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Commerce Ministry proposes, FinMin disposes
Bad news for exporters on state tax refund plan

New Delhi, October 14
Exporters' hopes of getting refund of state taxes, along with the existing reimbursement of central levies, may get dashed with the revenue department rejecting a proposal by commerce ministry in this regard which is aimed at giving additional benefits to the rupee-hit exporters community.

Re advantage lost, says Mittal
Appreciation of the rupee has led to loss of comparative advantage for exporters and has also put pressure on margins through cheaper imports, while high interest rate has impacted domestic sales, particularly consumer durables, CII president Sunil Mittal said here today.

Arun Sarin Punters bet on Sarin’s exit, Vodafone denies
London, October 14
Vodafone chief Arun Sarin may have pulled off the biggest deal in India, but he does not seem to be the poster boy for the company’s investors as the telecom major’s scrip moved North in the wake of rumours of his exit from the company, according to British media.




 
Two pocket watches are on display at Christie's in New York for sale onTuesday. A gold-plated openface keyless lever watch with alarm and musical automaton on the left is estimated between $2,000 and $3,000 while the 18K gold and enamel watch on the right is expected to cost between $3,000 and $4,000.
Two pocket watches are on display at Christie's in New York for sale onTuesday. A gold-plated openface keyless lever watch with alarm and musical automaton on the left is estimated between $2,000 and $3,000 while the 18K gold and enamel watch on the right is expected to cost between $3,000 and $4,000. — AFP photo

Petro exports to touch $497 b by 2012: Study
New Delhi, October 14
Despite crude prices touching an all-time high, India is likely to become a net exporter of petroleum products worth $497.01 billion by fiscal 2012-13 in wake of their exports growing at a much faster pace than imports, an Assocham eco pulse study said.

Screening of Applications
DoT may seek help from other ministries 
New Delhi, October 14
With over 35 companies’ license applications waiting to be screened, the Department of Telecom (DoT) is open to seek help from other ministries to track down the actual promoters of these companies along with shareholding pattern and source of funding.

Difference of opinion
Sharp difference are believed to have emerged in the DoT over TRAI’s proposal to change existing subscriber-linked criteria for allocating additional spectrum, with communication minister A Raja in favour while the telecom commission opposing it.

Tax Advice
Tax relief on donation to political party
by S.C. Vasudeva
Q. I am a senior citizen aged 73 years. Following income will accrue to me in 2006-07 (assessment year 2007-08)


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Commerce Ministry proposes, FinMin disposes
Bad news for exporters on state tax refund plan

New Delhi, October 14
Exporters' hopes of getting refund of state taxes, along with the existing reimbursement of central levies, may get dashed with the revenue department rejecting a proposal by commerce ministry in this regard which is aimed at giving additional benefits to the rupee-hit exporters community.

The commerce ministry had last month circulated a draft Cabinet note with a proposal to merge the popular Duty Entitlement Pass Book (DEPB) scheme with the drawback system and to rebate the state taxes to exporters.

"The ministry of finance does not support the proposal for reimbursement of state taxes by the central government on grounds that the proposal seeking neutralisation of such taxes is a complete departure from the existing policy and practice," the revenue department conveyed to the commerce ministry.

The finance ministry said while it agreed to rebating of central indirect taxes - customs duty, excise duty, service tax on inputs, special additional duty and education cess - through the drawback scheme, the burden of reimbursement of state taxes should not fall on the central government.

Such neutralisation of taxes would encourage states to devise more levies that would be loaded on to the Centre. It said if this is done, may lead to "opening up a Pandora's box".

It said while the states had agreed to refund VAT for exporters, they would put pressure on the Centre to get reimbursement for the same.

The revenue department said that receipts foregone under the existing export promotion schemes were over Rs 61,000 crore a year. In the face of extreme fiscal pressure, the finance ministry would find it "very difficult to support a new scheme which entails additional revenue implications".

Revenue targets have already been stretched to the extreme limit in the Budget, it said.

Besides, the proposal to refund state taxes to exporters was not in consonance with the recommendations of the 12th Finance Commission relating to sharing of revenue between the Centre and the states, it argued. — PTI 

Re advantage lost, says Mittal
Tribune News Service

Appreciation of the rupee has led to loss of comparative advantage for exporters and has also put pressure on margins through cheaper imports, while high interest rate has impacted domestic sales, particularly consumer durables, CII president Sunil Mittal said here today.

He stated that the rupee has appreciated by 11.8 per cent in the last one year and the currencies of competing countries in the international export markets had appreciated at a much lower rate and in some countries their respective currency has depreciated.

Countries, that are competitors to Indian exports in textiles, apparels and leather, have a comparative advantage on the local currency front vis-à-vis the US dollar as their respective currencies have appreciated at a lower rate than the rupee.

Chinese yuan has appreciated by 3.6 per cent, Pakistani rupee by 0.3 per cent, Bangladeshi taka by 3.2 per cent and the Sri Lankan rupee by 4.6 per cent, thus making Indian exports in this vital sector dearer since January 2007, said the CII president.

Similarly, in case of steel, countries that are competitors to Indian exports such as China, South Korea and Thailand, have a comparative advantage when compared to India due to lower rates of appreciation of their respective currencies.

In the case of chemicals and petro-chemicals too, China, South Korea and Thailand enjoy an edge over Indian exports in the international markets due to the high differential rates of appreciation.

The CII president expressed concern that IT and ITES sectors are at a significantly disadvantageous position when compared to competing countries such as Philippines (8.8 per cent appreciation) and their earning and exports realisation has also had an impact on their bottom line.

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Punters bet on Sarin’s exit, Vodafone denies

London, October 14
Vodafone chief Arun Sarin may have pulled off the biggest deal in India, but he does not seem to be the poster boy for the company’s investors as the telecom major’s scrip moved North in the wake of rumours of his exit from the company, according to British media.

“It was a good day for shareholders of telecom giant Vodafone but a bad one for chief executive Arun Sarin. The stock rose 8.5 pence to 179.5 pence on the back of market rumours that Sarin, whose strategy has been criticised in some quarters, might have decided to resign,” said The Telegraph in one of its market analysis reports on October 12.

The paper, however, said that the company had “dismissed the speculation saying that it was wide of the mark.” Shares of Vodafone on FTSE 100, the benchmark index of the London Stock Exchange, grew to 179.5 pence on October 11 from 171 pence the previous day. It remained flat on Friday.

The market movement on speculation about his future in the company, followed Sarin’s visit earlier in the week to India where he met Finance Minister P Chidambaram amidst reports about the $1.7 billion tax row that his group company Vodafone Essar is having with Indian authorities.

He was on the verge of losing the top job for the amount of investment made by Vodafone in 2005 to acquire Turkey’s Telsim at $4.5 billion. Last year, a group of Vodafone shareholders protested about underperfoming shares and the perceived lack of ability by Sarin to cope with the challenges facing the company.

Meanwhile, Vodafone today attributed an 8.5 per cent rise in its share price to positive projections made by its European rival Telefonica, while scoffing at reports that stocks soared because its CEO Arun Sarin was leaving.

“I cannot comment on the existence of any rumours, but no one is taking the suggestion that Sarin has resigned seriously, because it is totally incorrect,” a Vodafone spokesperson said. — PTI

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Petro exports to touch $497 b by 2012: Study
Tribune News Service

New Delhi, October 14
Despite crude prices touching an all-time high, India is likely to become a net exporter of petroleum products worth $497.01 billion by fiscal 2012-13 in wake of their exports growing at a much faster pace than imports, an Assocham eco pulse study said.

As per its projections, imports of petroleum products in value terms would be to a range of $429.45 billion in the next five years.

The Assocham study on ‘Petroleum trade’ for financial year 1999-2000 to 2006-07 has found that petroleum products exported by India have been growing at 73 per cent for last three years.

The study analysed that if the same growth trend continues, value of oil exports will surpass its imports in the next six years. In fact, the trend for current fiscal shows that imports grew by 11.4 per cent, while exports went up by 89 per cent in April.

Assocham president Venugopal N. Dhoot said: “Petroleum exports were valued at $0.03 billion in the financial year 1999-2000, which increased to $18.53 billion in 2006-07, growing at the compound annual rate of 96.5 per cent. Imports on the other hand, increased from $12.6 billion in the financial year 1999-2000 to $57 billion in 2006-07 recording a CAGR of 32.7 per cent.”

Even as the energy requirements of the Indian economy are rapidly increasing, capacity expansion of the refineries, both at public and private level, would help maintain the growth momentum of the exports of petroleum products, he added. 

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Screening of Applications
DoT may seek help from other ministries 

New Delhi, October 14
With over 35 companies’ license applications waiting to be screened, the Department of Telecom (DoT) is open to seek help from other ministries to track down the actual promoters of these companies along with shareholding pattern and source of funding.

“The processing of these applications will start very soon. Once it starts and during the scrutinisation, it is felt that the actual ownership, shareholding patterns and source of funding are prima facie doubtful and beyond our normal investigation, we will certainly take help of other ministries,” official sources said.

Cellular Operators Association of India (COAI) had written to the DoT that some of the applicants may be acting as proxies for existing operators to circumvent the norms.

Although officials did not specify which ministry (ies) could be of help in this regard, they said it was the ministry of corporate affairs, which checks into the ownership and funding issues after being referred by another ministry.

The FIPB wing of the ministry of finance can check the veracity of only those applications, which have a foreign equity component.

The queue of licenses is headed by Switzerland-based ByCell, which has applied for licenses in five circles in January 2006, followed by Spice for 20 circles (August 2006), after which come Swan Telecom, Cheetah and HFCL. Both Swan and Cheetah have been linked to Reliance Communications, AT&T and host of real estate companies.

There is an internal committee of the DoT looking into the applications, which would adopt a two-stage screening process.

Initial indications from the preliminary meetings of the committee say that spectrum might not come along with the licenses for these new applicants and the DoT may continue with the current first-come-first serve policy, where existing players would stand to get radio waves first to start operations. — PTI 

Difference of opinion

Sharp difference are believed to have emerged in the DoT over TRAI’s proposal to change existing subscriber-linked criteria for allocating additional spectrum, with communication minister A Raja in favour while the telecom commission opposing it.

According to sources, telecom commission, headed by telecom secretary, has taken a final view on TRAI’s recommendations with regard to spectrum allocation, number of players in each circle and other issues.

TRAI had suggested nearly five-fold increase in subscribers base to become eligible for additional spectrum.

If the regulator’s proposal is accepted, none of the existing mobile operators, be it Airtel, Vodafone-Essar or others, would be eligible for additional spectrum.

Cellular Operators Association of India (COAI) has already rejected TRAI’s suggestions and termed them as erroneous and legally untenable. 

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Tax Advice
Tax relief on donation to political party
by S.C. Vasudeva

Q. I am a senior citizen aged 73 years. Following income will accrue to me in 2006-07 (assessment year 2007-08)

1. Annual Pension Rs 1,25,000

2. Bank and PO deposits interest Rs 2,00,000

3. Agricultural Rs 2,00,000

4. Purchased NSC during 2005-06 Rs 1,00,000

5. Purchased NSC in 2006-07 Rs 1,00,000

6. Donation to Pingal-wara during 2006-07 Rs 5,000

7. Donation to a national political party during 2006-07 Rs 10,000

TDS deducted Rs 15,175

—Harbans Singh Brar

A. Your total income on the basis of figures given in the query works out at Rs 4,32,380. After giving rebate for the agricultural income and considering that the donation to political party is covered under Section 80GGC of the Act for the purposes of 100 per cent deduction, tax payable, including education cess would work out at Rs 14,498. You would, thus, be entitled to a refund to Rs 677 after adjusting the tax deducted at source.

Accrual basis

Q. I retired from HPGC (bifurcated from erstwhile HSEB) in June 2005. I am filing my Income Tax return regularly as per prevailing system by taking all emoluments of salary, along with interest on NSCs and bank savings from March to February as the salary/pension of February paid in March and March paid in April.

Presently, I am taking my pension and interest income from March to February in my income tax return due to the following reasons.

1. The SBI credited monthly pension in my bank savings account on the last date of every month to which it pertains and can only be withdrawn on 1st or thereafter on any date of the following month of its credit as per bank rules.

2. The banks credited the interest of bank saving accounts half yearly in January and July. The interest of January and February is taken as accrued interest.

3. Interest on NSCs is taken for each completed year as per rate applicable on accrual basis.

4. The post office pays quarterly interest of my SCSS account on the 1st of the following months and after end of each quarter.

5. The SBI credited the interest of my SCSS account quarterly on the last date of each quarter in my bank saving account. But I never withdrew it on the dates of its credit even on March 31 and thereafter too.

6. I intend to open a FD account of 400 days in a nationalised bank from July 7, 2007, after premature closure of my SCSS account from post office. The bank will credit the interest quarterly in the FD account after TDS deduction on the last date of each quarter and on maturity. The quarterly TDS certificate will be issued by bank after its deposit in SBI in the last week of following months.

In view of the above, please clarify my following points, so that I may be careful to file a correct Income Tax Return.

(i) Whether I should continue as I am taking the period from March to February in respect of item No 1 to 5 above. Or there is required any change in any item.

(ii) Whether in respect of Item No. 6 above, the interest will be considered from July to March on accrual basis and from March to June, from Item No. 4 above on cash basis with refund of TDS for March 2008 relevant to the year 2007-08. Or can the period be extended for 13 months i.e. from March to March next year. If I do not claim the refund of TDS for March 2008 for 2007-08, so that the period can be taken as from April to March from the next year i.e. from 2008-09.

— A.N. Gupta, Karnal

A. On the basis of the facts given in the query, it seems you are declaring pension and interest income from banks and post office on cash basis i.e. declaration is being made as and when the amounts are credited to your bank account. However, as per facts in the query, the interest on the NSCs is being taken on accrual basis. The hybrid system of declaring the income is not in accordance with the provisions of Section 145 of the IT Act, 1961, (the Act).

You have the choice of continuing with the present method of declaring income but the income from interest on NSCs should also be declared on the basis of actual receipt of interest. However, I would advise you to follow accrual basis and, therefore, file return in respect of the income due for April to March.

The interest on FD for 400 days should also be declared on accrual basis. The claim for tax deduction at source can be made on the basis of certificates issued by the bank and there should be no difficulty in claiming the credit for tax deducted at source. For example, if you have deposited the amount on June 10, 2007, the credit of interest and deduction of tax would synchronise with the three quarters covered for the purpose of return (September; 2007, December; 2007 and March 2008). The credit for such tax deducted at source can be claimed in the return for the assessment year 2008-09 (financial year ending March 31 2008).

Section 80C

Q. Savings up to Rs 1 lakh should compulsory be made from the “taxable income” earned during the financial year or from the “past years savings”. Kindly advise quoting instructions/guidelines/ amendment so as to convince the department.

— Harnam Singh, Chandigarh

A. The deduction allowable under Section 80C of the Act is limited to Rs 1 lakh. The section does not make a reference to the word “income chargeable to tax”. Accordingly, even if the investment/deposit in specified heads is made out of the past savings, a deduction under Section 80C of the Act would be allowable. 

ITR-2 to disclose MF dividends

Q. I am a Punjab Govt. pensioner. I have income from pension and bank interest and am in the range of income tax. In addition to it, I have some income from dividends of mutual funds, which is exempt from income tax. Kindly advise me whether Form ITR - 1 is applicable in my case to submit the return or some other form?

It is also mentioned that I have already submitted return through Form ITR - 1. In case some other form was required what is the procedure of replacing the previous form with the other before the due date and afterwards?

— V.S. Sakhuja, Amritsar

A. In your case the applicable form is ITR-2 and, therefore, you should file your return in Form ITR-2 so as to disclose the dividends from mutual funds. You can file a revise return in ITR-2 disclosing dividends from mutual funds. The earlier return will automatically get cancelled. 

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