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THE TRIBUNE SPECIALS
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TERCENTENARY CELEBRATIONS

B U S I N E S S

RIL offloads 4.01 per cent stake in RPL
New Delhi, November 24
Mukesh Ambani-promoted Reliance Industries Limited (RIL) today said it has divested 4.01 per cent of its stake in Reliance Petroleum Limited (RPL) for Rs 4,023 crore.

Govt committed to help tea industry: Nath
Guwahati, November 24
The Government of India is considering to share the social commitments of the tea industry to allow it to survive the global competition by cutting down on production cost.

Tata Motors rolls out 1 millionth car
Pune, November 24
Country's largest automobile maker Tata Motors today rolled out its one millionth passenger car off the Indica platform from its facility at Pune.

Spectrum Row
DoT panel to meet operators sans
BSNL, MTNL 

New Delhi, November 24
State run telecom companies — BSNL and MTNL — have been excluded from the panel to review spectrum allocation norms recommended by the Telecom Engineering Centre (TEC).

Reliance MF tie-up
New Delhi, November 24
Anil Ambani group firm Reliance Mutual Fund today said it has entered into an agreement with the United Bank of India and State Bank of Saurashtra for distribution of its products.


EARLIER STORIES

 

Mobile phones encrusted with diamond designs sit on display at one of Europe's most exclusive and trend-setting lifestyle trade fairs, the Moscow Millionaire Fair 2007, in Moscow on Friday. The fair hosts the top names of the international luxury goods industry.
Mobile phones encrusted with diamond designs sit on display at one of Europe's most exclusive and trend-setting lifestyle trade fairs, the Moscow Millionaire Fair 2007, in Moscow on Friday. The fair hosts the top names of the international luxury goods industry. — AFP photograph 

Power Grid, REL in pact for JV
Mumbai, November 24
State-run Power Grid Corporation of India Ltd (PGCIL) today said it has entered into an agreement with Anil Ambani group firm Reliance Energy Ltd to set up a joint venture firm for executing transmission projects.

Aviation Notes
Unprecedented delays hit Air India’s clientele

Since merging of Indian into Air India (AI), there is hardly a day when the national carrier has not earned a negative publicity. The quantum of scathing criticism and loss of work culture have dipped to such abysmal level that many patriotic regular flyers have reluctantly decided to change their loyalty from national carrier to private airlines.

Investor Guidance
Double tax avoidance treaty exists with US
Q : I am a US citizen but married to an Indian woman. I currently teach at an American school. What is my tax situation? My tax adviser in the USA says I should not have to pay Indian taxes because I am a US citizen and therefore, liable to pay US taxes and the US and India have joint treaty. Others, in my situation at work, say I should have two years tax free, but after that will have to pay. Any advice would be appreciated. — Frank

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RIL offloads 4.01 per cent stake in RPL

New Delhi, November 24
Mukesh Ambani-promoted Reliance Industries Limited (RIL) today said it has divested 4.01 per cent of its stake in Reliance Petroleum Limited (RPL) for Rs 4,023 crore.

The company said in a statement it has sold Rs 18.04 crore equity shares out of its holding of 75 per cent in RPL.

The sale of RPL shares was conducted by transactions through the stock exchanges and has helped to further broadbase the shareholding pattern of RPL, it added without specifying to whom its shares were sold.

After this sale, the shareholding of RIL in RPL is down to 70.99 per cent, 
it added.

RPL made an offering in May 2006 for 20 per cent of its' equity represented by 90 crore shares. This offering was the most successful IPO until then with overall demand exceeding $32 billion.

The number of shareholders of RPL has increased from 12 lakh shareholders at the time of IPO to 16 lakh.

Reliance Industries is India's largest private sector company with turnover of Rs 1,18,354 crore and net profit of Rs 11,943 crore as of March 31, 2007. — PTI 

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Govt committed to help tea industry: Nath
Tribune News Service

Guwahati, November 24
The Government of India is considering to share the social commitments of the tea industry to allow it to survive the global competition by cutting down on production cost.

Union commerce and industry minister Kamal Nath today said the government was perusing the recommendation of the committee set up to advise the government on ways to share social commitments of the tea industry so that the latter didn’t lag behind in the global cost competition in the long run.

He, however, stated that it was up to the tea industry to pull up its socks to take the lead in making long strides in the global scenario as the industry was basically under private sector dominance.

Addressing a press conference after the valedictory function of the India International Tea Convention (IITC) 2007 here, Nath said, “The government is committed to helping the tea industry in all possible ways.”

He said: “There are some social sector commitments of the tea industry unique to India. With changing times, these need to be revised and we are working on it. If the social commitments are carried forward without changes, the long-term cost competitiveness of the tea industry of the country will be hit.”

Highlighting the various schemes for tea production promotion in the country, Nath mentioned about the Rs 4,700-crore Special Purpose Tea Fund for rejuvenation of old plantations, subsidy for orthodox tea production, transport subsidies and relief fund for reopening of closed gardens.

Informing that electronic auction for tea marketing would commence from September next year, Nath called for aggressive marketing and branding strategy by the tea industry by getting over complacency.

He said India’s plan to boost tea export to Pakistan was likely to be hit by the current fluid political situation in the neighbouring country. “The present situation in Pakistan, when the country is being run by an interim government and is heading for polls, may not see it focus on tea trade with India and that may affect our design to increase Indian tea’s share in Pakistan market,” he said.

India expects to increase the volume of tea exported to that neighbouring country to 30 million kgs in the next five years from the current figure of 10 million kgs. 

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Tata Motors rolls out 1 millionth car

Pune, November 24
Country's largest automobile maker Tata Motors today rolled out its one millionth passenger car off the Indica platform from its facility at Pune.

The company commenced production in January, 1999. While it produced the 100,000th car in March 2001 and the 500,000th car in February 2005, the progression from the 900,000th car to the millionth car was achieved in just 7 months.

Addressing workers of the car plant here, company's chairman Ratan Tata said the journey to the momentous occasion was punctuated by many hurdles and difficulties.

"We have proved our critics wrong who doubted our ability and competence to produce a passenger car, in a departure from the traditional mould of truck manufacturing. Now, we have a reason to be satisfied with the rolling out of the one millionth car of Indica platform in less than a decade," he said.

As part of the celebration of the one-millionth milestone, the company announced several initiatives, including free service check-ups, free service camps, discounts on accessories and value-added services for existing customers. A contest for free upgrades for lucky customers is coupled with special retail offers for new customers.— PTI

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Aviation Notes
Unprecedented delays hit Air India’s clientele
by K.R. Wadhwaney

Since merging of Indian into Air India (AI), there is hardly a day when the national carrier has not earned a negative publicity. The quantum of scathing criticism and loss of work culture have dipped to such abysmal level that many patriotic regular flyers have reluctantly decided to change their loyalty from national carrier to private airlines.

Judging from goings-on and also from Air India’s performance, it is quite likely that the national carrier may turn to privatisation. Actually, this kind of concept suits a lobby of some powerful politicians who, as the events have unfolded, are more beholden to private airlines than to the national carrier.

The recent unprecedented delays and subsequently cancellations of some flights - five delays in a day - and brawl between Air India staff and passengers at the Indira Gandhi International Airport (IGIA) had such a demoralising effect on some regular flyers that they were heard saying: “Never to fly by AI again”.

On Tuesday, November 20, the prestigious AI-111 flight to New York via London was delayed. The ticket of Poornima, daughter of a VIP minister, was endorsed and she flew to London by Jet Airways. The tickets of other passengers were not endorsed. This showed that there were two rules in operation — one for VIP passengers and another for ordinary passengers. Whatever may be the compulsions of the national carrier, this kind of treatment to passengers does not augur well for the commercial airline.

Some Members of Parliament, attached to the aviation consultative committee, have suggested that beer and wine may be served on domestic circuit. While some MPs want to ‘raise a toast mid-air’, others say that it will ‘help vineyard farmers’.

The consensus in frequent flyers and cabin crews is that restart of the liquor service on flights will multiply problems. The in-depth study shows that ‘spirited’ passengers are liable to indulge in rowdyism and heap untold misery on young hostesses.

If liquor is served on flights, can passengers be denied of serving them tobacco. Cigarette smoking is banned worldwide on flights. But there are a few chain-smoking Bollywood stars, who smoke delightfully in the company of commanders and captains in cockpits. In sharp contrast, one Indian hostess was suspended for two-and-a-half months for smoking in cabin.

The bottomline is that the time is not yet ripe for restarting liquor service on domestic flights.

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Spectrum Row
DoT panel to meet operators sans BSNL, MTNL 

New Delhi, November 24
State run telecom companies — BSNL and MTNL — have been excluded from the panel to review spectrum allocation norms recommended by the Telecom Engineering Centre (TEC).

The committee, headed by DoT additional secretary R Bandhopadhyay and comprising representatives from GSM and CDMA operators, will be meeting on November 26 and 30.

Senior officials of the two PSUs expressed concern over being left out from the panel on spectrum allocation norms.

"Public Service Enterprises have to face many constraints in their operations, not the least being aggressive lobby by competitors to stymie their expansion," minister of state for commerce Jairam Ramesh had said recently in a letter to Sunil Mittal on a matter related to spectrum allocation.

PSUs have done far better in meeting social obligations compared to private players. BSNL, in particular, has fulfilled social role much more effectively than all the private companies put together.

Leaving BSNL and MTNL out of the purview of discussion on spectrum allocation norms may not serve the purpose, some of the operators said.

TEC had given its report on spectrum allocation norms earlier this month, suggesting manifold increase in subscribers for allocation of additional radio waves.

Communication minister A Raja had accepted the report in-principle, but in view of strong protests from GSM operators — Bharti Airtel, Vodafone Essar and Idea Cellular — the government constituted a panel to revisit the norms.

The committee has to give a report by the end of this month.

BSNL sources said it was very logical for the two PSUs to be part of the panel that is going to take a decision on spectrum allocation norms, a crucial component for growth in the telecom sector.

The PSUs have played a significant role especially in the rural areas but "they are always taken for granted", a source said. — PTI 

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Reliance MF tie-up

New Delhi, November 24
Anil Ambani group firm Reliance Mutual Fund today said it has entered into an agreement with the United Bank of India and State Bank of Saurashtra for distribution of its products.

Under the agreement, the banks would sell Reliance MF's products through their specified branches, the company said in a statement.

To sell these MFs, UBI has designated 160 branches, while SBS would sell through 150 branches. — PTI

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Power Grid, REL in pact for JV

Mumbai, November 24
State-run Power Grid Corporation of India Ltd (PGCIL) today said it has entered into an agreement with Anil Ambani group firm Reliance Energy Ltd to set up a joint venture firm for executing transmission projects.

The joint venture firm will evacuate electricity from NTPC Ltd's Koldam hydel project as well as from National Hydroelectric Power Corp's Parbati plant in Himachal Pradesh. — PTI

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Investor Guidance
Double tax avoidance treaty exists with US
by A.N. Shanbhag

Q : I am a US citizen but married to an Indian woman. I currently teach at an American school. What is my tax situation? My tax adviser in the USA says I should not have to pay Indian taxes because I am a US citizen and therefore, liable to pay US taxes and the US and India have joint treaty. Others, in my situation at work, say I should have two years tax free, but after that will have to pay. Any advice would be appreciated.
— Frank

A : Income earned in India by any person is normally taxable in India. However, in your case, you can take advantage of the double tax avoidance treaty between India and the USA. The article in the treaty, applicable to you would be Article 22.

As per this article, an individual, who visits India for a period not exceeding two years for the purpose of teaching or engaging in research at a university, college or other recognised educational institution and was immediately before that visit a resident of the USA, shall be exempted from tax by India on any remuneration for such teaching or research for a period not exceeding two years from the date he first visits India for such purpose.

Issues dealing with double taxation are subjective and open to interpretation and hence normally we do not advise on the same at this forum. In any case, this is our interpretation of the law and before taking any action, please do consult your tax adviser.

Equity-oriented MFs

Q: My query is regarding equity-oriented mutual funds and the situation when dividend is paid out and units are sold within nine months. Please let me explain by following example:

Details of case:

(1) Name of fund: Reliance Growth Fund

1/5/2007: Purchase of equity mutual fund units @ Rs 200 each unit.

5/6/2007: Dividend paid Rs 65 each unit

1/7/2007: Units sold @ Rs 180 each.

(2) Name of fund: HDFC Equity Fund

3/5/2007: Purchase of equity mutual fund units @ Rs 300 each unit

8/8/2007: Units sold @ Rs 275 each

(3) Name of fund: Fidelity equity fund.

5/5/2007: Purchase of equity mutual fund units @ Rs 250 each unit

10/8/2007: Units sold @ Rs 220 each

Tax treatment for above:

(A)As per my tax consultant:

STC loss on units of Reliance Growth Fund: 20

STC loss on units of HDFC Fund: 25

STC loss on units of Fidelity Equity: 30

Total of the above : Rs 75

Add total dividend received in respect of units sold within a period of 9 months from purchase date : Rs.65. Therefore, STC Loss to be carried forward : Rs 10.

(B) My understanding:

The STC loss on units of Reliance Growth Fund i.e. Rs 20 each unit is to be ignored as the dividend of Rs 65/- each unit was received and units sold within 9 months. However, the STC Loss i.e. Rs. 25 each unit on units of HDFC Equity fund and also the STCL (Rs. 30) on unit of Fidelity Equity Fund i.e. total STCL of Rs. 55 Should be allowed and carried forward for 8 years. Please confirm if my understanding is correct?

A : The treatment of the loss as per your understanding is correct....the tax consultant has erred in his advice. Dividend stripping laws are applicable to the particular lot of units sold in which the dividend has been declared and not to other non-related units.

Loan to sister

Q : I am an NRI based in the USA since 2000. My sister borrowed Rs 200,000 from me two years back - which I funded mostly from my US bank using Money2India.com and partly from my ICICI NRE savings account.

Now, she is returning the money. Can I have her deposit the money in my NRE account or does it have to be in NRO account.

I do not plan to repatriate the money back to the USA, but I would like to pay for my Life insurance using that. I want to pay the life insurance premium using NRE account so that the maturity amount is fully repatriable.
— Aditya Pai

A : AP (DIR) Circular 24 dt 27.9.03 grants general permission to borrow up to $ 2,50,000 or its equivalent in foreign exchange on a repatriable basis by an individual Resident from his close relatives (as defined in Sec. 6 of the Companies Act) resident outside India subject to -

-The loan is free of interest.

-The minimum maturity period of the loan is 1 year.

- The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender.

Since your loan to your sister satisfies all the requirements, she can deposit the money directly to your NRE account. You may approach your bank with your details of remittances and cheques from NRE accounts to back your claim to repatriability.

Perk value of company flat

Q : In one of your articles regarding perk value of company housing, you had mentioned that the concession could be 1% or may be 100% --- it makes no difference. Also as to when the employee is not getting any HRA and stays in a company flat, whether he can be given the benefit of 15% instead of 20% from FY 05-06 onwards, also please clarify if the company can give a revised Form-16 to the employee, or a letter with the new tax computation should serve the purpose.
— Vibhavari

A : The 1% - 100% thing was in regard to the rebate (before notification was released) whether the 15% rate was applicable only when there was a 100% concession in rent and not when the employee actually bore a part of the same. However, the same is not relevant now in light of the notification specifying that the perk value of company housing would be, in cities having population exceeding 25 lakh (as per 2001 census) @ 15%, in cities having population between 10 lakh and 25 lakh it would be @10% and it would be @7.5% in other cases.

Regarding the specific case that you have mentioned, yes the employee can indeed get the 15% rate. Revising Form-16 may not be possible since the TDS deducted as per Form-16 has already been paid to the government.....like I mentioned in the article, he can file a revised return and claim refund of the excess tax deducted.

The authors may be contacted at 
wonderlandconsultants@yahoo.com

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