalia

A. The answers to your queries are as under:

Income from salary: Rs 4,25,000

Less: deduction under Section 80C Rs 61,000 + 10,000 + 5,645 + 1,440 + 7,290 = Rs 85,375

Total taxable income: Rs 3,39,625

Income-tax thereon including education cess: Rs 52,927

The contribution to pension scheme is limited to Rs.10,000 in view of the provisions of the Section 80C of the Act read with the Section 80 CCC of the Act.

No deductions are allowable under the Section 80D and 80G of the Act as no expenditure of the nature covered by these sections is reflected in the query. Further the interest on bank loan for education is deductible under the Section 80E of the Act from the income of the person who has taken loan for pursuing his higher education. In view of your employment with Punjab Government it is presumed that the loan was not taken for your higher education.

Reassessment

Q. I have some FDs relating to 1996, which are still continuing by way of renewal system. I had started to file IT returns in 1997. For the assessment year 2004-05, in the month of July, 2006, I was asked to produce proofs about the sources of income of these FDs. I was asked in this regard after 9 years,. Is there any fixed time limit under rules or not.

— Karam Singh, Jalandhar

A. Section 149 of the Act requires that no notice for the reopening of any assessment shall be issued for the relevant assessment year if four years have elapsed from the end of the relevant assessment year. However, in case the income chargeable to tax, which has escaped assessment amounts to or is likely to be Rs 1 lakh or more, an assessment can be opened for a period of six years from the end of the relevant assessment year. Since you had made the fixed deposits in 1996, the Assessing Officer has no powers to reopen the assessment for the assessment year 1997-98 i.e. previous year ending March 31, 1997. You should, therefore, produce the evidence that these fixed deposits were made in 1996, which should suffice for the completion of your assessment. 

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