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CHANDIGARH

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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

AI-Indian merger challenged in HC
Mumbai, November 25
Merger of national carriers Air India and Indian Airlines has been challenged in the Bombay High Court on the ground that it defies Parliament's intent to keep international and domestic carriers separate.

Mediclaim portability on the anvil
New Delhi, November 25
Come April 2008, mediclaim policy holders who are not satisfied with the services of their current insurance provider can easily shift to another firm with accumulated bonuses.

Bicycle for Rs 1.06 lakh!
New Delhi, November 25
The Indian middle class may be looking forward to Tata Motors' Rs 1 lakh car, the world's cheapest, but a bicycle maker who has launched a product that is a tad more expensive believes the future belongs to two-wheels with a pedal.

Re rally adds $40 b to billionaires’ kitty
New Delhi, November 25
Rupee's sharp rally may have cost millions of people their jobs in export-oriented sectors, but the country's billionaires — who owe over one-tenth of their wealth to the currency appreciation — are not complaining.



Rupee hits IT salaries.
(56k)


EARLIER STORIES

 
Bollywood actress Kareena Kapoor looks at jewellery exhibited by designer Shobha Asar in Bangalore
Bollywood actress Kareena Kapoor looks at jewellery exhibited by designer Shobha Asar in Bangalore on Sunday. — PTI

Murugappa Group to invest in Singur
Kolkata, November 25
The Rs 8,500-crore Murugappa Group will invest in Singur in West Bengal to make components for Tata Motors' Rs 1-lakh small car. Murugappa Group chairman M M Murugappan said the investment close to Rs 25 crore would be made by group company Tube Investments India Ltd (TI India).

Market Scan
Investors need to be cautious
During the last week the Sensex was down by 780.49 points. As usual, there was a lot of volatility in the market. This is due to activities of the FIIs. As the SEBI chairman has stated there are certain categories of investors from the mature market where returns are not as good as in the past, so they have moved into our market to get them good returns.

Tax Advice
Residents can set off tax paid in US against tax payable in India
Q. My son is employed in Infosys Technologies Limited and he has been deputed by the company in the USA against HIB visa. His stay in India for the financial year 2006-07 is more than 183 days. He receives his basic pay from the company in India and also he receives his salary in the USA.

 





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AI-Indian merger challenged in HC

Mumbai, November 25
Merger of national carriers Air India and Indian Airlines has been challenged in the Bombay High Court on the ground that it defies Parliament's intent to keep international and domestic carriers separate.

The petition filed by Air India Cabin Crew Association (AICCA) also questions the Constitutional validity of section 620 of the Companies Act, which empowers government to exempt any government company from provisions of the Act.

Air India Limited and Indian Airlines Limited were created by a Parliamentary statute, and, therefore, without Parliament's nod they cannot be amalgamated, the petition contended.

The AICCA claims to the "sole recognised trade union" in Air India Limited, and has 1,800 members. The petition is expected to come up for hearing in the first week of December.

The merger (amalgamation) of AI and IA was sanctioned by the ministry of corporate affairs on August 22 this year.

However, the AICCA contends that in sanctioning the amalgamation, Parliament was bypassed.

Tracing the history of the national carriers, it points out that in 1953, eight private airlines were nationalised under the Air Corporations Act, which created AI and IA. Further, in 1994, Air Corporations (Transfer of Undertakings and Repeal Act) Act was passed, which converted AI and IA into Air India Limited and Indian Airlines Limited, respectively.

It goes on to contend that Parliament's intention was always that assets of two airlines should continue to vest in AIL and IAL and national and domestic carriers must remain separate.

Scheme of amalgamation, which does not have Parliament's approval, flies in the face of this policy, the petition says.

Further, it questions section 620 of the Companies Act, which allows government to take its corporations out of purview of the Act.

Empowered by this Section, the government had in 1978 issued a notification stating that for merger or demerger of government corporations, High Court's permission would not be needed.

Ordinarily, no merger or demerger is complete unless it is approved by the High Court. — PTI

Air India incurs Rs 448-cr loss

Rising fuel costs and payment of wage arrears has led Air India to incur a net loss of Rs 447.93 crore in the last fiscal, according to the approved accounts of the national carrier which had made a net profit of Rs 16.29 crore last year.

The loss was primarily due to higher operating costs and lower revenues, airline sources said after a two-day board meeting in Mumbai which approved the accounts for 2006-07.

Fuel costs accounted for 35 per cent of the total operating cost that rose by Rs 386 crore to Rs 3,530 crore, up almost 13 per cent. Besides, the carrier had an outgo of Rs 425 crore on account of payment of wage arrears of the staff that had been pending since long.

The revenues of the national carrier also fell by Rs 329 crore to Rs 5,360 crore, the sources said. While the airline had to pay Rs 200 crore on borrowings to fund its fleet acquisition programme, the interest on its working capital also rose significantly by Rs 155 crore, they said.

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Mediclaim portability on the anvil

New Delhi, November 25
Come April 2008, mediclaim policy holders who are not satisfied with the services of their current insurance provider can easily shift to another firm with accumulated bonuses.

The General Insurance Council — an association of non-life insurers — is preparing norms for portability of mediclaim policy and the same are expected to become operational by the beginning of next fiscal.

"The council is working on the guidelines and will finalise its recommendations by early January," its secretary general K N Bhandari told PTI.

Thereafter, it would be sent to insurance regulator IRDA for vetting, he said, adding that hopefully it would become effective from next fiscal.

"We have received several representations showing that absence of portability in mediclaim policy is not in the interest of policyholders," he said.

Under the present dispensation, a policy holder is given health cover for a year and the same has to be renewed every 12 months.

If there is no claim, the policy holder is entitled to a bonus in the form of increased sum and for every claim-free year, this bonus gets accumulated.

After the expiry of the term, if one intends to switch over to a new company, the accumulated bonus is not carried forward and one has to start all over again.

For senior citizens who bought the policy before turning senior, it becomes all the more difficult because companies are reluctant to sell new mediclaim policies to the elderly.

In order to resolve the issue of bonus as policies of different insurance companies are not same, the council is working on minimum cover benefit, Bhandari said.

Two insurers do not generally have identical mediclaim policy and so the council would work out a minimum benefit that would be carried forward in case of change of insurer, he said.

"We will set the guaranteed minimum covers as agreed by the entire industry which can be carried along to a new company. This will allow the insured to know the facilities he can carry to the new company," he said.

So the policy holder can easily do cost benefit analysis of switching over to a new insurance company, he added. — PTI

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Bicycle for Rs 1.06 lakh!

New Delhi, November 25
The Indian middle class may be looking forward to Tata Motors' Rs 1 lakh car, the world's cheapest, but a bicycle maker who has launched a product that is a tad more expensive believes the future belongs to two-wheels with a pedal.

Domestic firm FireFox Bikes Pvt Ltd has rolled out a high-end bicycle worth a little over Rs 1 lakh for adventure enthusiasts. The company would source the bike from its US-based partner Trek.

The 'Fuel Ex 8 bike,' priced at Rs 1,06,000, is targeted at "very serious bikers... who enjoy riding bicycles," FireFox managing director Shiv Inder Singh told PTI.

He said the initial response to the product has been quite encouraging and the company has already received orders to supply three units.

The bicycle sports features like hydraulic and gas-filled shock absorbers, disc brakes and 27 speed options.

The company expects to increase sales to 60,000 bikes a year by 2011 from 12,000 units now, Singh said. — PTI

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Re rally adds $40 b to billionaires’ kitty

New Delhi, November 25
Rupee's sharp rally may have cost millions of people their jobs in export-oriented sectors, but the country's billionaires — who owe over one-tenth of their wealth to the currency appreciation — are not complaining.

There are 54 Indian billionaires in the world with a combined net worth of about $368 billion, according to the US business magazine Forbes.

Besides, the 54 billionaires put together would have been poorer by close to $40 billion had the rupee remained around its year-ago level.

Mukesh Ambani, ranked as the second richest Indian with a net worth of $49 billion, would have been the biggest loser with a loss of over $6 billion if rupee had not appreciated.

Forbes calculated the net worth of all billionaires based on the foreign exchange rate on November 2, 2007, when a dollar was valued at Rs 39.32. A year ago, the dollar value stood at Rs 44.90 on November 2, 2006. — PTI

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Murugappa Group to invest in Singur

Kolkata, November 25
The Rs 8,500-crore Murugappa Group will invest in Singur in West Bengal to make components for Tata Motors' Rs 1-lakh small car.

Murugappa Group chairman M M Murugappan said the investment close to Rs 25 crore would be made by group company Tube Investments India Ltd (TI India).

The company would make steel door panels for the small car as a component manufacturer. — PTI

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Market Scan
Investors need to be cautious
by J.C. Anand

During the last week the Sensex was down by 780.49 points. As usual, there was a lot of volatility in the market. This is due to activities of the FIIs. As the SEBI chairman has stated there are certain categories of investors from the mature market where returns are not as good as in the past, so they have moved into our market to get them good returns. According to SEBI chairman Damodaran, Sensex has lost close to 1,400 points in the past six straight sessions till Thursday (November 22). The slippage in the market is due to sub-prime crisis in the USA, record international market rate of crude around $100 per barrel and climb down in the industrial growth rate of the Indian economy. Federal Reserve’s forecast is that the US economy would grow only between 1.8 per cent and 2.5 per cent next year. There is a need to be cautious on the part of Indian investors as the next financial year is likely to be less rosy than the current financial year. However, the union finance minister Chidambaram is still optimistic and expects the Indian economy to grow close to 9 per cent by the end of the current financial year. This is higher than the Reserve Bank’s projection of 8.5 per cent growth in the Indian GDP.

Tata Steel’s rights issue

Tata Steel’s rights issue opened on November 22 and will close on December 21, 2007. Tata Steel is offering both equity rights issue in the ratio of 1 share for 5 shares held by the shareholders and Cumulative Compulsory Preference Shares (CCPS in the ratio of 9 CCPS for every 10 equity shares held on the record date (November 5, 2007). There is no linkage between rights issue and the rights CCPS. The shareholder can apply for rights issue and abstain from CCPS issue. Price for equity share is Rs 300 for Rs 10 face value share. Each CCPS has a face value of Rs 100 and will be converted into one equity share @ Rs 600 per share on September 1, 2009. The CCPS shares carry a dividend of 2 per cent per annum.

At present the equity capital of Tata Steel is Rs 6085 million and its “reserves and surplus” stand at Rs 210, 953.8 million. The promoters, Tata Sons and other group share-holdings, have around 33.77 per cent and the public share holdings stand at 66.23 per cent. At present, Tata Steel scrip has an NAV of Rs. 252.4. After the issue of equity share at Rs 300 per share, the NAV will be Rs 247.2. After the issue of both equity shares of Rs 300 per share at CCPS at Rs 600 per share, it shall stand at Rs 322.2.

Tata Steel’s right issue @ Rs. 300 per share is very attractive as the market rate of Tata Steel share is around Rs 820. Tata Steel’s equity will be up by 20 per cent after the right equity shares @ Rs 300 per share, and the total increase in the equity will be at 35 per cent after the conversion of CCPS into equity shares. It will stand at Rs 8,214.75 million. Tata Steel is the cheapest producer of steel in the world. After the acquisition of Anglo Dutch steel company Corus, Tata Steel has emerged as the world’s sixth largest company. Before that, its rank was only 56th. Tata Steel will be able to maintain its profitability even after the enlargement of its equity capital from Rs 6085 million to Rs 8214.75 million. It is likely to be still the cheapest steel manufacturer in the world because any new steel manufacturing plant will involve much higher cost than Tata Steel. Long-term capital shareholders may subscribe to both the rights issue of equity shares and CCPS. The more cautious may apply for the former and ignore the CCPS.

Another attractive scrip in the market is Oswal Chemicals quoting at around Rs 53. It has the prospect of making substantial gains in its market price.

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Tax Advice
Residents can set off tax paid in US against tax payable in India
by S.C. Vasudeva

Q. My son is employed in Infosys Technologies Limited and he has been deputed by the company in the USA against HIB visa. His stay in India for the financial year 2006-07 is more than 183 days. He receives his basic pay from the company in India and also he receives his salary in the USA. Now whether his earnings from the USA will be taxed in India on which he has already paid tax in the USA or not, and if not, kindly quote the relative section & whether the same is required to be shown in the Income Tax return to be filed in India for the assessment year 2007-08.

— Shorav Suri, Ludhiana

A. On the basis of information given in the query, since your son will be treated as resident and ordinary resident for the assessment year 2007-08, your son would be assessable on his total world income. Accordingly, the income earned in the USA will have to be included for determining his total income. The amount of tax paid in the USA would, however, be allowable as set off against the tax payable in India on the total world income so determined. This set off is allowable under Section 90 of the Act as India has entered into a Double Taxation Avoidance Agreement with the USA. In your son's case, most likely return will be filed in Form ITR-1. A column is provided in the return which requires relief claimed under Section 90 of the Act to be specified.

NRO account

Q. My son opened a savings bank account in SBI at Chandigarh in 1999. He went to Canada on Permanent Resident Visa in 2003. He is staying there as Permanent Resident. Bank Account is still in operation.

Please advise in detail

(i) Whether the account can continue as it is? Or he has to complete some formality? If so, what are those?

(ii) What are the rules in this respect and which are those?

— Ram Nath Sud, Chandigarh

A. (i) It would be advisable to inform the bankers about the migration of your son to Canada.

(ii) The applicable rules are specified in master circular issued by the Reserve Bank of India on Non Resident Ordinary Rupee (NRO) Account dated 1st July 2006. In accordance with the said master circular, when a person resident in India leaves India with an intention to stay outside India for an uncertain period his existing account is required to be designated as Non Resident (Ordinary Account).

IT return

Q. I retired from PGI Chandigarh, in 2004 and my wife who is also working in PGI. is going to retire on 31.12.2007. I want your advice on the following points:-

1. We are at present residing in Govt. accommodation (PGI) Sector-24, Chd. We will be shifting to our own house in Panchkula between Jan & April-08. Can we file our income tax return for assessment year 2008-09 in Chandigarh?

2. In future we have to file our tax return in Panchkula. If so, what are the formalities we have to do before filing the return?

3. How to show the retirement benefit in the income tax return as we cannot attach annexure with the return nor there is any column for the same in the return form?

4. Whether we have to carryout the change of address in PAN?

— S.K. Dhawan, Chandigarh

A. The answers to your queries are as under:

(i) You can file your return for the assessment year 2008-09 at Chandigarh if you continue to be a permanent resident of Chandigarh for the said assessment year.

(ii) You will have to make an application to the Central Board of Direct Taxes for the transfer of your file to Panchkula. A copy of the said application should also be filed with the Chief Commissioner/Commissioner, Income-tax, Chandigarh, requesting him to transfer the file to Panchkula. Further, a copy of the said application should also be filed with the Chief Commissioner/Commissioner, Income-tax, Panchkula, requesting him to inform the authorities at Chandigarh, the relevant officer with whom your jurisdiction would vest henceforth and to whom the file should be transferred. The application to Central Board of Direct Taxes should specify the reasons for seeking the transfer which in your case would be the shifting of permanent residence to Panchkula.

(iii) In your case the return form would be ITR-2 in view of your owning a house in Panchkula. Such form does include Schedule E-1 for disclosure of exempt income. The income taxable out of such retirement benefits would in any case be included in your salary income.

(iv) The Permanent Account Number would remain same.

Rebate u/s 89

Q. A person working as an officer retires on 30.09.2007. His monthly gross salary is Rs 40,500 and commutation payable is about Rs 5,00,000. How shall his tax liability be calculated as gratuity in excess of Rs 3,50,000 is taxable. I shall feel highly grateful if you guide me.

— Bashir Nadeem, Srinagar

A. The gratuity amount exceeding Rs 3,50,000 would form part of the salary income and brought to tax accordingly. However, the Act provides that in a case where a person is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt of, in any one financial year, salary of more than 12 months or a payment which is construed as a profit in lieu of salary and due to which his total income is assessed at the rate higher than that at which it would have otherwise have been assessed, the assessing officer shall, on a application made to him in this behalf provide such relief as may be prescribed. You can, therefore, seek a relief under Section 89 of the Act for the amount of Rs 1,50,000 which would become taxable. Rule 21AA of the Income-tax Rules 1962 provides for the computation of the due relief. You should file Form 10E along with the return of income for seeking the relief under the aforesaid section.

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