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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Step-motherly treatment for BSNL, alleges Yechury
Left leader shoots off letter to PM saying govt favouring private firms
New Delhi, June 24
Attacking the government of failing to protect the interest of the state owned BSNL to encourage the growth of private telecom operators, CPM today sought the intervention of the Prime Minister Manmohan Singh to ensure that the PSU was not destroyed.

ICICI to work in tandem with village shopkeepers
Singapore, June 24
The head of India's largest private bank said today he hopes to add 60 million new customers in a novel partnership with shopkeepers and non-government organisations in villages who will provide basic financial services.
An employee talks over a phone at a branch of the ICICI bank in Mumbai
An employee talks over a phone at a branch of the ICICI bank in Mumbai. The bank has raised $4.9 billion (Rs 20,125 crore) through its follow on public offer (FPO) in domestic market and from the issue of American Depositary Share (ADS) in the United States. The bank priced the public issue at Rs 940 per share. — AFP photo


EARLIER STORIES

 
A leather goods seller awaits customers at a shop
A leather goods seller awaits customers at a shop on Sunday. Total leather exports from India is likely to cross $3 billion this year with a growth rate of about 11 per cent. However, Indian leather products are being priced out of the world market due to appreciation of the rupee against major currencies, and China is benefiting from the situation.

Suzuki may drive in Hayabusa next year
New Delhi, June 24
Indian two-wheeler market is set to witness more competition with Japanese firm Suzuki planning to roll out a 125cc scooter by September, a 150cc motor cycle and its flagship pro bike Hayabusa by March next.

Market Scan
Brace up for new CBDT note
The Central Board of Direct Taxes issued a circular dated June 15, 2007, which provides guidelines to the assessing authorities on distinction between long-term capital assets and trading assets.

Tax Advice
Disability pension of ex-serviceman exempt from tax
Q. I am a retired defence officer drawing a pension of Rs 10,000 pm and also working on contractual basis in a government department on a salary of Rs 12,000 pm. My total income is Rs 2,64,000.





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Step-motherly treatment for BSNL, alleges Yechury
Left leader shoots off letter to PM saying govt favouring private firms
Tribune News Service

New Delhi, June 24
Attacking the government of failing to protect the interest of the state owned BSNL to encourage the growth of private telecom operators, CPM today sought the intervention of the Prime Minister Manmohan Singh to ensure that the PSU was not destroyed.

“There is a deliberate effort to downplay BSNL and strengthen the private sector. We want the government to act on its own decision of over a year ago to acquire 45.5 million GSM lines,” party Politburo member Sitaram Yechury told reporters.

As per the decision, the government invited global bids, which were also evaluated. But no order has yet been placed. The process of implementing the decision has not yet begun.

"Private companies have made hay by garnering greater market share, pushing BSNL to the third position from its erstwhile position of being the market leader," Yechury said.

"Definitely, the government is to be blamed for it. While we will support healthy competition between the public and private sectors, it is absolutely wrong to destroy a PSU to encourage the private sector," he added.

With BSNL executives and employees planning a five-day protest from on Monday, the CPM leader has shot off a letter to the Prime Minister, saying their protest was directed at highlighting the fact that BSNL was being neglected by the government.

Despite Motorala having withdrawn the case two months ago, no orders have been placed so far. This time is being utilised by private players to gain market share, he added.

Meanwhile, BSNL is set to award the world’s leading telecom equipment makers Ericsson and Nokia Siemens Network an estimated $4.5 billion to $4.7 billion mutual contract in the next few days.

This mega telecom deal intends to raise the excellence and speed of high pace data applications. The first phase of the project is set to introduce 8 lakh new ADSL connections. BSNL has announced plans to setup six million broadband connections with an upgrade option of an additional three million over the next three years. This deal agreement includes installation as well as training and maintenance of the entire system.

The deal finally has managed to cross all hurdles and now this deal shall see Ericsson take 60 per cent of the contract, while the recently formed Nokia Siemens Network joint venture will take on the job of installing the remaining 40 per cent of the 45.5 million GSM mobile communications lines.

BSNL sources said they were now ready to place an advance order in the coming few days and the price being paid for carrying out the project shall be about $100 to $103 per line.

BSNL has slipped to the fourth position with a subscriber base of 27.9 million. Bharti Airtel tops the list with 40.7 million users, followed by Reliance Communications (30.5 million) and Hutchison Essar (29.2 million).

BSNL’s profits were hit because of a cut in access deficit charge. Moreover, private operators claimed a share of the universal service obligation fund. The telecom company is vying for the navaratna status. This will give the BSNL board the autonomy to invest up to Rs 1,000 crore on expansion without prior approval from the finance ministry. This will help the company use its reserves of Rs 40,000 crore.

The Indian telecom market is seeing phenomenal growth, adding more than 6 million subscribers a month. The government plans to have 500 million mobile users by 2010.

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ICICI to work in tandem with village shopkeepers

Singapore, June 24
The head of India's largest private bank said today he hopes to add 60 million new customers in a novel partnership with shopkeepers and non-government organisations in villages who will provide basic financial services.

"The key is going to be convenience," K V Kamath, the chief executive of the ICICI Bank Ltd told The Associated Press. The project has been launched in some villages but this is the first time Kamath has given detail of how it will work.

"A long as you make it convenient he (the customer) is going to use it. Even the village customer is going to go the extra mile to get that service," he said in the interview on the sidelines of the World Economic Forum on East Asia.

Kamath said technology will allow banking to be brought to rural areas of India, where about 60 million of the country's 1 billion people live.

"If ...I get 60 million customers (out of 600 million) it is a good start," Kamath said, adding that the target will be his "vision for the next five years".

"In 10 years we should be able to take it to three-four times that number," he said. It will take 18 to 24 months to fully roll out the first stage of the project, he said.

He said the backbone of the rural banking project will be smartcards issued to customers with biometric identification systems.

They will swipe the cards on point-of-sales machines installed on shops and other ICICI partners including NGOs, branch offices of corporations that sell seeds, fertilisers or tractors, and other organisations with presence in rural areas.

Once the identity of the card's user is established, the customer will be able to either deposit or borrow money from the establishment where the machine is installed.

In other words, the shopkeeper will act as ICICI's local representative, Kamath said. — AP

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Suzuki may drive in Hayabusa next year

New Delhi, June 24
Indian two-wheeler market is set to witness more competition with Japanese firm Suzuki planning to roll out a 125cc scooter by September, a 150cc motor cycle and its flagship pro bike Hayabusa by March next.

"We are aiming to plug the gap between 100cc and 150cc segment in scooters. By September, we plan to launch a 125cc variometric scooter," Atul Gupta, Suzuki Motorcycle India Pvt Ltd (SMIPL) vice-president, sales and marketing, said.

He said the scooters from Suzuki would be positioned as a family vehicle through its "powerful features and high mileage as USP", while still targeting the youth.

"This segment has not been tapped by anyone and we see a potential in that segment," he said, adding the company expected scooters to contribute about 20 per cent in its overall target of 1.2-1.3 lakh units in 2007-08.

On the motor cycle front, Gupta said the company was looking at bringing high-powered bikes, starting with a new 150cc model to compete with the likes of Bajaj Pulsar and Hero Honda's CBZ Xtreme by March 2008 to add a youth-driven product in its portfolio.

Gupta also said the launch of super premium bikes from the stable of Suzuki in India was very much a possibility in the near future with the government's relaxation of norms for importing 800cc-and-above bikes.

"If all the aspects go well, including our own service and spare parts, then the likes of Hayabusa (1,300cc) and GXR (1,000 cc) could be brought in here by March 2008," he said.

He said SMIPL is looking at new markets in neighbouring countries, such as Sri Lanka and Bangladesh, while it is already shipping products to Nepal. — PTI

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Market Scan
Brace up for new CBDT note
by J.C. Anand

The Central Board of Direct Taxes (CBDT) issued a circular dated June 15, 2007, which provides guidelines to the assessing authorities on distinction between long-term capital assets and trading assets. This circular is of vital importance to the direct tax payers as well. Taking a broader view of the judicial pronouncements by the Supreme Court and High Courts, the CBDT throws light on the question whether a particular holding of shares is by way of investment or forms part of the stock-in-trade and provides guidelines to the assessing authorities on this problem.

Under normal circumstances, the circular states, the assesse should be in a position to produce evidence from its records as to whether it “has maintained any distinction between those shares which are stock-in-trade and those which are held by way of investment”. Distinction between the two is to be determined on the basis of the following criteria: (i) the substantial nature of transactions, (ii) the manner of maintaining books of accounts, (iii) the magnitude of purposes and sales, (iv) the ratio between purchases and sales.

Whereas the circular lays down, the motive in the purchase and sales of shares is of earning a profit, the transaction would be in nature of trade and assessed as business income, but where “the investment in shares of a company is to derive income by way of dividend etc.” Then the profits accrued on the sale of such investment in shares would be held as capital gains and not revenue receipt.

It may be proper to point out that a long-term investor makes investments in shares not merely for dividend income, but more for appreciation in the market prices of shares in which an investor has put money and is holding this investment on a long-term basis as well as for long-term gains through bonus shares and rights shares to the investor.

It is of vital importance for the investors to pay special attention to the guidelines issued to the assessing authorities. A long-term investor should:

(i) maintain proper record of investments. In case he/she indulges himself/herself in speculative business in shares in any other way, separate account books should be maintained for investments and speculative business.

(ii) magnitudes of purchases and sales and an abnormally high ratio between sales and purchases might earn the assesse the role of a trader and the income accruing from it as business income.

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Tax Advice
Disability pension of ex-serviceman exempt from tax
by S.C. Vasudeva

Q. I am a retired defence officer drawing a pension of Rs 10,000 pm and also working on contractual basis in a government department on a salary of Rs 12,000 pm. My total income is Rs 2,64,000.

It is given to understand that pension income in terms of GOI letter F.No. - 20/51/99 - ITA-I is exempt from income tax. I have to submit the IT return for 2006-07. Kindly advise me on is my IT liability this year. I have no other source of income.

A. In accordance with letter F.No. 200/51/99-ITA-1 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, New Delhi dated May 6, 2000, the total disability pension admissible to armed forces personnel is exempt from income-tax. The pension of a retired defence officer is not exempt from tax. On the basis of figures given by you, the tax liability on a total income of Rs 2,64,000 would be Rs 29,784, including education cess for the assessment year 2007-08. This is on the presumption that you are not a senior citizen i.e. you have not attained the age of 65 years.

PPF account

Q. I opened a PPF account on March 26, 1992. I shall be able to withdraw the entire amount from the account after April 1, 2007. I intend to deposit Rs 1,000 in my PPF account in the month of February 2007. Since, it is the last year, that is 2006-07, would I be able to claim deduction of Rs 1,000 under Section 80C of the IT Act, 1961?

— Ashok Kumar, Ambala city

A. The deposit of Rs 1,000 in your PPF account in the month of February 2007 would definitely entitle you to a deduction of Rs 1,000 under Section 80C of the Income-tax Act, 1961 (the Act). I may add that in view of a notification issued by the Government of India, you can extend the PPF account for any number of block of five years.

Gift to brother

Q. I am a government employee in the education department. My gross salary for the financial year 2006-07 is Rs 2,57,242 in which Rs 37,905 is included as arrear of pay wef 9/97 to 3/06. My savings in the GPF, LIC and other instruments are more than Rs 1 lakh. I paid Rs 50,000 to my younger brother, who is a businessman, as a gift, through a crossed cheque in December 2006. Kindly help me to settle my tax liability for the AY 2007-08.

1. Is the amount of gift taxable for my younger brother?

2. Is there any relief on this gift towards my tax liability? If yes, under which section and up to which extent.

3. What is relief under Section 89(I). Is there any need to file revised return of tax for previous years or not?

4. Please calculate my tax liability for the assessment year 2007-08 under proper head and sections.

— Pravin Gupta, HP

A. The answers to your queries are as under:

1. The gift to your brother is neither taxable in your hands nor in the hands of your brother.

2. The gift made to your brother does not entitle you to any rebate under any provisions of the Act.

3. Rule 21A is applicable for granting relief under Section 89 of the Act. The said rule contains detailed method for the computation of the relief. It is not possible to print the entire Rule 21A on account of the paucity of space. There is no need to file the revised income-tax return in case you seek the relief under Section 89 of the Act.

4. The tax liability for assessment year 2007-08, on your total income of Rs 1,57,242 would work out at Rs 6,577, without giving relief under Section 89 of the Act.

Senior citizen

Q. I am a retired government pensioner of 77 years of age. Please calculate my tax liability on the basis of the following details for the financial year 2006-07. Assessment year is 2007-08.

Expected pension Rs 1,23,200

Expected pension arrear Rs 8,840

Expected house property income (after 30 per cent rebate) Rs 51,600

Interest on saving bank account Rs 16,000

Likely to purchase NSC's during 2006-07 for Rs 10,000

Amount of exemption for senior citizen pensioner Rs 1,85,000

— D.R. Oberoi

A. On the basis of figures given by you in the query, your total income would work out at Rs 1,99,640. The deduction allowable under Section 80C of the Act would be Rs 10,000. The net income being 1,89,640, the tax and the education cess payable thereon would be Rs 947. I may add that interest accrued on National Saving Certificates, if any, held by you in the preceding years and for the year has not been considered as the details in respect thereof have not been given in the query.

Medical reimbursement

Q. I wish to seek your advice on the following important points:

(a) Is the amount received on account of medical reimbursement for OPD treatment for certified complicated chronic disease on the prescription of government hospital/PGI taxable? If so, is the entire amount taxable or there is some exemption limit?

(b) Is such treatment taken from the government hospitals and private ones treated at part of tax liability or is there any difference among treatment prescribed by the two types of hospitals?

— Balbir Singh Batra

A. The replies to your queries are:

In accordance with the provisions of Section 17(2) of the Act, the amount of reimbursement would not be a perquisite and thus not includible in your salary in case the chronic diseases is that which has been prescribed by Rule 3A of the Income-tax Rules, 1962 (the Rules).

The prescribed diseases include cancer, ailment of heart, mental disorder drug addiction etc. It is a long list of ailments and it would not be possible to list out the same in view of paucity of space. In such cases the employee is required to attach with the return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and receipt for the amount paid to hospital so as to avail such exemption. The private hospitals are also covered for such exemption provided these are approved by the Chief Commissioner having regard to the prescribed guidelines. Such guidelines are also contained in Rule 3A of the Rules.

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