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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

US power firm to pump in Rs 10,300 crore
New Delhi, June 17
The Indian unit of US power firm, AES, plans to invest Rs 10,300 crore in the power sector by 2011 and has set sights on having a total generation capacity of more than 5,000 MW in the next 5-7 years.

FinMin circular on share trading
New Delhi, June 17
The Finance Ministry has asked tax officials to calculate tax liability of those transacting in shares using the principles prescribed by the Authority of Advance Rulings (AAR).

Salary: Sarin overtakes Mittal
New Delhi, June 17
Lakshmi Mittal may be the richest Indian by virtue of his stake in world’s biggest steel empire, but in terms of annual remuneration as a CEO he has been beaten by another India-born chief executive - Arun Sarin.

Shah Rukh KhanSRK to endorse Emami brands
Emami Group has roped in Shah Rukh Khan as brand ambassador for its fairness cream for men — 'Emami Fair and Handsome' — to increase its foothold in the fast-growing segment. The Rs 1,500-crore personal care and health care group has signed Khan for two years to endorse the product in the country, an Emami release said today. — PTI

 



EARLIER STORIES

 

Wedding Master

Robot "Tiro" acts as a wedding master for robot engineer Seok Gyeong-Jae (left) and his bride in Daejeon, about 160 km south of Seoul, on Sunday.
Robot "Tiro" acts as a wedding master for robot engineer Seok Gyeong-Jae (left) and his bride in Daejeon, about 160 km south of Seoul, on Sunday. The robot, designed by Seok's company, led the wedding ceremony by reading documents. — Reuters photo

Godrej eyes buyouts overseas
Mumbai, June 17
The $1.7 billion Godrej Group is targeting at least two acquisitions every year in China, Indonesia and Brazil to expand its fast moving consumer goods (FMCG) business.

A-I cargo service by month-end
Mumbai, June 17
Air-India is set to launch its cargo service this month-end and long-distance non-stop flight to the US from August 1.

ONGC to invest Rs 1,000 crore
Rajahmundry, June 17
The Oil and Natural Gas Corporation (ONGC) chairman R S Sharma said the company has worked out Rs 1,000 crore investment plan for the current year.

Market Update
Market may show two-way movement
Volatility ruled the roost in the markets during the past week as global and local factors continued to cast their spell. Concerns of rising domestic and global interest rates weighed on the sentiment.

TAX ADVICE
PPF account can’t be extended twice
Q. (1) I opened a PPF account in 1987 and extended it for five years. (a) Can I extend this PPF account for another five years and be eligible for yearly withdrawals and deduction under Section 80C (If I continue depositing up to Rs 70,000 every year) as heretofore?

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US power firm to pump in Rs 10,300 crore

New Delhi, June 17
The Indian unit of US power firm, AES, plans to invest Rs 10,300 crore in the power sector by 2011 and has set sights on having a total generation capacity of more than 5,000 MW in the next 5-7 years.

"We have signed an MoU with Chhattisgarh government to set up a 1,200 MW coal-based plant in Raigarh district. Many clearances have been obtained... (we are) waiting for the coal mines to be allotted," Sanjeev Aggarwal, director (business development), AES India Pvt Ltd, said.

For the project, the company has been given approval by the Foreign Investment Promotion Board and union Cabinet to bring in foreign direct investment of Rs 1,650 crore.

AES needs about 180 million tonnes of coal to meet the demand for 25 years of operation and has identified coal mines, he said, adding "We have given the application to central coal ministry and hope to get the clearance fast".

The company is in talks with financial institutions and banks to tie up funds. For the Chhattisgarh plant, AES is talking to IDFC, ICICI and World Bank's private sector lending arm IFC, he said, adding the plant would be funded in a debt-equity ratio of 70:30.

The US firm, which is also running a 420 MW power plant in joint venture with Orissa Power Generation Corporation with 49 per cent equity and management control, is in the process of adding another 1,200 MW at an investment of Rs 4,800 crore.

The company's portion in the expansion of Orissa project comes to about Rs 2,300 crore. Of this, AES would pump in Rs 575 crore as equity and the balance as debt.

AES has been operating the OPGC plant since 1998 and has been the highest dividend paying company to the state government for the last 4-5 years, Aggarwal said.

He said the company was hoping to start work on the project in 2008 once all clearances and fuel linkages were in place. — PTI

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FinMin circular on share trading

New Delhi, June 17
The Finance Ministry has asked tax officials to calculate tax liability of those transacting in shares using the principles prescribed by the Authority of Advance Rulings (AAR).

The issue assumes importance as shares held for investment are taxed as capital gains which is 10 per cent for short term (less than one year) and nil for long term, while the income from trading in shares is treated as business income and taxed according to the category of the assessee like domestic company, foreign company etc.

While laying down the principles on the basis of the Supreme Court decisions for determining the tax liability, AAR has said that ordinarily the purchase and sale of shares with a motive of earning a profit would amount to business income.

However, the investments made with the objective of earning income through dividend may be treated as capital gains.

The AAR further added that tax officials should take into account nature of transactions, the manner of maintaining book of accounts and magnitude of purchases and sales and the ratio between them, as a guide to determine the nature of investment.

For calculating tax liability of FIIs, AAR observed that tax officials should verify how the shares are valued or held in the books of accounts — whether they are valued as stock in trade for arriving at business income or held as capital assets.

The CBDT has clarified it is possible for a taxpayer to have two portfolios — investment and trading portfolio. While the investment portfolio would comprise securities which are to be treated as capital assets, the trading portfolio would include stocks in trade. — PTI

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Salary: Sarin overtakes Mittal

New Delhi, June 17
Lakshmi Mittal may be the richest Indian by virtue of his stake in world’s biggest steel empire, but in terms of annual remuneration as a CEO he has been beaten by another India-born chief executive - Arun Sarin.

Vodafone, the world’s largest mobile player by revenue, gave more than $33 million (about 16.9 million pounds) to Sarin as salary and other benefits in the form of cash, stocks and options in the financial year ended March 31.

Sarin got a base salary of $2.5 million (1.27 million pounds), while his total cash remuneration- including incentives and other benefits- stood at $6.4 million (3.24 million pounds), the company said in its annual report.

This was higher than the salary taken by L N Mittal last year as CEO of Mittal Steel.

The steel giant had disclosed last month that Mittal earned a base salary of $2.005 million, while the total cash package- including performance related payment stood at $3.68 million.

Sarin was also granted shares worth $7 million (3.5 million pounds) under the company’s incentive plans. This is in addition to the grant of stock options worth about $20 million (10 million pounds).

The total share options held by Sarin at the end of last fiscal were valued at about $70 million. Besides, he has accumulated shares worth about $22 million, which have been given to him under various incentive plans.

In comparison, Mittal was awarded options worth just $1.8 million, taking his total holding of options to about $8 million at the end of 2006. — PTI

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Godrej eyes buyouts overseas

Mumbai, June 17
The $1.7 billion Godrej Group is targeting at least two acquisitions every year in China, Indonesia and Brazil to expand its fast moving consumer goods (FMCG) business.

The group, which had recently taken over UK’s Keyline, South Africa’s Rapidol and home-grown Nutrine, is aiming at 25 per cent annual growth, of which five per cent is expected to come through acquisitions, chairman Adi Godrej said.

Acquisitions in these overseas markets will primarily be in the personal and household care segments, he said.

The group was looking at some more overseas acquisitions in South Africa and Europe, he said, adding that there could be some domestic buyouts as well. Though the group has strong retail brands, it does not plan to enter retailing in a big way. — PTI

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A-I cargo service by month-end

Mumbai, June 17
Air-India is set to launch its cargo service this month-end and long-distance non-stop flight to the US from August 1.

Air-India will launch its cargo service on the Frankfurt and Paris routes with Airbus A-310s, two of which have been converted into cargo freighters, Air- India chairman V Thulasidas said, adding, "The non-stop US flight to New York will start on August 1 with the new Boeing 777-200 ER to be delivered sometime in July."

Air-India would operate its cargo service under the name of Air-India Cargo and proposes to convert six-seven old Boeing 737-200s into cargo freighters with Alliance Air for operations in domestic routes and for neighbouring countries after its merger with Indian, he said.

The cargo service will initially connect Damam, Paris and Frankfurt. Indications suggest that it would operate on the Gulf and European destinations from Mumbai, Chennai and Bangalore. — PTI

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ONGC to invest Rs 1,000 crore

Rajahmundry, June 17
The Oil and Natural Gas Corporation (ONGC) chairman R S Sharma said the company has worked out Rs 1,000 crore investment plan for the current year.

Addressing newspersons Sharma, who had come here to review the performance of the Rajahmundry asset and kg basin, said the Kakinada oil refinery with 7.5 mt was not economically viable and hence was proposed to enhance to 15 mt.

He said the second phase of tenders for Tatipaka refinery would be executed soon.

There were 26 overseas projects in 15 countries and share of oil and gas from these projects was 7.9 mt, he added.

He said there was short fall in gas in the Rajahmundry asset last year due to the delay of g1 and g2 projects.

Stating that ONGC’s business in India during last year was satisfactory, Sharma said oil recovery was the highest and production had gone up by seven per cent. — UNI

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Market Update
Market may show two-way movement
by Lalit Batra

Volatility ruled the roost in the markets during the past week as global and local factors continued to cast their spell. Concerns of rising domestic and global interest rates weighed on the sentiment.

Caution was also partly due to large IPO pipeline. While the IPO of realty major DLF was over last week, another large issue which is from ICICI Bank is set to open for subscription this week.

The market may continue to drift sideways as the next trigger is going to be first quarter results though the progress of monsoon is being closely tracked. Inflation has declined recently and it now hovers below 5 per cent.

The domestic bourses closely track movement in the global markets. So, any sharp correction in global equities may trigger self-off here as well.

ICICI Bank-FPO

India’s largest private sector lender ICICI Bank is coming out with a follow-on public offer (FPO) in the domestic market to raise Rs 8,750 crore. The FPO is priced in the band of Rs 885 to Rs 950.

Investors with a three-year horizon may apply at lower price band of Rs 885 as this would ensure that retail investors will get the shares allotted at Rs 835 (retail bidders are being offered Rs 50 as discount) and this would mean a 9 per cent discount to the last week closing of Rs 908 on the BSE.

The issue at higher price band is at a premium to the current market price and even after a Rs 50 discount would not leave anything on the table for the retail investors.

ICICI Bank had transferred its 74 per cent stake in the insurance business (life and general) and 51 per cent stake in the asset management business to a separate wholly-owned subsidiary company called ICICI Holdings (IH) for an aggregate investment value of Rs 2,228 crore.

The bank has offloaded a 5.9 per cent stake to five investors for around Rs 2,650 crore, which translates into a valuation of Rs 44,600 crore. The market estimates for IFS valuation ranged between $8billion and $10 billion.

Since the placement has been made at a higher price, the same has set a benchmark for evaluating the subsidiary, which is a positive development in the build-up to the FPO.

The bank enjoys growth visibility with improvement on the operational front following the Sangil Bank merger. Also, the benchmark valuation of the insurance subsidiaries is ahead of market estimates; this along with any future stake sale and the listing of IFS would help to unlock significant value in its subsidiaries.

Investors with a three-year perspective will hence enjoy the fruits of unlocking of value of this behemoth’s subsidiaries.

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Tax Advice
PPF account can’t be extended twice
by S.C. Vasudeva

Q. (1) I opened a PPF account in 1987 and extended it for five years. (a) Can I extend this PPF account for another five years and be eligible for yearly withdrawals and deduction under Section 80C (If I continue depositing up to Rs 70,000 every year) as heretofore?

(b) If the answer to (a) is in the negative, then can I deposit Rs 70,000 in the existing account before its maturity and avail deduction under Section 80C for the financial year 2007-08, even though the entire balance in my account will be paid to me after maturity?

(c) If the answer to (b) is also negative, then can I open another PPF account, after this account expires, and make deposits therein?

(2) I purchased NSC’s worth Rs 1,50,000 in March 2003 and I have been including interest on accrual basis in my IT return every year. I want to avail of deduction under Section 80c on the amount of interest for the financial year 2006-07 and thereafter every year, and also include the accrued interest in my income.

I presume that when these NSCs mature, I will not be required to pay income tax in the amount of interest accumulated for six years, which I will receive along with the principal amount, as per EET as I have been including the interest on accrual basis in my income every year.

(3) Earlier, the interest on SB account in the post office was tax-free. As per your information in the Tribune dated December 11, 2006, this is now taxable. Please tell as to from which year this change has been made.

— Gurnam Singh, Patiala

A. (1) (a) The provisions of the PPF scheme provide for the extension of a further period of five years after the expiry of a period of 15 years from the day of initial subscription. No further extension is provided for by the scheme.

(b) You can deposit the permissible amount before date of completion of 20 years and claim the deduction under Section 80C of the IT Act, 1961 for the previous year.

(c) In view of answer to your query at (b) above, this aspect would not arise.

(2) In case you have included yearly accrued interest on the NSCs in your return, you would not be liable to pay tax on the total amount of interest received in the year of maturity of the NSCs.

(3) It has been clarified in my earlier responses that the interest on post office monthly saving schemes is taxable whereas interest on post office savings account is exempt under Section 10(15)(i) of the Act.

Senior citizen status

Q. I have completed 65 years of age on April 12, 2007. Can I avail the facility for senior citizens for the year 2007-08 in the income tax?

— Mehar Chand

A. You can avail the facility for senior citizens for the year ended March 31, 2008 i.e. assessment year 2008-09 and not for assessment year 2007-08.

Interest on FDRs

Q. I am 84-year-old and have FDRs in a bank. I want to know whether in my IT return I will have to account for Rs 1,16,984 paid to me by the bank on my FDRs or Rs 1,68,134, the accrued amount? (Copies of certificates issued to me by the bank are enclosed herewith.)

The bank manager is neither prepared to omit the amount of Rs 1,68,134 from his report/certificate as I have been paid Rs 1,16,984, nor he could explain why and what amount of Rs 1,68,134 relate to. Only explanation he gave was that he was doing everything as per banking rules. He is not even prepared to show me the letter containing such rules.

— M.S. Dewan, Ambala Cantt

A. Through the details given by you, it has been clarified by the bank manager that the amount of Rs 51,150 has been added to your term deposit receipts, meaning your term deposits have gone up by the amount of interest of Rs 51,150. The declaration of your interest income in the return will have to be for a sum of Rs 1,68,134 because the total income received by you for the period April 1, 2006 to December 31, 2006 is Rs 1,68,134, which has been credited to your savings account and Rs 51,150 has been credited to your term deposit account.

Deductions u/s 80U

Q. I am a retired govt servant. I have been submitting my IT return regularly. I cannot hear from left ear for the last five years i.e. about 90 per cent loss of hearing. My doctor says I cannot claim deduction under Section 80U as I can hear from my right ear. Please clarify.

Is the medical certificate of loss of hearing in one ear, issued by the ENT deptt of Trust Hospital, valid to claim deduction under Section 80U of IT?

— R.K. Verma, Bhiwani

A. In accordance with the provisions of the Disabilities (Equal Opportunities Protection of Rights and Full Participation) Act 1995, disability includes hearing impairment. The hearing impairment has been defined as loss of 60 decibels or more in the better ear in the conversational range of frequencies. The entitlement to deduction under Section 80U of the Act would depend on the submission of the certificate from the medical authority on the above lines.

Medical authority, under the aforesaid Act, has been defined as any hospital or institution specified for the purpose of this Act on notification by the government. You will have to therefore consult the notified medical authority to ascertain if you would be entitled to the deduction under Section 80U.

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