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Don’t curb capital inflows, IMF advises India
Washington, November 3
International Monetary Fund (IMF) has advised India against putting any restrictions on capital inflows in the face of appreciating rupee, saying any such move may undermine confidence of foreign investors on the Indian economy.

World Bank keen to up India funding
New Delhi, November 3
World Bank president Robert B. Zoellick gestures while addressing mediapersons in New Delhi The World Bank today expressed its keenness to increase lending to India in sectors like infrastructure, environment, agriculture and poverty alleviation.

World Bank president Robert B. Zoellick gestures while addressing mediapersons in New Delhi on Saturday. — Tribune photo by Manas Ranjan Bhui

MFs’ assets cross Rs 5-trillion mark
Mumbai, November 3
The continuing bull run in the stock markets has made mutual funds richer by close to Rs 80,000 crore, pushing their total asset size past Rs 5,00,000 crore for the first time in history.

Tatas frontrunner for Land Rover
London, November 3
Less than a year after acquiring Anglo-Dutch steelmaker Corus, Tata Group appears close to taking over the reins of Ford's British marques — Land Rover and Jaguar, for which it is believed to have submitted a detailed offer of more than $2 billion.

US subprime crisis claims 2nd victim
New York, November 3
Turmoil in subprime mortgages and credit markets has possibly claimed its second victim.

NTPC profit up 41.92 pc
New Delhi, November 3
NTPC Ltd, India’s largest power utility, has reported 11.54 per cent growth in net sales to Rs 16,975.67 crore for the half year as compared to Rs 15,218.87 crore in the corresponding period last year.


A man walks in front of the painting "Homme a la Pipe" by Spanish artist Pablo Picasso during a preview of Sotheby's fall sales of impressionist and modern art in New York
A man walks in front of the painting "Homme a la Pipe" by Spanish artist Pablo Picasso during a preview of Sotheby's fall sales of impressionist and modern art in New York on Friday. The painting has an estimated bid of $12 to $15 million. Sotheby's fall sales will offer to bidders 76 lots of impressionist and modern art, in New York on November 7-8. — AFP


EARLIER STORIES

 

Aviation Notes
Politics rules Indian skies

by K.R. Wadhwaney
Will Air India (AI) be free to buy super-jumbo Airbus Industrie's aircraft A-380 in immediate future? It is difficult to hazard any guess at this crucial point of time because in India aviation skies are not free from political manoeuvring.

Corporate Results
IOC net up 32 pc at Rs 3,817 cr

Mumbai, November 3
IndianOil Corporation (IOC) has posted a 32.39 per cent increase in net profit at Rs 3,817.75 crore for the quarter ended September 30 against Rs 2,883.59 crore for the corresponding period last year.

Investor Guidance
STT not applicable on gold ETFs
by A.N. Shanbhag
Q: Recently gold ETFs have hit the market. In this regard, I have bought and sold gold ETFs this year between April and October. Now, Goldbees is shown in Equities segment on the NSE. Also, my broker has deducted Securities Transaction Tax (STT) on sale amount.

 
Video
Local outgoing @ Re 1!
(56k)

 

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Don’t curb capital inflows, IMF advises India

Washington, November 3
International Monetary Fund (IMF) has advised India against putting any restrictions on capital inflows in the face of appreciating rupee, saying any such move may undermine confidence of foreign investors on the Indian economy.

"It has been said or asked or written that India should implement some limits to the capital inflows. The problem with this kind of thing is that it may undermine confidence on the Indian economy...It would certainly have influence on capital inflows but not always a good influence," IMF new managing director Dominique Strauss-Kahn told reporters.

"I think the Indian authorities should think over several times before implementing this kind of an instrument (policy to curb capital inflows)," said Strauss-Kahn, who took over as IMF chief on Thursday.

Capital markets regulator SEBI last month imposed certain restrictions on Participatory Notes, which are instruments used by unregistered foreign entities to invest in Indian equity markets. But the aim of that move was to bring transparency in the markets and not to control capital, SEBI chairman M Damodaran had said earlier this week.

Strauss-Kahn also stressed on the point of transparency.

"One point is the transparency and to try to enhance the transparency of those capital inflows... you might have some concern about the distinction between investment inflows and speculative inflows. That is a question of transparency," he said at a breakfast meeting.

Emphasising on positive points of capital inflows, the IMF managing director said: "The appreciation of rupee is driven by a lot of international capital flows to India and that is a good news. A lot of countries want to invest in India and a lot of companies want to have their back offices now...That reflects the way the Indian economy has grown during the last (few) years," he said.

Pointing out that the capital inflows have an unavoidable impact on the value of rupee, the IMF chief said "nevertheless it reflects the fundamentals and you don't want to do anything which in one way or another undermines this good look or appreciation or forecast of your national economy." "Because at the end of the day, in the long run, what happens to the Indian economy is a good thing, even if it is not always easy to deal with an appreciation of the currency," Strauss-Kahn said. 
— PTI

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World Bank keen to up India funding

New Delhi, November 3
The World Bank today expressed its keenness to increase lending to India in sectors like infrastructure, environment, agriculture and poverty alleviation.

"If government wants our support, I believe, we can scale up lending across various arms IBRD, International Development Assistance (IDA) and International Finance Corporation (IFC)," World Bank president Robert B Zoellick said after winding up his first visit to India as bank's chief.

Last year, the World Bank gave $3.7-billion assistance, while IFC extended $1 billion as debt and equity to private sector companies in the country.

The assistance from International Bank for Reconstruction Development (IBRD) would depend upon the government, he said, adding that "we will definitely scale up IFC lending".

As far as concessional assistance from IDA is concerned, he said "it would depend upon overall amount we get in IDA 15". Zoellick said he was going to persuade donors to be more generous in expanding the IDA corpus.

In the days ahead, the World Bank would focus on states, agriculture and clean energy in addition to infrastructure sector projects, he said.

Currently, the states account for about 60 per cent of the World Bank's portfolio in India, he said, adding that "increasingly more of our efforts will be devoted to the state level." — PTI

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MFs’ assets cross Rs 5-trillion mark

Mumbai, November 3
The continuing bull run in the stock markets has made mutual funds richer by close to Rs 80,000 crore, pushing their total asset size past Rs 5,00,000 crore for the first time in history.

Total assets under management (AUM) of the 32 fund houses in the country rose to a record high of Rs 5,56,729 crore at the end of October, according to the latest data available with Association of Mutual Funds in India.

This represents an increase of Rs 79,740 crore or about 17 per cent from Rs 4,76,990 crore a month ago. All 32 fund houses recorded an increase in their AUM last month.

In the past one year, the industry-wide total AUM has increased by about Rs 2,50,000 crore or about 45 per cent from Rs 3,07,376 crore at the end of October 2006.

Reliance Mutual Fund, part of Anil Ambani group company Reliance Capital, has retained its top position with AUM of Rs 79,974 crore, followed by ICICI Prudential at Rs 56,213 crore.

UTI MF remained at the third position with an AUM of Rs 51,753 crore, followed by HDFC MF (Rs 47,745 crore) and Franklin Templeton (Rs 32,041 crore) among the top five players.

Reliance MF gained Rs 9,533 crore, while ICICI Prudential's AUM rose by Rs 5,842 crore in October this year and UTI MF saw an increase of Rs 6,750 crore.

Analysts said that the sharp increase in the AUM was mostly driven by the inflow into the new as well as existing equity-focused schemes, while positions liquidated by the funds following a sharp rally on the bourses also contributed to the increase in assets. — PTI

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Tatas frontrunner for Land Rover

London, November 3
Less than a year after acquiring Anglo-Dutch steelmaker Corus, Tata Group appears close to taking over the reins of Ford's British marques — Land Rover and Jaguar, for which it is believed to have submitted a detailed offer of more than $2 billion.

The home-grown business conglomerate is understood to be leading the race for the two brands at close of second-round of bidding yesterday, media reports said here.

Other bidders include private equity firms One Equity Partners, the private-equity arm of American bank J P Morgan, and Ripplewood Holdings, The Telegraph reported.

Jac Nasser, the former chief executive of Ford, is spearheading the bid of One Equity. Six contenders were involved in the race before the latest round of bidding.

The sale of the two brands is expected to complete in two months. "We are moving on and within a maximum period of two months, it will be known which of the groups interested, will be the new owner of the two brands," Ford Europe president John Fleming told Spanish newspaper El Mundo in October.

Jaguar and Land Rover plants in the Midlands employ about 20,000 persons. — PTI

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US subprime crisis claims 2nd victim

New York, November 3
Turmoil in subprime mortgages and credit markets has possibly claimed its second victim.

Chairman and chief executive of financial giant Citigroup Charles Prince plans to resign at a board meeting on Sunday in face of fresh losses from distressed mortgage assets leading to a $5-billion write-down and sharp drop in profits, media reports said today.

The move would end the four-year tenure of Prince, a longtime lawyer and loyal lieutenant of former Citigroup head Sanford Weill, who assembled the financial giant that stands as America's largest bank by assets, the Wall Street Journal reported.

It would make Prince the second major chief executive in finance to leave his job in a week, following the ouster of Merrill Lynch's Stan O'Neal.

At Sunday's meeting, the New York Times said directors are also expected to formally accept his resignation and discuss the possibility of another write-off, just weeks after announcing large losses related to subprime mortgages and the credit market turmoil.

Prince moved before the board considered his fate. Noting that his tenure has been rocky, the Journal said he faced pressure to cut costs, and more recently, debt-market turmoil has taken a tremendous toll.

Citigroup's stock is down 31 per cent this year and almost 9 per cent in the last week. People familiar with the matter were quoted as saying that the Securities and Exchange Commission (SEC) is looking into the bank's accounting for its off-balance sheet investment funds that have recently attracted scrutiny. — PTI

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NTPC profit up 41.92 pc
Tribune News Service

New Delhi, November 3
NTPC Ltd, India’s largest power utility, has reported 11.54 per cent growth in net sales to Rs 16,975.67 crore for the half year as compared to Rs 15,218.87 crore in the corresponding period last year.

According to the unaudited results of the company, it registered a net sales of Rs 8,016.86 crore at the end of the second quarter of the current fiscal as compared to Rs 7,724.30 crore during the same quarter previous year.

Profit after tax has registered a growth of 41.92 per cent and the same is reported as Rs 4,295.42 crore for the six-month period ended September 2007 as compared to Rs 3,026.71 crore in the corresponding period last year.

Profit after tax for the second quarter is Rs 1,925.49 crore as compared to Rs 1,473.93 crore in the corresponding period last year, registering a growth of 30.64 per cent.

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Aviation Notes
Politics rules Indian skies
by K.R. Wadhwaney

Will Air India (AI) be free to buy super-jumbo Airbus Industrie's aircraft A-380 in immediate future? It is difficult to hazard any guess at this crucial point of time because in India aviation skies are not free from political manoeuvring.

AI is not a purely commercial outfit, as most renowned airlines worldwide are. AI's chairman and managing director V. Thulasidas's range of powers is limited. He is free to recommend. Thus, far and no further. When he recommends, his proposal is subjected to scrutiny at various levels.

The national carrier’s spokesman has made a very cautious reaction. He has gone on record as saying: “We have a team working on our future requirements after future projections are made. Thereafter, the proposal will go to the board for approval and will then be sent to the government for approval.”

This is not all. But the CMD's recommendation has to be evaluated at many levels from one committee to another before politicians reveal their minds.

Judging from previous shopping of aircraft, two leading manufacturers got into one-to-one match. The race was won by one super power, which had a greater arm-twisting leverage. The similar situation obtains now. The proposal between European manufacturer and AI may continue to remain on drawing-board.

AI has already placed orders with Boeing. It has also been sanctioned a loan from the US Exim bank of $1.2 billion to fund the purchase of 17 aircraft. In addition, there is preliminary agreement under which the bank has agreed to fund the balance 51 aircraft. Many other concessions have been offered to the National Aviation Company.

The aviation history reveals three phases of Air India: The first under JRD Tata saw healthy growth and AI was one of the most talked-about carriers. The middle period was unstable and the present era is uncertain as, aviation analysts predict, that the merger will not be meaningful. The aviation analysts further emphasise that there is subtle agenda behind this merger, which will provide further incentives to private operators. Two private operators are almost flying as high as the national carrier.

This is the most crucial time for the Manmohan Singh government to wake up from its deep slumber. It should allow AI to function commercially and professionally without even wee bit interference from politicians. Its CMD and his team should be empowered to choose any aircraft that they deem fit for the airline.

Air India has experienced officials, who can make the airline as competently as several other profitable airlines, like Singapore and Lufthansa.

If the government does not act decisively in the functioning of Air India, it will plunge into further trouble. Maybe, with the passage of uncertainty obtaining in the corridors of the aviation, private operators will be main functionaries and Air India subsidiary.

If this ever happens, it will be the darkest hour for the national carrier, which between 1940 and 1960 was one of the pioneers in the world of aviation.

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Corporate Results
IOC net up 32 pc at Rs 3,817 cr

Mumbai, November 3
IndianOil Corporation (IOC) has posted a 32.39 per cent increase in net profit at Rs 3,817.75 crore for the quarter ended September 30 against Rs 2,883.59 crore for the corresponding period last year.

Total income of the company increased by 1.8 per cent to Rs 58,457.23 crore for the quarter compared to Rs 57,418.49 crore for the same period last year.

The company also declared a final dividend of Rs 13 per share and an interim dividend of Rs 6 per share for the year ended March 31.

Tata Elxsi

Tata Elxsi Ltd has posted a decline of 23.54 per cent in net profit at Rs 9.09 crore for the quarter ended September 30, as compared to Rs 11.89 crore for the reviewed quarter last fiscal.

The total income rose by 34.91 per cent to Rs 101.35 crore for the quarter ended September 30, against Rs 75.13 crore for the same quarter a year-ago.

Crompton Greaves

Crompton Greaves has posted a 82.46 per cent increase in net profit at Rs 74.19 crore for the quarter ended September 30 as compared to Rs 40.66 crore previous year.

The standalone total income rose to Rs 1,011.03 crore for the reviewed quarter as against Rs 907.4 crore for the same period a year ago, up by 11.42 per cent.

Ceat net up 6-fold

Ceat Ltd has reported over six-fold jump in net profit for the quarter ended September 30 at Rs 25.5 crore compared to Rs 3.83 crore for the same period last year. — Agencies

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Investor Guidance
STT not applicable on gold ETFs
by A.N. Shanbhag

Q: Recently gold ETFs have hit the market. In this regard, I have bought and sold gold ETFs this year between April and October. Now, Goldbees is shown in Equities segment on the NSE. Also, my broker has deducted Securities Transaction Tax (STT) on sale amount. My question is can I treat it as shortterm capital gain and pay 10 per cent tax and if I hold for more than one year can it be tax-free.

— Shefali

A: Gold ETF is a unique product where though it is listed on the exchange, it is not an equity-oriented fund. So, by law, it is not subject to STT and STT shouldnt have been deducted upon sale.

In any case, coming to taxation, since it is not an equity fund, LTCG would be subject to 10 per cent tax and STCG would be at the slab rates applicable to you.

Gift to relative

Q: My son who is doing engineering and is 19 years old has requested that I should give him some money (approximately Rs. 1-1.5 lakh), which he wants to independently invest in IPOs/share market. I want to know, if he makes any sort of capital gains and he does not have any other taxable income, will this gain will be added to my income or that will be his income only.

— Minal Shah

A: Any gift of money between relatives is totally tax-free. As per the IT Act, a father is a relative of his son and hence any sum gifted by you to your son is tax-free for the both of you. Now, since he is 19 years old, he is a major and hence his income will be independently taxed in his hands and not added to your income.

Inheritance tax

Q: I am an US citizen and have taken OCI in India. As an OCI, is there anything that I am not allowed to inherit? Is there any inheritance tax? If I sell an inherited property, can I transfer the sale proceeds back to the US?

— Sukrut

A: There is no asset that cannot be inherited as such. Also, as of now, inheritance tax isn’t applicable in India. However, tax laws are known to change and it would be prudent, if possible, to get ownership of the assets directly now rather than inherit them later on. Also, sale proceeds of inherited property can be remitted abroad up to a limit of $ 1 million per financial year (April-March). Note that this would relate to net sale proceeds after payment of capital gain taxes applicable. To put it differently, there is no tax incidence whatsoever upon inheritance. However, as and when you sell the inherited asset, capital gains tax will be payable. Your cost of acquisition would be deemed to be the cost which the original owner (the person who left you the inheritance) paid to acquire the asset.

Money transfer

Q: Can you please guide me on the following:

My cousin, born and brought up in India has been residing at UK since last 10 years. He has money lying in his Provident fund/savings bank account. He wants to get the amount converted and transferred to his a/c abroad. Can this be done and is there any limit on transfer? What would be the formalities?

— Shreenath

A: Master Circular /0402006-07 dt 1.7.06 makes it possible for an NRI or a PIO to remit as much as $ 1 million per calendar year for bona fide purposes out of the sale proceeds of assets held in NRO accounts. He should have acquired the assets in question, out of rupee resources when he was in India or by way of legacy/inheritance from a person who was a resident in India.

The following funds/ assets are eligible for remittance:

a) Sale proceeds of immovable property.

b) Assets acquired by way of inheritance/legacy.

c) Deposit with a bank or a firm or a company.

d) Provident fund balance or superannuation benefits.

e) Amount of claim or maturity proceeds of insurance policy.

f) Sale proceeds of shares and securities.

g) Any other asset held in India, in accordance with the FEMA.

The remittance can be effected only when it is sought for all bonafide purposes to the satisfaction of the AD. An undertaking by the remitter and certificate by a Chartered Accountant in the format prescribed by CBDT vide their Circular 10/2002 dt 9.10.02 has to be produced.

It is necessary to file Form-A2, FEMA Declaration, Certificate from an accountant, and undertaking for payment of income tax, in the specified format. A No-Objection-Certificate from the income tax department will be useful, but not necessary.

Tax on compensation

Q: When the part of the building is forcibly taken by Municipality for road widening or by any other authority for any purpose, more often than not, it is found that the other part of the building needs repairs. The compensation received is not enough to make the remaining part of the building rehabitable. Does the assessee have to pay any capital gain tax?

— Viraj

A: Under such cases, the assessee may take the cost of repairs less the compensation received for compulsory acquisition as additional capital invested in the remnant property. There would be no tax liability at the current juncture but as and when it is sold or transferred, the original cost with its acquisition date and the new capital invested with its date will be taken into consideration for the purpose of computing capital gains.

Normally, when the acquisition is in toto, it attracts the provisions of capital gains as if the owner himself has sold the property. The only difference is that because the authorities take their own sweet time to settle the compensation, as per Sec. 54H the tax is payable for the year during which you receive the compensation.

We strongly feel that in this case, the assessee should be allowed to rework the cost of the remnant property without any tax liability when the property was acquired by damaging part of it.

The authors may be contacted at wonderlandconsultants@yahoo.com

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