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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS

B U S I N E S S

Panel to work out roadmap for Saarc development fund
New Delhi, September 15
A working group of the South Asian Association for Regional Cooperation (Saarc) will meet later this month to identify more concrete ways to check terror funding in the region.

10 suitors for IFCI stake
New Delhi, September 15
As many as 10 domestic and foreign financial institutions and consortia have evinced interest in picking up 26 per cent stake in IFCI, the expressions of interest for which were opened today.

Coal buying policy set to change
Kolkata, September 15
Coal India Ltd (CIL) would incorporate changes in its procurement policy from October to bring about transparency and avoid delay in global procurement.

Explore rural areas, minister tells Milkfed
Chandigarh, September 15
The Punjab Cooperation Minister, Capt Kanwaljit Singh, today emphasised on the systematic and aggressive procurement of milk and marketing of Verka products in accordance with the emerging market trends to make rapid strides in the growing field of fresh milk supply and other dairy products.

Dappar to handle global freight
Dappar (Dera Bassi), September 15
Now, hundreds of export-oriented units in the industrial hubs of Nalagarh, Baddi, Kala Amb, Yamunanagar, Dera Bassi and Chandigarh can dispatch international consignments from container freight station here.

Aviation Notes
Emiric Air seeks nod to be regional player
by K.R. Wadhwaney
The civil aviation ministry, in principle, has agreed to Pawan Hans’ proposal for independent heliport.

Investor Guidance
Long-term gain tax-free on equity-based MFs
by A.N. Shanbhag
Q: Under which section income (long term and short term) from mutual funds is free from tax? Does dividend option save tax in short term.

This image released by the Sotheby’s auction house shows The Guennol Lioness, a Mesopotamian sculpture dated 3,000 BC, which will go on the auction on December 5 in New York.
This image released by the Sotheby’s auction house shows The Guennol Lioness, a Mesopotamian sculpture dated 3,000 BC, which will go on the auction on December 5 in New York. The white limestone sculpture from ancient Mesopotamia, measuring just over 8 cm, is expected to fetch up to $18 million. — AFP photo


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Panel to work out roadmap for Saarc
development fund

Tribune News Service

New Delhi, September 15
A working group of the South Asian Association for Regional Cooperation (Saarc) will meet later this month to identify more concrete ways to check terror funding in the region.

“The working group of the eight-nation regional grouping would meet on September 24 or 26 to suggest more concrete ways to counter terror funding,” secretary (financial sector) in the ministry of finance Vinod Rai told newspersons here today.

The decision to this effect was taken at the meeting of the Saarc finance secretaries yesterday and was approved in today’s finance ministers meeting.

In today’s meeting, the finance ministers of the region deliberated mainly on early operationalisation of Saarc Development Fund (SDF), harmonisation of financial norms between member states, institutional cooperation for development of capital markets in the region and South Asian Customs Union.

Addressing a press conference on today’s deliberation, finance minister P. Chidambaram said the inter-governmental expert group on financial issues has been mandated to develop the roadmap for the SDF, South Asian Economic Union and South Asian Customs Union in a gradual and phased manner.

Replying to a question, he said the finance ministers of the regional grouping did not discuss the issue of terror funding today.

In today’s meeting, the member states agreed for early operationalisation of SDF, which they felt would accelerate the implementation of sub-regional projects identified under its social window.

“As much as $300 million have come to the proposed fund, which will have three windows names maternal and child health; women’s empowerment; and capacity building for enhancing the quality of education for project implementation,” Chidambaram said.

“The meeting recommended that the sub-group on investment and arbitration be directed to finalise the agreement and submit it for the approval of the next session of the Standing Committee which will meet in December 2007,” he said.

In order to facilitate institutional cooperation aimed at development of capital markets in the region, the meeting recommended harmonisation of securities market regulations; facilitation of cross-border transaction on the capital side; and formal agreements among regulators and ministries of finance of Saarc countries.

“The meeting recommended the establishment of an expert group on development of capital markets in South Asia,” the finance minister said.

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10 suitors for IFCI stake

New Delhi, September 15
As many as 10 domestic and foreign financial institutions and consortia have evinced interest in picking up 26 per cent stake in IFCI, the expressions of interest for which were opened today.

Out of 10 suitors, seven are standalone, including domestic financial institution IDFC, Kotak Mahindra Bank, GE Capital, Cargill, French banking company Nataxis, US-based private equity fund manager Blackstone and Newbridge, an IFCI official said.

Interested parties also include three consortia, including one between WL Ross, Standard Chartered Bank, Goldman Sachs and HDFC, and another between Punjab National Bank with Shinsei Bank of Japan and US-based investor JC Flowers, he said.

Besides, Morgan Stanley is in consortium with Sertlite Industries has also evinced interest in the picking up stake in the financial institution.

As on March 31, 2007, Morgan Stanley and Goldman Sachs had 2.5 per cent and 3.3 per cent stake respectively in IFCI.

The company will evaluate EoIs (expression of interests) and announce shortlisted investors on September 25.

Request For Proposal (RFP) would be floated by October 1.

Ernst & Young (E&Y) had been appointed by IFCI as consultant to find a strategic partner for reviving the financial institution.

A few years back, efforts were made to revive IFCI by merging it with PNB but attempts fell through as the bank's management later realised the company did not fit into its portfolio. — PTI

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Coal buying policy set to change

Kolkata, September 15
Coal India Ltd (CIL) would incorporate changes in its procurement policy from October to bring about transparency and avoid delay in global procurement.

"We are introducing Integrity Pact (IP) in our procurement and contracting system above a limit and it will be implemented with immediate effect. We are also going for rating of vendors as another step," CIL chairman Partha S Bhattacharya said here today at the meeting with vendors on IP.

The company has signed an MoU with Tranperency International to implement IP on procurement of equipment and services.

CIL spends around Rs 10,000 crore annually on contracts and procurements.

Integrity pact is a tool devised by Transparency International worldwide to fight corruption in public contracting. A vendor would not be allowed to participate in a tender if he did not sign the Integrity Pact. — PTI

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Explore rural areas, minister tells Milkfed
Tribune News Service

Chandigarh, September 15
The Punjab Cooperation Minister, Capt Kanwaljit Singh, today emphasised on the systematic and aggressive procurement of milk and marketing of Verka products in accordance with the emerging market trends to make rapid strides in the growing field of fresh milk supply and other dairy products.

He was presiding over a one-day workshop based on "future strategic plan for milk and milk products marketing in Punjab" organised by the Punjab Milkfed here at Kisan Bhavan.

While directing Milkfed authorities to set up a professionally managed marketing agency, the minister said Milkfed has the dual advantage of running its day-to-day affairs, both in cooperative as well as in corporate mode and asked them to go for hybrid technology as well as management to bring new synergy in functioning.

The minister set a new agenda for Milkfed to explore opportunities in the rural sector also and lamented that it was still confined to the urban populace while 70 per cent of the population in the state was living in villages.

When a bottle of soft drink was available even in the remotest village then why the Milkfed was lagging behind in pumping their popular products like sweetened milk, lassi and raseela mango there despite having a well established network of milk collection societies, he questioned.

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Dappar to handle global freight
Tribune News Service

Dappar (Dera Bassi), September 15
Now, hundreds of export-oriented units in the industrial hubs of Nalagarh, Baddi, Kala Amb, Yamunanagar, Dera Bassi and Chandigarh can dispatch international consignments from container freight station here.

This has become possible after the Container Corporation of India, running the freight station, got customs clearance. International consignments, instead of being sent to Ludhiana can be directly sent to any of the international ports, thus cutting on the costs and time.

Facilities like customs clearance and shipping line will now be available at the station, T.P. Singh, terminal manager at the station, said.

The first consignment of 40 containers was flagged off from the freight station by the officials of the Punjab State Warehousing Corporation to the Jawahar Lal Port, Mumbai, today. The domestic traffic at the freight station was started last year.

The freight station, built at a cost of about Rs 6 crore, can handle loading or unloading of 90 containers at a time.

The Container Corporation of India has tied with the Punjab Warehousing Corporation, which runs a dry port across the road.

Entrepreneurs in the area believe since the dry port was across the road, the cost of carriage and additional risk of road accidents were major deterrents.

The National Highways Authority of India (NHAI) was being approached for giving a direct access corridor between the dry port and the container siding.

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Aviation Notes
Emiric Air seeks nod to be regional player
by K.R. Wadhwaney

The civil aviation ministry, in principle, has agreed to Pawan Hans’ proposal for independent heliport.

The first preference is Delhi. The site is near Akshardham temple (eastern bank of Yamuna). The land required is about 40 acres for terminal building, hangars, runway and separate arrival and departure lounges.

If the Delhi Development Authority (DDA), for some reason, is unable to grant land to Pawan Hans, the heliport will be constructed at Greater Noida, where availability of land is not a problem.

Delhi will be an ideal centre for heliport because it is a hub for politicians and corporates.

Once heliport is raised in Delhi, Pawan Hans will endeavour to construct similar infrastructures at important cities like Mumbai, Kolkata, Chennai, Bangalore.

General aviation will be the gainer if heliports are built at different centres.

Emiric Air — a Kerala-based company — has written to the ministry and directorate-general of civil aviation to start a regional airline in south.

There is not much traffic in that region and regional carrier will be widely accepted.

The same may not be possible in Delhi or Mumbai as these airports are already over-crowded in sky and on ground.

No-frills carriers are already facing financial problems. They are making heavy losses.

There is a possibility of some folding up or being merged with big players, who are spreading their wings.

Maybe, these no-frills airlines may decide to wear the tag of regional carriers.

Commuting from airport to city and back during the peak hours in Mumbai is a nightmare. Many corporates have failed to reach the venue for meetings on time.

Aware of this serious predicament, the GVK-based Chhatrapati Shivaji International Airport has planned to have a hotel on the top of the new terminal building.

The proposal has been well-received by the authorities and corporates.

“The hotel and office complex will help busy corporates honour their commitments without any hazard,” say analysts.

Some corporates have suggested that a mini golf course may be developed around the hotel terminal building.

“If it is not possible, maybe, a putting area is developed on the roof-top. According to these corporates, this facility does not exist in some hotels abroad. Will Delhi be able to draw a leaf out of the Mumbai private construction company? It is not difficult,” according to Delhi International Airport Limited (DIAL) officials, adding: “All we need is permission and land.”

The construction work at these two international airports has, however, been progressing satisfactorily, despite unforeseen bottlenecks. Officials claim that they will be able to complete their projects on schedule.

Regular flyers are upset on demand for paying more for ‘aisle window’ seats. “This is sheer nonsense,” say three regular commuters.

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Investor Guidance
Long-term gain tax-free on equity-based MFs
by A.N. Shanbhag

Q: Under which section income (long term and short term) from mutual funds is free from tax? Does dividend option save tax in short term.
— Syyead

A: For equity-based MF schemes, long-term gain is free from tax u/s 10(38). Short-term gain is exigible to tax @10 per cent u/s 111(A).

For debt-based schemes, normal rules apply. In other words, short-term gains are treated as normal income of the assessee and taxed at the rates applicable to the assessee.

Under Section 112, long-term gains will attract tax @10.3 per cent without indexation or @20.6 per cent with indexation, whichever is more beneficial to the assessee.

It is true that the dividends are tax-free in the hands of the investors but the MF has to pay dividend distribution tax to the exchequer before distributing the dividend to the investors. Fortunately, u/s 115R(2) no DDT is to be levied on equity-based funds, open-ended or close-ended.

Salary and Form 16

Q: I am working in a proprietorship concern as a manager and my salary is credited in bank as commission.

My incentive is also credited in the same bank as incentive. Both, my salary and incentive put together totals Rs 10,000.

I want to file my returns from 2006-07 but when I showed my salary, the auditor asked for Form 16, which my office does not issue.

What should I do? Should I then declare my income as commission and file returns as business or as income from salary?

I want to go for a housing loan. Kindly help me in this regard.
— Raghav

A: It seems that you are not a salaried employee i.e. you are not on the rolls of the company. The monthly amount that accrues to you as you yourself have pointed out is in the nature of commission and the same has to be included under the head “profits and gains from business or profession”.

Since this amount is not salary, the proprietorship concern will not issue Form 16 to you. However, if your income has suffered any TDS, they will issue you Form 16A detailing the TDS deducted on your behalf.

Canadian by birth

Q: I went to Canada along with my wife for one year. My son was born in Canada on May 26, 2006. So he is a Canadian by birth and also holds a Canadian passport. We came back to India on July 29, 2006. We have taken PIO card for my son for visa free entry. I already have a PPF account with the SBI. I want to know if I can open a PPF account in the SBI for my son, who is PIO cardholder.
— Rohit

A: In my opinion, yes, you can open a PPF account for your son, as he becomes a tax resident in India as per the IT Act. He no longer remains an NRI as per the Income Tax Act. The term PIO is FEMA defined and the Income Tax Act does not recognise the same.

Tax on dividend

Q: I will be grateful, if you clarify one position in respect of dividend distribution tax. The investor is a company in SEZ and has received dividend from investment in mutual funds net of DDT.

The company is of the view that since it is situated in SEZ and enjoys tax exemption, it should not bear the DDT and the mutual fund shall refund the DDT deducted from the dividend paid to it. Is the company’s stand tenable?
— Jadhav

A: DDT is applicable to all investors alike, whether situated in SEZ or otherwise. Another example of a similar tax applicable to companies that are otherwise exempted from paying tax is FBT. Of course, one cannot compare DDT and FBT. It is only the concept that though a company may not be otherwise paying tax, yet certain taxes are nevertheless applicable.

Secondly, DDT essentially is a tax paid by the mutual fund and not the investor. In fact, the dividend, which is the real income stream is exempted for all investors. Now it is the mutual fund that pays the dividend net of DDT. However, technically, it is the mutual fund that is liable to pay the DDT. So the company’s view is not tenable in my opinion.

Bonds and gains

Q: I recently sold a residential property in Mumbai after holding it for over three years. I intend to purchase a new housing property for much more than the sale value within two years of this sale.

However I have a query. I sold this property in May 2007 (FY 07-08). Going by your opinion, if I do not purchase property by July 31, 2008, then I will be required to park funds in capital gains deposit account of a public sector bank. My query is:

Till July 31, 2008, (the date of filing FY07-08 returns), can I use the funds as I like (say FD, FMP, MF etc) or do I have to put it in REC bonds within six months of May 2007 (date of sale of property)?
— Narendra Sohani

A: The bond investment and the property investment to save cap gains tax are mutually exclusive of each other. That is to say that to save the tax either you would invest in the bonds or in property. Of course if the capital gain amount is high, you may invest partly in bonds and the rest in property.

You have to invest the capital gains in REC bonds within six months from the date of transfer. The REC bond investment is locked in for three years.

But in your case, yes, you can pretty much do what you like with the amount till July 31, 2008.

The authors may be contacted at wonderlandconsultants@yahoo.com

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