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B U S I N E S S

Telecom Licence
Letters of Intent may come with Rs 1,650-cr fee rider
New Delhi, October 21
Finding it difficult to scrutinise a sea of applications for telecom licences, the government is contemplating to issue Letters of Intent to all applicants and ask them to pay a fee of about Rs 1,650 crore (for pan-India operations) but without giving any time-frame for spectrum.

The fee clause would not only help in scrutinising the applications but also help in keeping non-serious players out of fray.

Posco prefers shifting to bloodbath
Bhubaneswar, October 21
South Korean steel major Posco, whose plans for the Rs 52,000-crore mega plant in Orissa have run into rough weather following anti-project activists taking its officials hostages on October 13, today said it would rather shift the location than invite a bloodbath.



EARLIER STORIES

 
Logan is seen in this file photo. Mahindra & Mahindra's (M&M) entry-level sedan, Logan, which hit the Indian roads some six months back, may not have set its sales register soaring exactly, but it has been named among the 16 best cars not sold in the US by a leading US magazine. In the list of “The Best Cars Not Sold in America”, compiled by BusinessWeek in its latest edition, Logan is the only Indian car, along side 15 others being sold in the non-American markets.
Logan is seen in this file photo. Mahindra & Mahindra's (M&M) entry-level sedan, Logan, which hit the Indian roads some six months back, may not have set its sales register soaring exactly, but it has been named among the 16 best cars not sold in the US by a leading US magazine. In the list of “The Best Cars Not Sold in America”, compiled by BusinessWeek in its latest edition, Logan is the only Indian car, along side 15 others being sold in the non-American markets.

Gramtells may dot rural post offices
New Delhi, October 21
In order to take economic development and technology to large masses, the government is contemplating to install especially designed gramtells (rural ATMs) at post offices.

Another EPFO meeting soon
New Delhi, October 21
Under pressure from trade unions demanding hike in interest rates on provident fund (PF), the employees provident fund board (EPF) will hold its meeting soon to fix the interest rates for 2007-08.

Tax Advice
Husband can’t sell off istridhan without wife’s consent
Q. I sold my gold/silver ornaments one and half years back and proceeds fetched me about 4 lakh. No receipts were obtained since shopkeepers hesitate to issue. This was done to consider some business and marry my child. My husband is a retired officer with no pension.

Market Scan
FII pullout may shield from CRR hike

Last week, after starting on a firm note, the market lost ground later as the Securities & Exchange Board of India (Sebi) draft norms on restriction of FII inflow sent shivers on the street. Volatility was high in the tree trading sessions after Sebi issued the draft proposals after trading hours on Tuesday.


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Telecom Licence
Letters of Intent may come with Rs 1,650-cr fee rider

New Delhi, October 21
Finding it difficult to scrutinise a sea of applications for telecom licences, the government is contemplating to issue Letters of Intent to all applicants and ask them to pay a fee of about Rs 1,650 crore (for pan-India operations) but without giving any time-frame for spectrum.

This would not only help in scrutinising the applications but would also help in keeping non-serious players out of fray, sources said.

They, however, said that a final decision in this regard would be taken soon. Telecom Commission has met several times to deal with the situation and has forwarded comments to Telecom Minister A. Raja for finalising the policy.

The Department of Telecom (DoT) has received over 570 applications from companies, including AT&T, Ispat Industries promoters Mittal brothers, Hindujas, HFCL, Shyam Telecom and a host of reality players such as DLF, Parsvnath and Unitech.

The last week's decision of DoT to grant permission for using dual technology--CDMA and GSM-- for mobile services has irked the existing players, with Cellular Operators Association of India (COAI) likely to challenge the decision in sectoral tribunal TDSAT. On top of it if LoIs were issued by the DoT, the decision may hurt existing players.

COAI, when contacted, however, declined to comment on it.

The association has also opposed DoT's decision to accept telecom regulator TRAIs recommendation of enhanced subscriber- linked criterion for spectrum allocation as with this most of the existing players would not be eligible for additional spectrum.

Within hours of DoT's decision on twin technology, Anil Ambani-led Reliance Communications had paid Rs 1,651 crore to DoT and also applied for spectrum simultaneously with Wireless Planning Coordination (WPC) wing of the department.

According to analysts, RCom would be the main beneficiary of DoT's decision as the company had desired to enter GSM telephony segment long ago along with its nationwide CDMA- based cellular services.

Although spectrum availability is uncertain as DoT and Ministry of Defence are holding discussions on ways to vacate the frequency to accommodate new players, RCom will get priority over others waiting for it for almost two years.

When contacted RCom spokesperson said the company would soon launch nationwide GSM operations. — PTI

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Posco prefers shifting to bloodbath

Bhubaneswar, October 21
South Korean steel major Posco, whose plans for the Rs 52,000-crore mega plant in Orissa have run into rough weather following anti-project activists taking its officials hostages on October 13, today said it would rather shift the location than invite a bloodbath.

Posco chief executive officer Ku-taek Lee had earlier announced April 1 as the date for beginning of construction of the 12 mtpa greenfield steel plant.

Posco spokesman Sashank Patnaik, quoting the decision of the board of directors, said the company would prefer to shift to some other place than invite a “bloodbath” in setting up the Rs 52,000-crore project, the country’s largest FDI.

The statement followed CPI general secretary A.B. Bardhan’s letter to Prime Minister Manmohan Singh in which he apprehended a “bloodbath” if the Orissa government took “repressive measures” in acquiring land for Posco.

“Posco had come here to do business and not for creating social disturbance,” the spokesperson said.

Though the MoU for the project was signed on June 22, 2005, the company has been facing stiff opposition from the local people.

The villagers, under the banner of the Posco Pratirodh Sangram Samiti, on October 13 had kidnapped and subsequently released four officials of the company, including three South Koreans. — PTI

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Gramtells may dot rural post offices

New Delhi, October 21
In order to take economic development and technology to large masses, the government is contemplating to install especially designed gramtells (rural ATMs) at post offices.

The suggestion formed part of the recommendations of the Steering Committee on micro finance and poverty alleviation, which is being considered by the Planing Commission for incorporation in the Eleventh Plan (2007-12).

Gramtellers are rural ATM machines developed by the Indian Institute of Technology (IIT), Chennai. They operate by using smart cards and fingerprints in place of conventional personal identification numbers and magnetic cards.

“The post office network in the country should be used to deliver banking services, especially in the rural areas,” the committee suggested.

They should further be encouraged to work as business facilitators and banking correspondents in accordance with the RBI guidelines, it said.

The common service centres, developed by the Information Technology Department to take electronic services to villages, may also be linked to the post offices to synergise the technology to handle financial products, the committee proposed.

It recommended that multi-purpose, unique ID-based smart card system should also be utilised for effective delivery of micro-credit.

The committee also suggested evolving a standardised and simplified bookkeeping procedure for all forms of micro finance organisations that would help in accurate and timely disclosures of financial statements and annual reports.

The Nabard, Small Industries Development Bank of India and the rural development ministry are working on evolving such a mechanism, which would also understand the health of micro finance organisations.

The committee has suggested to perceive micro insurance as a key service in financial needs package for people in relation with savings and credit that would keep the vulnerable sections away from poverty trap. — PTI

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Another EPFO meeting soon
Tribune News Service

New Delhi, October 21
Under pressure from trade unions demanding hike in interest rates on provident fund (PF), the employees provident fund board (EPF) will hold its meeting soon to fix the interest rates for 2007-08.

Holding of the meeting early becomes imminent as the government last week notified the interest rates for 2006-07 after the Cabinet had approved to fix it at 8.5 per cent.

This came as a disappointment for the trade unions, which had been demanding that the government should hike the rate by at least one per cent to fix it at 9.5 per cent, considering the upward trend in banking interest rates.

The board is likely to convene the meeting next month, chief provident fund commissioner A Vishwanathan said.

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Tax Advice
Husband can’t sell off istridhan without wife’s consent
by S.C. Vasudeva

Q. I sold my gold/silver ornaments one and half years back and proceeds fetched me about 4 lakh. No receipts were obtained since shopkeepers hesitate to issue. This was done to consider some business and marry my child. My husband is a retired officer with no pension. He had not shown this in his IT return. I also did not know if it is my income since I traded my gold ornaments for some cash. That is all. Have I to file my own IT return now retrospectively with any penalty? I am given to understand that Indian women are legally allowed their istridhan up to certain quantity. Can you specifically quote legal provisions to bail me out now? My husband has not shown in his return since it was not his property, being my own istridhan? Any fall out for my husband? Please elaborate your expert advice quoting provisions and judicial citations so that women folk understand their liabilities etc.

— Paramjeet Kaur

A. On the basis of the facts in the query it seems the gold/silver ornaments belonged to you and did not belong to your husband. If that be so, no liability can come upon your husband. If the jewellery held by you was more than three years old, the gain arising on sale would be a long-term capital gain.

The reply to your query is based on the presumption that the jewellery was more than three-year old. Such long-term capital gain arising on the sale of gold/silver ornaments is taxable. However, such gain would be taxable only if the same exceeds the maximum amount up to which no tax is payable by an assessee. Further, the capital gain will have to be computed by deducting the indexed cost of such gold/silver ornaments from the sale price. The cost price would be indexed with reference to the notified index for the year of acquisition of such jewellery to the year of sale. The net amount would be the capital gain. In case such ornaments were held by you prior to April 1, 1981, the fair market value as on April 1, 1981, will have to be ascertained.

Such fair market value would be indexed with reference to the notified index to arrive at the indexed fair value for the year of sale. The balance amount, if any, would be taxable if it exceeds the maximum amount up to which tax is not chargeable in your case. Since you sold the ornaments one and a half year back, the sale should have taken place somewhere in the early 2006. The maximum amount up to which tax was not payable by women below the age of 65 years as applicable to financial year 2005-2006 was Rs.1,35,000. In case you had no other income and the capital gain is more than the said amount, such gain would have been taxable for the assessment year 2006-2007@ 20 per cent plus applicable education cess @ 2 per cent.

Istridhan is a Hindu married women’s property and she is the absolute owner thereof. Even the husband has no right to use the same to the detriment of his wife without her consent. If the husband does not return the same, the wife can lodge a complaint under Indian Penal Code (Pratibha Rani vs. Suraj Kumar) (155 ITR 190) (S.C.). The concept of istridhan is an accepted position under Hindu law as well as under the tax laws. There is a circular of the CBDT, which provides that ornaments weighting up to 500 gram should not be seized at the time of raids in case of ladies. I am not aware of any other circular about which a reference has been made by you. I hope the reply would meet your requirements.

LIC policy for son-in-law

Q. As per the version- as mentioned on newspaper - “the male and female child are equal in all aspect social as well as legal aspect” says Ministry of Women and Child Welfare.

Income tax law allows income tax rebate of a person paying LIC instalment out of his taxable income on the behalf of children and wife. Does income-tax law allow rebate of income tax if one pays LIC instalment on the behalf of his son-in-law and daughter -in-law.

Kindly clarify, if instalment is paid for daughter’s husband and son’s wife entitled for rebate under Section 80C.

— Govind Ram Gupta

A. Section 80C of the Act provides for the deduction of any amount paid to effect or keep in force the insurance on the life of individual himself, his wife or husband or/and any child or such individual subject, however, to certain limits. The payment made for taking an insurance policy in the name of your daughter would be allowed as deduction under Section 80C of the Act. However, no such deduction is permissible if the policy is taken in the name of daughter’s husband or son’s wife.

VRS and gratuity

Q. I took VRS from bank under the exit option scheme in April, 2006. I have been paid ex gratia of Rs 6,20,000 for 25 and a half months period service i.e. 50 per cent of the remaining service period of 4 years 3 months.

Please advise how ex gratia amount rebate can be claimed. Can it be claimed by bifurcating amount in the coming assessment years, since this amount has been paid (for coming years service) as salary in advance and not in arrears for 25 ½ months claims or for 4 years 3 months period claim?

Whether amount of Rs.5,00,000 rebate under Section 10(10C) be claimed because it is laid down in the policy.

Since the scheme does not comply with Rule 10(10C) of the Income-tax Act, 1961, no exemption of IT of ex gratia from income tax is intended in the scheme, there is no legal requirement for obtaining prior approval of the IT department.

— Rajender Gupta, Ludhiana

A. The maximum exemption allowable under Section 10(10C) of the Act is Rs 5 lakh. The aforesaid exemption is allowable in case the scheme governing the payment is in accordance with the guidelines, which have been prescribed by the IT Rules, 1962. The exemption in respect of gratuity and the provident fund is covered separately under the sections dealing with such exemptions. In case the scheme does not comply with the provisions of Section 10(10C) of the Act, the amount received as ex-gratia would become taxable even if it is in the nature of advance salary because the salary received in advance is also taxable in the year of receipt under section 15 of the Act. You should, however, be entitled to a relief under Section 89 of the Act in respect of the salary received in advance.

Section 139

Q. I am a senior citizen above 65 years of age. My total income is given below for F.Y. 2006-07 and A.Y. 2007-08:

1. Annual pension Rs 95,604

2. Interest income Rs 1,54,303

3. Amount invested in

PPF and NSC u/s 80C Rs 82,963

4. Agriculture income Rs 42,000

Kindly compute my total tax payable for the A.Y. 2007-08.

— Raghubir Singh, Chandigarh

A. Your total income on the basis of figures given in the query works out at Rs 1,66,944. This being below the amount on which tax is not chargeable in case of senior citizens, no tax would be payable by you. I may add that you are liable to file the return of income in view of a newly introduced proviso to Section 139 of the IT Act, 1961 (the Act).

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Market Scan
FII pullout may shield from CRR hike
by Lalit Batra

Last week, after starting on a firm note, the market lost ground later as the Securities & Exchange Board of India (Sebi) draft norms on restriction of FII inflow sent shivers on the street. Volatility was high in the tree trading sesssions after Sebi issued the draft proposals after trading hours on Tuesday.

The 30-share BSE Sensex lost 859 points to 17,559 in the week ending Friday, October 19. The Nifty lost 3.9 per cent to 5,215 in the week.

The FIIs selling hit the bourses, last week, following Sebi’s proposals to clamp down FII inflow through the participatory notes (PN) route. After trading hours on Tuesday, Sebi issued draft proposals wherein the market regulator restriction on the use of popular participatory notes (PNs) route of FII inflow and it also recommended unwinding of some PNs within 18 months. PNs are financial instruments used by foreign investors that are not registered with Sebi to invest in Indian shares. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with these securities as underlying.

We reckon that with the restriction on participatory notes, the near term FII inflow may be affected given that the participatory notes contributed substantially to FII inflows on the bourses over the past few months and it will take some time for the FIIs currently using the PN route to get registered with the market regulator.

We believe that long-term fundamentals of the Indian economy have not changed overnight and remain strong, no restrictions have been put in place to control the inflows from the registered FIIs. Thus, investors could use such opportunity to invest in the market with a long-term view as in the near to medium term the volatility is likely to remain high. If the move does control the huge influx of foreign money (as fresh issuance of PNs would be limited), then the RBI may not intervene in the foreign exchange market to support the rupee and domestic liquidity would not increase. This would also reduce the odds of another hike in the cash reserve ratio. Hence, all is not negative and we need to see how this event unfolds in the next four days once the proposed guidelines become a regulation.

Power Grid

The stock of Power Grid Corporation of India (PGCIL), which owns and operates most of India’s interstate and inter-regional electric power transmission system, had an electrifying debut when it got listed on the bourses in the first week of October. The issue which was priced at Rs 52 got listed at a premium of over 83 per cent and ended its first day just above the three figure mark.

The company in 2007 transmitted approximately 298 billion units of electricity, representing approximately 45 per cent of all power generated in India. With the government’s plan of adding near 80,000 MW of power generation capacity during the Eleventh Five Year Plan and the necessity of achieving a national power grid with inter-regional power transfer capacity of more than 37,000 MW, we believe that PGCIL, being the nodal agency, will benefit tremendously. Since it is the only power transmission company listed on the bourses, the demand from FIIs will keep the stock going in the long run.

Risk averse investors looking for steady growth may buy this stock on declines as the market corrects itself in the coming weeks.

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