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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

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B U S I N E S S

Anti-outsourcing undercurrent strong in US, says Mittal
New Delhi, June 9
The outsourcing debate in the United States should not become an ‘India debate’ as the Indian professionals are adding competitiveness to the US industry, CII President and CEO of Bharti Enterprises said here today.

RBI order on FDI flow
Mumbai, June 9
In a bid to cap debt-flows under Foreign Direct Investment (FDI) route, the Reserve Bank of India today said that only fully convertible debt instruments would be permitted under the Foreign Direct Investment (FDI) policy.

Heidelberg to tap Chandigarh printing market
Chandigarh , June 9
Heidelberger Druckmaschinen (Heidelberg), commanding a market share of 43 per cent in the world’s sheet-fed printing industry, yesterday descended on the Chandigarh market to explore latest possibilities in the state-of-the-art printing technologies.

Charges cut on train e-tickets
New Delhi, June 9
Train passengers opting for Internet-based e-ticketing facility will now have to pay only Rs 10 instead of Rs 15 for sleeper class reserved tickets.



EARLIER STORIES

 
Vice-President (marketing) of General Motors (India) Ankush Arora poses with Chevrolet Optra Magnum car in New Delhi on Saturday. The car is powered by a 2-litre TCDi diesel engine and will be from Rs 8,74,000 onwards.
Vice-President (marketing) of General Motors (India) Ankush Arora poses with Chevrolet Optra Magnum car in New Delhi on Saturday. The car is powered by a 2-litre TCDi diesel engine and will be from Rs 8,74,000 onwards. — Tribune photo by Mukesh Aggarwal

Aviation Notes
AI’s Serbia plan a hara-kiri
Air-India takes wrong decision at a wrong time. Caught amidst the uncertainty of merger and its aftermath, the national carrier wants to expand by buying 14 obsolete flying machines of Serbia's JAT Airways fleet, which is totally unworthy of optimum utilisation.

Investor Guidance
Tax benefit allowed for money spent on eviction
Q: We desire to sell our ownership residential building but there was one tenant who refused to leave. We filed a suit in a court of law for his eviction but the case dragged on for over five years. Finally we paid him Rs. 1.5 lakh and he obliged.

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Anti-outsourcing undercurrent strong in US, says Mittal
Tribune News Service

New Delhi, June 9
The outsourcing debate in the United States should not become an ‘India debate’ as the Indian professionals are adding competitiveness to the US industry, CII President and CEO of Bharti Enterprises said here today.

Mittal, who led a CII CEOs delegation to the US between June 3 and 6, told newspersons that during their meetings with the US officials, senators and Congressmen, it was impressed upon them that the outsourcing debate should not become an India debate as there would be 17 million requirement of IT and knowledge professionals by the US, which could be best served by India.

"In fact, Indian professionals are adding competitiveness to the US industry," Mittal said.

In this context, CII President pointed out that the CEOs delegation highlighted the fact that most of manufacturing industry has moved to China and was feeding US consumption patterns today.

Agreeing to the fact that this could still become an election issue on the US, the CII President said that the fear of the US on 'loss of jobs' is palpable and there were clear undercurrents regarding this.

The CII delegation has presented the 'India case' strongly to address this concern, and we need to continue to do so with more data, he added.

In fact, the CII highlighted the trend of 'reverse outsourcing. "There has been a trend of reverse outsourcing recently," Mittal said. "IBM has bagged $1.1 billion order from Bharti," he added. He mentioned that other telecom companies are also looking at outsourcing to the US. The US political leadership very well received this case study.

The CII president said that the delegation impressed the US side, the trend of increasing Indian investments in the USA. "Indian companies are increasingly investing in the US, this is creating jobs. American management is being continued, expansions are underway; more jobs are being created" Mittal said.

Favours foreign transponders for telcos

Bharti Enterprises CEO Mittal demanded that the government should allow telecom players to book space in foreign transponders to enable them to provide services to the customers at even cheaper cost.

Pointing that there is a long pendency of application for licenses for using space in Indian transponders, Mittal said the government should evolve a channel, after satisfying security concerns, to enable private telecom players to acquire space in foreign transponders.

“We have already written a letter to Department of Telecommunications impressing upon them that this would enable us to provide services to the customers at even cheaper cost,” Mittal told newspersons here.

On Bharti’s retail chain, Mr Mittal said the company is likely to launch the retail venture early next year by opening about a half a dozen stores, branding of which is still being worked out with its back-end partner Wal-Mart.

“The process is on, we are recruiting people and everything is moving as per the plan… you will see half a dozen (stores) coming up early next year,” he said

Mittal had met Wal-Mart Vice Chairman Mike Duke in Washington during the visit as part of a CII delegation.

On the legal issues linked to the retail venture, the Bharti CEO said "the legal issues like brand agreement, franchise arrangement may take some time... but we are going ahead as per the plan.”

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RBI order on FDI flow

Mumbai, June 9
In a bid to cap debt-flows under Foreign Direct Investment (FDI) route, the Reserve Bank of India today said that only fully convertible debt instruments would be permitted under the Foreign Direct Investment (FDI) policy.

“It is clarified that henceforth, only instruments which are fully and mandatorily convertible into equity, within a specified time will be reckoned as part of equity under the FDI Policy and eligible to be issued to persons residing outside India”, the RBI notification said here.

The RBI has issued the clarification to prevent corporate from circumventing the provisions of the FDI policy by issuing hybrid instruments like optionally convertible or partially convertible debentures, which are intrinsically debt-instruments.

The central bank has further clarified that companies, which have already received funds from outside India for issue of partially or optionally convertible instruments on or before June 7 may issue such instruments.

The existing investment in instruments, which are not fully and mandatorily convertible into equity may continue till their current maturity, it said.

The SEBI-registered foreign institutional investors (FIIs), it further said, would be eligible to invest in listed non-convertible debentures or bonds issued by Indian companies subject to ceilings prescribed from time to time. — PTI

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Heidelberg to tap Chandigarh printing market
Tribune News Service

Chandigarh , June 9
Heidelberger Druckmaschinen (Heidelberg), commanding a market share of 43 per cent in the world’s sheet-fed printing industry, yesterday descended on the Chandigarh market to explore latest possibilities in the state-of-the-art printing technologies.

A select gathering was witness to the latest developments in the world of printing press and how best they were suited to the local market. Namrta Dhar, marketing manager, said “As a part of the ongoing tour, we have travelled to Kochi, Trichur and Nagpur. However, due to changed market scenario, there are numerous queries and potential in the small markets as well. Chandigarh is seen as another major emerging market, particularly in the printing scenario.”

Giving details, Namrta said “Our company is not only a seller. We train our customers not only when they buy our machine but till the time they come out with production”. She was addressing mediapersons at a seminar on “Folding box production and label printing”.

The company has its headquarters at Heidelberg, Germany, and focuses on value-added chain for popular format classes in the sheet-fed offset and flexographic printing sectors, which includes pre-press, post-press and associated workflow components.

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Charges cut on train e-tickets
Tribune News Service

New Delhi, June 9
Train passengers opting for Internet-based e-ticketing facility will now have to pay only Rs 10 instead of Rs 15 for sleeper class reserved tickets.

Sources in the railway ministry said here today the service charge of Rs 40 for AC class tickets through e-ticketing as well as that of home delivered I-tickets booked on the Indian Railways Catering and Tourism Corporation (IRCTC) portal has not been touched.

The minimum charge for each ticket will be Rs 10 while an additional Rs 5 will be charged for every additional passenger, subject to a minimum of Rs 25.

The reduction in services charges came into effect yesterday and is aimed at encouraging distance booking of tickets through electronic use.

The sources said about 36,000 tickets accounting for one lakh passengers are being booked daily through e-ticketing. The ministry wants to meet the target of increasing the number to one lakh tickets and three lakh passengers by the next fiscal.

The service charge for sleeper class e-ticketing facility which was introduced in 2005-'06 was Rs 60 and was reduced to Rs 40 in 2006-'07. In the 2007-'08 Budget, it was further brought down to Rs 15.

The Railways is in the process of removing shortcomings of e-ticket system, such as absence of refund facility, booking of unreserved and waitlist tickets and the exact position of the reserved berths. The ministry also plans to introduce rechargeable cash cards for e-ticketing.

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Aviation Notes
AI’s Serbia plan a hara-kiri
by K.R. Wadhwaney

Air-India takes wrong decision at a wrong time. Caught amidst the uncertainty of merger and its aftermath, the national carrier wants to expand by buying 14 obsolete flying machines of Serbia's JAT Airways fleet, which is totally unworthy of optimum utilisation.

JAT aircraft are as old, if not older, as Air-India's. They face technical snags more often than they can afford to. Some vested interests, for their own advantages, seem to have misguided the powers that-be that the national carrier can utilise JAT route network and agreements with other foreign carriers.

This far-fetched idea is nothing but is an act of suicide. During the last decade and more, AI has entered into agreements with many US and European airlines.

While the airlines are making effective use of these agreements, AI has been unable to make use of these slots and other advantages for want of adequate fleet. Analysts feel that AI will be the loser and Serbia will be laughing all the way to the bank. This is not all. AI will also suffer in bargain when privatisation becomes reality.

Out of 210 national carriers, only 23 are fully state-owned. Air-India is one of these and the government has helped it from dying many deaths. Now, after a few failed attempts, the merger is wrongly or rightly coming about. AI should tighten its seat-belt instead of buying good-for-nothing aircraft. Despite government patronage, the national carrier has been sliding backward vis-a-vis private ones, which are providing better service on ground and on board to secure clientage.

There is a thinking in certain political circles that merger will help national carriers consolidate their position. Analysts feel that private carriers — at least two sets of carriers — are running their airlines with utmost professionalism and their market evaluation is far more reliable than that of AI and Indian. As things stand today, private players will have larger share of traffic than national carriers.

Instead of frittering away its energies and tax-payers' money, Air-India should concentrate on better governance, reduction in overhead expenses, including trimming staff bellies and synergise route structure within its control.

This exercise will be far more beneficial to the airlines than buying useless 14 aircraft from the Serbian airlines.

AI must learn to run airlines professionally, if it intends to offer competition to private carriers, some of which supported by 'double-faced politicians', are determined to rule the Indian skies.

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Investor Guidance
Tax benefit allowed for money spent on eviction
by A.N. Shanbhag

Q: We desire to sell our ownership residential building but there was one tenant who refused to leave. We filed a suit in a court of law for his eviction but the case dragged on for over five years. Finally we paid him Rs. 1.5 lakh and he obliged.

Can we claim any tax benefits for the money we have paid him?

— Ramu Podwal

A: Yes, you can enjoy some tax benefits not only for the Rs 1.5 lakh paid to the tenant but also the expenses incurred by you on the court case. The expenses incurred on both these counts were essentially and necessarily for improving the property and making it saleable in the open market.

Therefore, you can compute the indexed cost of acquisition by adding the indexed cost of original acquisition from the date of its acquisition and the indexed cost of improvement from the date when the tenant got evicted.

You may derive support from the case law VSMR Jagdish Chandran v CIT (1997) 93Taxman389 (SC) which ruled --- Where a mortgage was created by the previous owner during his life time and the same is subsisting on the date of his death, and the successor obtains only the mortgagor’s interest in the property, and by discharging the mortgage debt he acquires the mortgagee’s interest in the property and therefore, the amount paid to clear off the mortgage is the cost of acquisition of the mortgagee’s interest in the property which is deductible as cost of acquisition u/s 48.

In-built annexures

Q: Regarding New ITR's 1 to 8. I would appreciate your confirming that no annexures have to be attached. This means that original TDS certificates in Form-16, 16A, xerox copies of proof of investment under section 80C need not be attached to the ITR forms. Kindly confirm. If so, how will the IT department verify the accuracy of the TDS figures, investments made under 80C etc. Moreover the space provided for giving TDS details is so less that 12 months figures cannot even fit from Form 16, 16A. Kindly clarify.

— J B Movdawalla

A: Yes, you are absolutely right. The department claims that no annexures are required (except for only ITR-7 meant for charitable organisations and political parties), but if you go through the forms, you will find that the annexures are built into the forms. However, thankfully, the authorities have accepted the suggestion of the task force committee of Dr Kelkar which suggested doing away with the proofs since the data is already with the income tax department. NSDL was assigned the job of creating the database and it is not ready and operational. The proofs of having suffered TDS or paid some contribution need not be filed though the department may call for the proof in case of necessity.

This is the very first assessee-friendly measure that the department has instituted for honest assessees and simultaneously the system will apprehend those who were declaring and attaching fraudulently obtained receipts. For instance, it was very easy to get a receipt for non-existent contribution made to a non-existent PPF account for a few rupees from an employee of a PPF accounts office.

ITR Form 2

Q: The new ITR Form-1 is for individuals having salary/pension and interest income. ITR Form-2 is for individuals and HUFs having salary/pension, income from other sources, income from house property and capital gains.

Now, a married lady, having salary and interest income only, is the joint owner (2nd party) of a flat with her widowed mother (1st party ) with no income from the flat as the flat is fully occupied by the widowed mother (the assessee is staying separately with her in-laws) for the whole year, fills up which ITR Form, Form-1 or 2?

I feel it should be ITR Form-1 as the lady has only salary and interest income and no income from the house property. Kindly enlighten.

— HPS Iyer

A: We strongly feel that this lady who owns the flat has to file ITR-2 since she does have income from house property but it, being self-occupied, is exempt. She herself may not be staying in the flat on a permanent basis but nonetheless it is self-occupied since it is her mother who stays there and the lady is obliged to provide a shelter to the mother.

Inherited property

Q: My husband has inherited an ancestral residential property (gifted by a relative, by way of a will) in Pune city. Though this relative expired in 1986, the property is several generations old. My question is — If my husband sells this property, will he be liable to pay long-term capital gain tax? If yes, what would the calculations be based on? (assuming that the property is valued at Rs 1 crore).

2. I wasn't clear on my understanding of the following. Assuming that I buy a new under-construction property using the LTCG fund under the capital gains account scheme — The tentative possession date while being June 2009, the registration of this under-construction property has happened in June 2007 itself.

There is a three year lock-in for the sale of the property. So will the lock-in period end in June 2010 or June 2012?

I look forward for your guidance.

— Deepa Hublijkar

A: In the case of gifted or inherited property, for computing long-term capital gains arising out of the subsequent sale by the donee or the legatee, the cost of the property is the cost incurred by the donor when he originally acquired it, or the fair market value as on April 1, 1981, as assessed by an official chartered valuer, whichever is higher. If the donor himself has acquired the property through a gift or inheritance, the cost of acquisition is the cost to the original holder (or FMV as on April 1, 1981) who has originally purchased it.

Explanation ‘iii’ to Section 48, defines indexed cost of acquisition to mean an amount which bears to the cost of acquisition the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the first year in which the asset was held by the assessee or for the year beginning on April 1, 1981, ‘whichever is later’.

This means in the case of an inherited or gifted property, the cost of acquisition is the cost to the original holder (or FMV as on April 1, 1981) but the date of acquisition for indexing should be taken as the date of the inheritance for the gift. However, the character of long or short-term depends upon the date of acquisition of the original holder. In case this original holder has also acquired the property by way of gift or inheritance then it will be the date of very first holder who purchased or constructed the property.

2. The new residential house acquired for the purpose of claiming exemption u/s 54 (for residential houses) or 54F (for other assets) has a lock-in of three years. The clock starts from the date of acquiring the new house. In the case of houses, the house under construction is not a house. The construction should be complete, the flat should be ready for occupation and the municipal annual value be known.

The authors may be contacted at wonderlandconsultants@yahoo.com

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