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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Fleet may help AI regain lost elan, hopes PM
New Delhi, July 28
With private airlines pushing Air India and Indian to the backs
eat, Prime Minister Manmohan Singh today asked the national carriers to ensure world-class services as they start inducting new generation aircraft
The scene at the launch of the new fleet of Air India in New Delhi on Saturday.
The scene at the launch of the new fleet of Air India in New Delhi on Saturday. — Tribune photo by Mukesh Aggarwal
to face the growing competition.

ITC abandons West Bengal plans
Kolkata, July 28
ITC’s Rs 15,000-crore industrial proposals in West Bengal have been abandoned for the non-availability of land, ITC chairman Y.C. Deveshwar declared.
ITC chairman Y.C. Deveshwar addresses a press conference in Kolkata
ITC chairman Y.C. Deveshwar addresses a press conference in Kolkata. —  Reuters photo

Renault, Bajaj synergy builds up
New Delhi, July 28
French car maker Renault and India’s two wheeler major Bajaj Auto today said they were in talks for exploring joint business opportunities, but did not mention whether it pertained to making a $3,000 car.

News Analysis
Sensex may not
go below 15,000
Stock markets are known to give nasty shocks when everything seems going smooth. More so in this globalised world. Investors have not only to keep watch on local economy and corporate profits, but also scan the larger world for signs of trouble, especially in the US, Europe and Asia.
Last Thursday and Friday saw the US indices plunge 5 to 6 per cent. Since all major economies’ health depends on American well-being, any sneeze there is bound to cause cold in much of the world.
Last Thursday and Friday saw the US indices plunge 5 to 6 per cent. Since all major economies’ health depends on American well-being, any sneeze there is bound to cause cold in much of the world.

Nita Ambani, wife of Mukesh Ambani, visits a new Reliance Fresh store in Ahmedabad.
Nita Ambani, wife of Mukesh Ambani, visits a new Reliance Fresh store in Ahmedabad. Country’s most valued firm Reliance Industries Ltd on Saturday posted a 28.15 per cent increase in net profit at Rs 3,264 crore for the first quarter as compared to Rs 2,547 crore for the same period last year amidst saying that it expects new ventures like organised retailing to deliver higher returns to shareholders. — PTI photo

EARLIER STORIES

 

Aviation Notes 
Licenced aspiring pilots await medical nod

Cumbersome procedures, government’s lopsided policy of permitting IAF doctors to undertake commercial pilots’ medical examination and ‘corrupt practices’ are some of the vital causes for hurting the production line of pilots in country.

Investor Guidance
Personal car is not capital asset

Q: I am an NRI. I have purchased a car in India. Is my car a capital asset? Do I have to pay any capital gains tax when I sell my used car?


Video
Mittal confident of Orissa unit mining lease.
(56k)

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Fleet may help AI regain lost elan, hopes PM

New Delhi, July 28
With private airlines pushing Air India and Indian to the backseat, Prime Minister Manmohan Singh today asked the national carriers to ensure world-class services as they start inducting new generation aircraft to face the growing competition.

"I want you to focus your attention on that. Our airports, our airlines and all related systems must be world class and must make every customer and client feel cared for," he said at a function here to mark the launch of the new Air India fleet.

Singh said the government had taken decisive steps in a short period of one year for placing the largest procurement order of 111 aircraft for both Indian and Air India.

"This has been by far the largest procurement of aircraft by any airline in the country," he said, hoping that with these acquisitions, the national carriers would be better placed to take on competition at home and abroad, and regain their "lost elan."

He said the national carriers have so far been unable to take advantage of the opening of skies, primarily due to the shortage of aircraft.

"The opening up of the skies has created new market opportunities for civil aviation business in India. However, our national carriers were unable to take full advantage of the opportunities at hand for a variety of reasons," he said.

Earlier, Civil Aviation Minister Praful Patel sought Prime Minister's support for acquiring new aircraft for the national carriers, over and above the 111 planes, which would mainly replace the existing fleet.

At the function, which was also attended by Agriculture Minister Sharad Pawar and Deputy Chairman of Planning Commission Montek Singh Ahluwalia, Patel said the merged entity would require many more aircraft, even after the 111 planes were inducted."If we have to look ahead for growth, we will have to revisit the entire fleet requirement. I will urge the government and the Prime Minister to look into this aspect," he said.

Talking to reporters, Patel said his ministry would soon submit a proposal to the Planning Commission for sanction of new aircraft to meet the needs of state-owned carriers after 2011.

Air India Chairman and Managing Director V. Thulasidas said the proposal to the Planning Commission would indicate a requirement of about 60 planes of all sizes depending on the demands of different segments. Earlier, the Prime Minister launched the new fleet of Air India that included long-haul Boeing 777-200, which will run non-stop on Mumbai-New York and Delhi-New York sector. The new fleet also comprised two freighter aircraft to meet the growing cargo requirements. — PTI

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ITC abandons West Bengal plans
Subhrangshu Gupta
Tribune News Service

Kolkata, July 28
ITC’s Rs 15,000-crore industrial proposals in West Bengal have been abandoned for the non-availability of land, ITC chairman Y.C. Deveshwar declared.

Talking to mediapersons in the city, Deveshwar alleged that the required land could not be acquired for the ITC to set up hotels in Kolkata and Siliguri and they could not wait further. They have now decided to shift the ITC hotel proposals to UP, Gujarat and elsewhere.

Deveshwar said they were planning to invest about Rs 15,000 crore in West Bengal during the next few years on several industrial schemes, for which at least 1,000 acres of land was needed.

But in the wake of bad experience in obtaining about 100 acres for hotels, they would now be abandoning all new industrial proposals in the state.

“After all, industries cannot be built in the air,” ITC chairman remarked, reminding Chief Minister Buddhadeb Bhattacharjee’s industrial lessons to Mamata Banerjee and others, who were agitating against the government’s land acquiring policy for the industries.

Deveshwar alleged that ITC officials moved from door to door at Writers Buildings with their new industrial proposals, but in vain. The proposals were rejected on one pretext or the other.

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Renault, Bajaj synergy builds up

New Delhi, July 28
French car maker Renault and India’s two wheeler major Bajaj Auto today said they were in talks for exploring joint business opportunities, but did not mention whether it pertained to making a $3,000 car.

“Bajaj Auto and Renault are in preliminary deliberations to jointly understand customer requirements and business potential for competitive vehicles in India,” the two companies said in a joint statement.

The statement, however, did not clarify whether the talks were for Renault’s proposed $3,000-car or for other light commercial vehicle ventures that Bajaj is working on at the moment.

“If concluded favourably, this could lead to a long-term partnership between Renault and Bajaj for the development of the business so conceived,” the statement added.

Over the past few weeks, there have been speculations that Bajaj had become the partner of choice in India for Renault’s $3,000-car project after its existing partner M& M reportedly showed disinterest.

Sources said if things go as planned, the two companies would jointly look at taking their products global. — PTI

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News Analysis
Sensex may not go below 15,000
Nirmal Sandhu

Stock markets are known to give nasty shocks when everything seems going smooth. More so in this globalised world. Investors have not only to keep watch on local economy and corporate profits, but also scan the larger world for signs of trouble, especially in the US, Europe and Asia.

Last Thursday and Friday saw the US indices – Dow Jones, S & P’s 500 and Nasdaq – plunge 5 to 6 per cent. Since all major economies’ health depends on American well-being, any sneeze there is bound to cause cold in much of the world.

The Indian markets ignored America’s dark Thursday and rose as FIIs continued their brisk buying, pushing the BSE Sensex to 15,776. Realisation dawned on Friday, but few perhaps had expected a 542-point crash.

Now all nervously wait for the Monday opening. There are bears and there are bulls. Some react with panic and exit, while others see an opportunity for smart buys.

Given the sound fundamentals of the economy, strong corporate earnings and huge amounts waiting for investment, the Sensex is unlikely to go below the 15,000 mark. FIIs have made net purchases of shares worth $10 billions this year so far. They had invested $8 billion in equities in the whole of last year.

If the market avoids a crash on Monday, Tuesday will see the focus shift to the RBI. If the key rates remain unchanged, the rally could resume. And if the rates are lowered, which few expect, the Sensex could zoom.

There is absolutely no possibility of the RBI further tightening the rates unless Dr Reddy has plans to shock the world around him. Inflation is at a comfort level. No one can say the economy is overheating at this juncture.

Greed often makes investors blind to telltale signs of trouble. The crisis in the US housing market has been in the making for the past one year. Latest data indicated the number of unsold houses in the US was at the highest since 1992.

Properties have been sub-mortgaged to people with poor credit histories. There are fears of bankruptcies. The Federal Reserve, the US equivalent to the RBI, estimates possible losses at $50-100 billion.

There were some bankruptcies of sub-prime lenders in February and March, but traders took the problem lightly and the rally in stock markets resumed. If fears prove true now, there would be a severe credit crunch.

Builders and finance companies could suffer heavy losses. This could raise the cost of financing globally. The dollar could weaken further. This would help some, hurt others. Investing companies that suffer losses in one country, usually book profit elsewhere, thus triggering a selling spree.

There are positive signs too. The US regulators do not call it a systemic crisis. It is felt the credit market is undergoing a healthy correction. Besides, there are reports of better-than-expected 3.4 per cent quarterly growth in the US economy. The US corporate earnings are on the rise. The oil-rich Gulf states and booming Asian economies will keep up the flow of enough cash.

The right verdict perhaps is: fear has replaced the mood of optimism in the US and European credit markets, but there need not be any overreaction or panic in this part of the world.

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Aviation Notes 
Licenced aspiring pilots await medical nod
by K.R. Wadhwaney

Cumbersome procedures, government’s lopsided policy of permitting IAF doctors to undertake commercial pilots’ medical examination and ‘corrupt practices’ are some of the vital causes for hurting the production line of pilots in country.

According to few frank and forthright pilots-to-be, the ministry, the Directorate-General of Civil Aviation (DGCA) and the IAF authorities have messed up the flow of commercial pilots.

Hundreds of aspirants have spent a lot of money in securing four stipulated licences to earn the right of flying on commercial airliners.

The four licences are: student pilot licence, private pilot licence, commercial pilot licence and airline transport pilot licence.

A majority of these aspirants have had training in the country and some, who can afford, were trained in the USA and other countries, where training time is lesser than India.

But many of them, with licences in their pockets, are in a limbo as they have been left waiting for months to achieve the required medical certificate before they can undertake commercial flying. “This is frustrating,” say three aspiring pilots, adding: “Why should assessment at the DGCA and medical test take so long?”

For those, who are seeking commercial licence, there are only two centres — Central Medical Establishment (CME) at Delhi and School of Aviation Medicines, Bangalore. Recently, third centre at Tejpur has been established.

The number, seeking commercial licence, has increased from almost five to 60-65 a day. Doctors specialising in the Aviation Medicines Specialists Course are much less in number.

As a result, the waiting period has increased from nearly three months to six.

Owing to inordinate delay in securing medical certificates, allegations of nepotism, favouritism and bribery have surfaced.

The skies have opened. Many foreign airlines are planning operations in India. But sadly, modernisation and upgradation of airports and time-consuming system pertaining to pilots’ medical examination have been the causes of concern.

In foreign countries, like the USA, Canada, Britain, Germany and France, civilian doctors undertake examination of pilots. There are no complaints against civil doctors. Why cannot the government authorise well-known government and private hospitals to organise fitness tests of pilots seeking to fly commercial airlines?

Such a step may reduce paucity of pilots to a great extent. 

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Investor Guidance
Personal car is not capital asset
by A.N. Shanbhag

Q: I am an NRI. I have purchased a car in India. Is my car a capital asset? Do I have to pay any capital gains tax when I sell my used car?

— Mukesh

A: Capital asset, as defined by Sec. 2(14) of ITA does not include items held for personal use such as furniture, air-conditioners, refrigerators, cars etc. Therefore, a car used for personal purpose (depreciation is not charged), is not a capital asset. When it is sold, no capital gains, either short-term or long-term can arise. The profit cannot be brought to income tax.

‘Capital asset’ for the purpose of wealth tax, as defined by Sec. 2 of WTA is diametrically opposite the definition by ITA. Motor cars, other than those used in business of letting them out on hire, are chargeable to wealth tax. It is needless to observe that when you reinvest the sales proceeds of the car in productive assets, there is no wealth tax payable thereon.

It is obvious that all returning NRIs will do well by bringing their cars with them.

PAN and tax

Q: I have some investments in mutual funds and have received communications from them regarding the fact that I have to submit my PAN number. I have not applied for PAN so far as my income is below the taxable limit. Now, if I apply for PAN, will I have to file my tax return, in spite of the fact that my income is not taxable? This is indeed unfair. What is the remedy in this situation?

— Nitish

A: There are many persons like you who are under the impression that getting a PAN means having to compulsorily file a tax return.

This is a misconception. Though a taxpayer needs to have a PAN to file the tax return, the reverse is not true. Filing a tax return is obligatory, if and only if one earns an income above the basic exemption limits. For FY 06-07, these are Rs 1 lakh, Rs. 1.35 lakh and Rs. 1.85 lakh for men, ladies and senior citizens respectively. So, if your income is lesser, irrespective of whether you have been allotted a PAN or not, you need not file a tax return.

Lower perk tax

Q: In the recent Budget, the perk value on employer provided accommodation has been lowered to 15 per cent from 20. This has been done retrospectively, i.e. applicable from FY 05-06 onwards. However, my return for that year is already filed. Now, how can I get the benefit of this reduction?

— Bhambhardekar

A: You can do so by filing a revised return. You can file such a return till March 31, 2008. However, eligibility of the lower perk tax is not yet free from doubt. Some experts are of the view that the same is available only if there is a concession given in the matter of rent. In other words, if you have been paying a concessional rent to the employer for the accommodation, then and only then will you be eligible for the lower rate. However, if it is a rent-free accommodation, then the original rate of 20 per cent as specified by Rule 3 continues to apply. However, some other experts feel that Rule 3 has since become redundant and it is a matter of oversight that it hasn’t yet been omitted. You should consult your tax advisor before taking any step in this regard.

ITR2 for home loan

Q: I am a salaried person. My only other income is some bank interest. I was under the impression that I will need to file income tax form ITR-1. However, since I have taken a housing loan, I am being advised by my CA to submit my return through ITR-2. I am not convinced since I don’t have any rental income or any capital gain etc. What should I do in this regard?

— Matta

A: If you have taken a housing loan, on account of the interest deduction, you will have a negative income from house property. But since house property income (albeit negative) comes in the picture, you are being correctly advised to file ITR-2 by your CA. If you do not intend to take the housing loan deduction into account, then of course you are free to use ITR-1. However, the loss from house property on account of the interest payment can be set-off against your salary income or the interest income thereby lowering your tax liability. Hence, it would be very much in your interest to use ITR-2 instead of ITR-1.

NRI son’s gift

Q: I am in the US on a H1-B visa. Over time I have saved some money from my salary here and I intend to transfer a part of such savings to my parents account in India. This money will be used by them for their day to day purpose. Will I or my parents have to pay any tax on this?

— Nikhil

A: In essence, you will be gifting your parents the funds. There is no tax on gifts from relatives and you qualify to be a relative of your parents as per the Income Tax Act. Hence neither you nor your parents will be taxed on such a transfer.

The authors may be contacted at wonderlandconsultants@yahoo.com

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