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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Taxmen to scan telecom ledgers
New Delhi, February 4
The Finance Ministry is looking into the slow growth of service tax in the telecom sector, one of the top service taxpayers, and whether some companies were evading tax through technical loopholes.

SAIL may bid for foreign firms
Patna, February 4
The Centre is mulling a proposal to relax the existing rules to help facilitate public sector giant Steel Authority Of India Limited (SAIL) to join the race for takeover of foreign steel companies like Mittals and Tatas, according to Steel Minister Ram Vilas Paswan.

Claridges to invest Rs 2,300 cr in five hotels 

A-I finds global budget carrier attractive idea 
Mumbai, February 4
With Malaysia-based Air Asia proposing to start a low-cost global airline, Air-India may look at the long-haul budget carrier business following the success of its subsidiary, Air- India Express, in the segment.

Jobs no guarantee, says Tata 
London, February 4
Acknowledging that the company had paid “very close” to its top price for Corus, Tata Group Chairman Ratan Tata has said the company could not give any guarantee over safety of jobs as it plans to make UK operations more profitable.

UK union threatens stir 

Dabur to start Pak facility by ’08
Plans product portfolio expansion

New Delhi, February 4
Dabur is chalking out plans to start a manufacturing facility in Pakistan and expects the facility to be operational by the end of next fiscal.


A model displays an outfit at the Rock & Republic Fall, 2007, fashion show during the Mercedes-Benz Fashion Week in New York on Saturday.
A model displays an outfit at the Rock & Republic Fall, 2007, fashion show during the Mercedes-Benz Fashion Week in New York on Saturday. — Reuters

EARLIER STORIES

 

Bolster supplies to tame inflation: PM
New Delhi, February 4
Concerned over the increasing inflation rate, which has crossed the 6 per cent barrier for the second time in the past three weeks, Prime Minister Manmohan Singh has asked industry to enhance supplies to tame inflation.

CII for banking reforms
New Delhi, February 4
The CII today called for fiscal reforms in the banking sector to enable it to meets the requirements of the economy clocking around 9 per cent GDP growth.

Tax Advice
Term deposit can’t be pledged to secure loan
by S.C. Vasudeva

Q. In 2006-07, the fixed deposits with bank for a period of five years or more qualify for rebate under Section 80C within overall limit of Rs 1 lakh. Can loan be raised before maturity payment is allowed on these fixed deposits? If so, after how much time?

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Taxmen to scan telecom ledgers

New Delhi, February 4
The Finance Ministry is looking into the slow growth of service tax in the telecom sector, one of the top service taxpayers, and whether some companies were evading tax through technical loopholes.

Sources in the Finance Ministry said the growth in service tax collections from the telecom sector has been quite sluggish this year so far. The sector has shown a meagre growth of 7 to 8 per cent in service tax collections in spite of the fact that the sector is growing at a rate of over 30 per cent.

“The Central Board of Excise and Customs (CBEC) has given the task to a committee for examining the reasons of slow growth in service tax collections from telecom sector. The committee has also been asked to look into whether the companies were indulging in tax evasion through technical loopholes.” The sector has contributed Rs 2,565 crore during first six months of April-September 2006 as against Rs 4,207 crore during previous year. The telecom sector contributed Rs 3,934 crore service tax to the government exchequer during 2003-04.

The telecom sector is among the top five sectors including banking, financial services and insurance sectors to contribute service tax, imposed at the rate of 12 per cent.

The sources said that as part of its measures to plug the loopholes, the Department of Revenue has clarified that domestic telecom operators providing roaming service tax to international roamers would be liable to pay service tax on the amount received for this service.

The Department has asked its field officers to collect service tax in respect of such services with effect from January 15.

Meanwhile, the Banking Cash Transaction Tax (BCTT), introduced in June 2005 amid opposition from political parties, has helped the Department of Income Tax trace thousands of crores in black money.

“The BCTT has proved one of the most effective investigative tools in the hands of Income Tax officials in the field to unearth black money and stop the flow of black money in the economy,” a senior Income Tax official said.

He disclosed that in Delhi alone the Department recently found undeclared cash transactions worth over Rs 1,500 crore in a nationalised bank alone operated by seven account holders.

Now, the department is tracing tax evaders spread across the country including Bihar, Punjab, UP and other states, he said.

Sources said the department has also tumbled upon a massive tax evasion by some mills, which used to issue fake invoices of raw material purchase, without any actual delivery.

The government has collected about Rs 357 crore from BCTT by December end this fiscal. — PTI

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SAIL may bid for foreign firms

Patna, February 4
The Centre is mulling a proposal to relax the existing rules to help facilitate public sector giant Steel Authority Of India Limited (SAIL) to join the race for takeover of foreign steel companies like Mittals and Tatas, according to Steel Minister Ram Vilas Paswan.

"The existing rules put certain limitations on SAIL when it comes to buying foreign companies. But we will be amending and relaxing the rules to enable the public sector giant make offshore bids," Mr Paswan said last evening.

Observing that SAIL had already started buying sick public sector units like IISCO, BRL, Neelanchal Inspat Limited and MER, he said buoyed by the profit of Rs 14,000 crore earned by the largest steel manufacturing company, the Centre was planning to invest Rs 100,000 crore by 2020 for its expansion.

Ruling out any proposal to sell the company to Arcelor-Mittal, Mr Paswan said "SAIL is doing exceedingly fine." He said his ministry had taken a policy decision for uniform pricing of all steel products of SAIL across the country.

Mr Paswan informed that SAIL would adopt 10 steel villages in the country under social development programme. — PTI 

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Claridges to invest Rs 2,300 cr in five hotels 

New Delhi, February 4
Banking on the increased inflow of business travellers to the country, Claridges Hotels has chalked out a Rs 2,300-crore expansion plan for setting up five hotels in major cities.

The company, which currently operates four hotels in Delhi, Mumbai and Mussoorie, is planning to add one hotel every year and has identified Bangalore, Chennai, Goa, Hyderabad and Pune for future expansion.

"We want to attract business travellers to our hotels and would be investing about Rs 2,300 crore in opening five hotels in major business destinations of the country," Claridges Hotels and Resorts Managing Director Sanjeev Nanda said. He said the company's proposed five-star hotels were expected to be operational by 2012.

"Our target is to open one five-star hotel each year for the next five years. All the proposed accommodations should be operational by 2012," Mr Nanda said. — PTI

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A-I finds global budget carrier attractive idea 

Mumbai, February 4
With Malaysia-based Air Asia proposing to start a low-cost global airline, Air-India may look at the long-haul budget carrier business following the success of its subsidiary, Air- India Express, in the segment.

"We are open to the idea of flying a low-cost airline to Europe and the US... who knows, it might catch on in future and we would like to gear up to meet such a demand," Air-India Chairman V. Thulasidas said here.

Air Asia, which offers fares equivalent to Rs 700 between two South-Asian destinations, proposes to offer flights to Europe from Asia for as low a price as $100, revolutionising long-haul travel.

Taking a cue from this, Air-India is now mulling a budget airline to Europe and the US, Mr Thulasidas said, adding that the national carrier now had low-cost flights to several destinations in West Asia from a number of cities in India and between Chennai and Singapore.

Barring Dubai, where Air-India operates both budget flights and regular ones with business and first-class categories, the airline does not operate regular flights to other destinations in West Asia, which have low-cost flights.

With Europe and the US requiring at least 8-10 hours of air travel, Air-India could consider even a budget, first-and-business-class travel in such long-haul sectors, he said.

"But as of now, there are no concrete plans in this regard," Mr Thulasidas said. — PTI 

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Jobs no guarantee, says Tata 

London, February 4
Acknowledging that the company had paid “very close” to its top price for Corus, Tata Group Chairman Ratan Tata has said the company could not give any guarantee over safety of jobs as it plans to make UK operations more profitable.

The company had so far done only “paper” due diligence on Corus and had yet to examine the steelmaker’s plants in detail, Tata told the Financial Times in an interview in Mumbai.

For this reason, Tata said he could not give any guarantee on job cuts. “I would not even attempt to do so because it would be wrong of me to give those assurances or to deny that that was so”.

“But I would say that we are not a company that would first look at jobs,” he added.

Tata’s comments come after Britain’s largest steel trade union, Community, demanded a meeting with the tycoon seeking assurances he will remain committed to expanding Corus after his successful bid.

He said the company would apply to Corus the lessons it had learnt from upgrading its 100-year-old Indian plant, which it has transformed into one of the steel industry’s highest-margin producers.

“Our plan would be to try to make the UK operations more profitable,” he said.

Tata said if the company had lost the Corus bid, its disappointment would have gone beyond the group and it would have been an issue of great disappointment in India.

“So on the one hand, you want to do the right thing by your shareholders and on the other hand, you did not want to lose,” he said.

Tata Group, which has large businesses in auto, telecom and information technology, paid £6.7 billion for Corus in a head-to-head auction with Brazil’s Companhia Siderurgica Nacional this week. — PTI

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UK union threatens stir 

Britain’s leading steel union, Community, has warned Tata Group that unless it invested heavily in the future of Corus, it will face widespread industrial action.

The threat comes as Ratan Tata, the group’s Chairman, cautioned that there were no guarantees over job safety.

Community, formerly the Iron and Steel Trades Confederation, is particularly concerned about the future of the Port Talbot works in South Wales, where it believes investment of £200 million in steel finishing capacity is needed to secure the plant’s future. More than 3,100 of Corus’s 24 ,000 workforce is employed there.

A senior Community official told the Observer that the union is seeking an urgent meeting for assurances on future investment.

“Tata can invest in the future or it risks a serious industrial dispute in the UK. We are quite prepared to go to these lengths. It needs to put £200 million into Port Talbot. That’s what it paid bankers for the advice on the deal. It’s peanuts,” he said.The union’s key concern is that Tata has said it intends to import cheap Indian unfinished steel, called lab, for finishing in the UK.

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Dabur to start Pak facility by ’08
Plans product portfolio expansion

New Delhi, February 4
Dabur is chalking out plans to start a manufacturing facility in Pakistan and expects the facility to be operational by the end of next fiscal.

“The company is planning to expand its business, both in terms of existing product categories and new geographies,” Dabur India CEO Sunil Duggal said, adding that the manufacturing operations in Pakistan were part of their global expansion plans.

Dabur, which already has manufacturing facilities in Nepal and Bangladesh, said it had made its foray into Pakistan through its subsidiary, Asia Consumer Care (Pak) Ltd.

The company was also planning to expand its existing product portfolio by adding products in the skin-care and home-care segment and was also mulling the acquisition route in order to expand.

“Acquisition would happen...but it would happen in the health and hygiene segment, not in food business,” Mr Duggal said. Whether acquisitions would be in the domestic market or international space, he said “valuations in the domestic market are overstretched.” However, he confirmed the company was in talks with both domestic and global companies.

The FMCG major was also planning to strengthen its research and development operations and would infuse more capital towards them.

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Bolster supplies to tame inflation: PM
Tribune News Service

New Delhi, February 4
Concerned over the increasing inflation rate, which has crossed the 6 per cent barrier for the second time in the past three weeks, Prime Minister Manmohan Singh has asked industry to enhance supplies to tame inflation.

In his interaction with industry leaders, the Prime Minister said the government would not interfere with the current growth momentum and carry forward the reform agenda.

Worried over the inflation front, Dr Manmohan Singh told captains of industry associated with Assocham yesterday that the industry should come forward to help the government in this regard by enhancing supplies of manufactured and e-essential commodities.

The PM expressed happiness that the investment rate was picking up at 34 per cent while the savings rate was likely to exceed 32 per cent and hoped that the oil prices would soften to tame inflation. 

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CII for banking reforms
Tribune News Service

New Delhi, February 4
The CII today called for fiscal reforms in the banking sector to enable it to meets the requirements of the economy clocking around 9 per cent GDP growth.

“Banks should be encouraged to participate in derivative trading to help them have more balanced mix of assets. This can be done by treating banks derivative trading at par with other business activities for the purpose of the Income Tax Act,” the CII said.

As the banks have entered the derivative market on the specific recommendation of the RBI, the profits and losses on account of transaction in the derivative products should be treated at par with other business activities, the CII said.

Highlighting the critical role played by borrowings from foreign countries, the CII has stressed the need for making the external commercial borrowings cheaper.

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Tax Advice
Term deposit can’t be pledged to secure loan
by S.C. Vasudeva

Q. In 2006-07, the fixed deposits with bank for a period of five years or more qualify for rebate under Section 80C within overall limit of Rs 1 lakh. Can loan be raised before maturity payment is allowed on these fixed deposits? If so, after how much time?

— Rajinder Chopra, 
Ambala City

A. The Bank Term Deposit Scheme 2006 very clearly specifies that the term deposit shall not be pledged to secure loan or as security to any other asset. Accordingly, it is not possible to raise a loan on the security of a deposit, which has been claimed as deduction under the Section 80C of the IT Act, 1961 (the Act).

It has also been clarified in this scheme that no term deposit shall be encashed before the expiry of five years from the date of its receipt.

Demat accounts

Q. I am a PSU employee. I have got a clean overdraft of Rs 5 lakh from my employer and Rs 30,000 as LTC encashment. The total comes out to be Rs 5,80,000. My questions are:

(1) Can I invest this money in shares, in full amount in one year or part of it? Is there any limit for an individual retail investor?

(2) Can I open two demat accounts with one bank account.

(3) What will be my liability for income tax for short-term gains and long-term gains.

(4) What will be time for depositing tax timing out of income from shares?

— Mohanjit Singh, Mohali

A. The answers to your queries are as under:

(a) There is no limit for an individual retail investor to invest in the shares and securities. You can, therefore, invest the full amount of Rs 5,80,000 for acquiring shares from the market.

(b) It may not be possible for you to open two demat accounts in the same branch of the bank which has the facilities of maintaining such accounts.

(c) The tax on short-term capital gain arising on the sale of equity shares in a company or a unit of a equity oriented fund is chargeable @ 10 per cent thereof provided the transaction of sale of such equity share or unit is entered into on or after the date on which the Securities Transaction Tax Act came into force and such transaction is chargeable to the Securities Transaction Tax under the said Act.

(d) The long-term capital gain on the aforementioned class of shares or units is exempt from tax provided the conditions specified as in (c) above are satisfied. In case the transaction has been entered into without the payment of Securities Transaction Tax, the tax on such capital gain is payable @10 per cent thereof.

(e) The tax in respect of capital gain is also payable in advance on September 15, December 15 and March 15 of the previous year in which the gain is earned.

Rent and deduction

Q. I am retired person and getting pension of Rs 13,000 per month. I am living in a rented house by paying Rs 3,500 p.m. My total income including pension is Rs 2 lakh approximately and am senior citizen.

How much amount I am eligible to claim for income tax deduction in respect of rent being paid by me.

— Narain Das, Hisar

A. An assessee not having the benefit of receipt of rent allowance from an employer is entitled to a deduction of any expenditure incurred by him in excess of 10 per cent of his total income towards payment of rent in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence, to the extent to which such excess expenditure does not exceed Rs 2,000 per month or 25 per cent of his total income for the year subject to such other conditions or limitation as may be prescribed. Such deduction is not allowable where any residential accommodation is owned by the assessee or his spouse or minor child or by HUF of which he is a member.

On the basis of figures in the query, your total income is Rs 2 lakh and you are paying a rent of Rs 42,000 per annum. The deduction on the basis of these figures would work out as under:

(1) Rent paid in excess of 
10 per cent of your salary 
(Rs 42,000-20,000) Rs 22,000

(2) 25 per cent of total income Rs 50,000

(3) Maximum deduction allowable @ Rs 2,000 p.m. Rs.24,000

The least of the above being Rs 22,000, you would be entitled to a deduction of Rs 22,000. It may be added that this deduction is subject to the aforesaid condition and filing of a declaration in Form No 10BA along with the return of income.

Section 88

Q. In your advice of the Tribune dated July 3, 2006, you have taken into account the following tuition fees for deduction while calculating tax liability of person:

(1) Darshan Singh Quadian (for his son) Rs 45,000

(2) Jagjiwan Singh Samrala (for his son) Rs 22,500

Isn’t the amount of tuition fee admissible for deduction limited to Rs 12,000 per child per year?

— G.S. Toor, Ludhiana

A. The limit of Rs 12,000 has been withdrawn which was provided for in the Section 88 of the Act after the introduction of Section 80C wef 2006-07. According to the present position a deduction not exceeding Rs 1 lakh is allowable in respect to various items covered in the said section. There are no sectoral monetary limits for individual items specified in the section.

Form 15H

Q. My elder brother aged 87 years is retired and has to obtain Income Tax PAN card to complete Form 15H formalities with the banks, with which he has deposits. He has only interest income of about Rs 55,000 p.a. and deposits with banks and post offices. As he has PAN card, is it necessary for him to file Income Tax Return for F.Y. 2005-06.

— Sham Lal Kapur, Amritsar

A. It is not necessary for him to file the Income-tax return for 2005-06. He can file Form 15H with the bank by virtue of which the bank would not deduct tax at source from the interest payable to your elder brother.

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