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Sterlite buys Asarco for $1.7 billion
New Delhi, March 7
Anil Agarwal Metal czar Anil Agarwal-promoted Sterlite Industries today said it has signed an agreement to acquire America's third largest copper producer Asarco Llc for $1.7 billion (Rs 8,756.6 crore), which includes cash payment of $1.1 billion (Rs 5,666 crore).

Aviation Notes
Air India to make hub at Frankfurt
In complex civil aviation sector, the ground continues to be uneven since the induction of the open air policy in early 1990s. Surprising, as it has been, private operators get preferential treatment in relation to national carrier, National Aviation Company (Air India).

Recession takes toll on JCB’s revenue
Jammu, March 7
There has been a remarkable decline in the gross turnover of the sales of the JCB machines, one of the world’s largest manufacturers of construction equipment, due to the ongoing global recession.

Raju’s brother surrenders
Hyderabad, March 7
On the run since the Satyam Computers fraud came to light, B Suryanarayana Raju, the younger brother of the disgraced founder-chairman B Ramalinga Raju, surrendered before a local court here today.

Investor Guidance
No rebate on PO senior citizen scheme
Q: I want to know that under the Post Office Senior Citizen Scheme income tax rebate is allowed or not.
— Raj Kumar Aggarwal
A:
No income tax concession is available for investments in any of the post office schemes other than NSC, PPF, and 5-yr Post Office Term Deposits. Each of the aforementioned instruments is eligible for deduction under Sec. 80C. While the maximum limit in the case of PPF is Rs 70,000, for NSC and term deposits, the limit is Rs 1 lakh per annum.


A general view taken on Saturday shows the outside of a branch of the Lloyds TSB bank in London. The British government said on Saturday it would take a majority stake in Lloyds Banking Group (LBG) and guarantee toxic assets, leaving only two major British banks outside the state's control. The state will increase its ownership of the group from 43 per cent to 65 per cent and underwrite £260 billion worth of its toxic assets. — AFP

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Sterlite buys Asarco for $1.7 billion

New Delhi, March 7
Metal czar Anil Agarwal-promoted Sterlite Industries today said it has signed an agreement to acquire America's third largest copper producer Asarco Llc for $1.7 billion (Rs 8,756.6 crore), which includes cash payment of $1.1 billion (Rs 5,666 crore).

Sterlite would pay the balance $600 million (Rs 3,090.5 crore) in form of a promissory note, payable over a span of nine years.

"Sterlite has signed a new agreement with Asarco for purchase of substantially all the operating assets of Asarco.

The purchase consideration comprises a cash payment of $1.1 billion on closing; and a senior secured non-interest bearing promissory note for $600 million, payable over a period of nine years," Sterlite Industries said in a statement.

The deal, subject to the approval of US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, is expected to be closed by July-August this year, it added.

Vedanta Resources Group chairman Anil Agarwal said, "This acquisition is in line with our strategy of leveraging existing skills to become a diversified global copper producer and create long-term value for shareholders." Sterlite, the Indian subsidiary of London-listed Vedanta Resources, had been negotiating the Asarco deal since last year. It had initially offered $2.6 billion for buying the assets of the ailing company, which has been in bankruptcy for over four years.

However, with devaluation of mining assets and falling copper prices amid the global economic downturn, Sterlite wanted to settle the deal at a lower price and later revised down its takeover bid to $2.1 billion.

The market was speculating the deal to be clinched at $1.5 billion, which would have been just over half the value of what Sterlite had first offered for the target company.

For the new agreement, RBS Securities acted as financial adviser while Shearmand & Sterling as legal adviser to Sterlite.

As per the deal, Sterlite said it would acquire Asarco's three open-pit copper mines and associated mills and SX-EW in Arizona; a copper smelter in Arizona; a copper refinery, rod and cake plants, and a precious metals plant in Texas, the US.

The Vedanta group firm added it would assume operating liabilities, but not legacy liabilities for asbestos and environmental claims for ceased operations. The asset acquisition is on a cash free and debt free basis, it said.

After acquiring Asarco, Sterlite Industries would become the world's leading copper producer with a combined production of 7.5 lakh tonnes per annum.

At present, Sterlite's annual copper production is 5 lakh tonnes (including in Africa), which the company intends to double in over three years span.

In all, Vedanta Resources has lined up a whopping Rs 70,000 crore investment in its aluminium, copper, zinc and iron ore businesses in India by 2011-12.

Of the proposed investment, the company has already invested nearly 50 per cent. Post-expansion, Vedanta is poised to become the world's fifth largest metal and mining company. — PTI

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Aviation Notes
Air India to make hub at Frankfurt
by K.R. Wadhwaney

In complex civil aviation sector, the ground continues to be uneven since the induction of the open air policy in early 1990s. Surprising, as it has been, private operators get preferential treatment in relation to national carrier, National Aviation Company (Air India).

The private airlines, for example, have not been depositing income-tax they deduct at source. They owe to the government more than Rs 37 crore. According to the Income Tax Department (Bangalore circle), the ‘default’ will be much more if the all-India figures of all airlines are examined.

Similarly, private carriers owe huge amounts to the oil companies. They take fuel on credit and have not been paying dues for a considerable period. Now, the oil companies, like IndianOil, have been compelled to provide fuel only against cash payment.

Judicious move

Driven by several commercial considerations, Air India has finally decided to make Frankfurt as ‘hub’ for majority of West-bound flights. This move will offer convenient connections to passengers. The new schedule will come into effect from March 29. According to airline, the connections at Frankfurt will be ‘immediate’ and the traffic flow will increase considerably.

Air India will also shortly start operating non-stop flights to San Francisco from Delhi. This will be third non-stop flight to the US. The national carrier is also working towards joining Star Alliance , the consortium of 21 carriers from across the globe. The membership will help Air India an extended global reach. The airline is also expected to get 30 new aircraft from two manufacturing companies, Boeing and Airbus Industrie, before the year is out. The order includes three Boeing 777-200 (long range) and four B-777-300. With the addition to the family, the airline will be able to phase out some worn-out aircraft.

As operations from Hyderabad’s first Greenfield have been mighty successful, the authorities have embarked upon another major initiative. The state-of-the-art aircraft maintenance /repair/overhaul facility at the cost of Rs 400 crore will be established. This venture will help airlines cut their expenses by undertaking repairs and maintenance here instead of sending aircraft abroad.

The 25-acre facility, when completed, will be equipped to service 60-80 aircraft annually. The facility, known as MRO (Maintenance Repair Overhaul), will initially have hangars for two narrow-bodied aircraft. Then, it will be expanded to accommodate the wide-bodied aircraft. The facility is being created in collaboration with Malaysian Airlines.

Growing unrest

Both Airports Authority of India (AAI) and other private operators have been granted permission to levy ‘development fee’. The passengers consider this totally unreasonable, saying that “there are some facilities which should be provided free, as railways do.” According to flyers, no other country levy these kinds of fees from passengers.

As 1D domestic departure terminal becomes fully functional from next month, the 70-year-old terminal 1B will be dismantled. Constructed about 70 years ago, during World War II, the area is likely to be utilised for raising a terminal for general aviation. The part of the building may be used as ‘museum’, as the original proposal was. Maybe, the part of the building will house cargo complex.

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Recession takes toll on JCB’s revenue
Tejinder Singh Sodhi
Tribune News Service

Jammu, March 7
There has been a remarkable decline in the gross turnover of the sales of the JCB machines, one of the world’s largest manufacturers of construction equipment, due to the ongoing global recession.

The company, which has its presence in almost all countries of the world, has also been hit hard by the global financial meltdown that has affected almost every sector.

In an exclusive interview with The Tribune, Vipin Sondhi, managing director and CEO of the JCB India Limited, said the turnover of the company has seen a decline as compared to previous years.

“Yes the global meltdown has had an impact on the overall turnover of the company. In 2006, the company recorded a turnover of Rs 2,200 crore, in 2007, the turnover was Rs 3,500 crore, but during last year i.e. 2008, our turnover dropped to Rs 3,000 crore,” Sondhi said.

Sondhi, who was in Jammu to inaugurate the first dealership of the company in the state, said the company controls 53 per cent market of the construction equipment in the country.

He said during the past 8-9 months, the company had seen a decline in the business.

Regarding the proposed plan of the company to make its presence felt in J&K, he said, “Jammu and Kashmir has always been a good market for the company, we have been here for past 11 years. In 1997, we sold our first machine here whereas last year we sold 163 machines in the state.”

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Raju’s brother surrenders
Tribune News Service

Hyderabad, March 7
On the run since the Satyam Computers fraud came to light, B Suryanarayana Raju, the younger brother of the disgraced founder-chairman B Ramalinga Raju, surrendered before a local court here today.

Suryanarayana Raju is the chairman of SRSR Advisory Services floated by his brother to manage the family's stake in Satyam.

Raju gave himself up before 14th Additional Chief Metropolitan Magistrate S Samuel Victor Emmanuel who released him on bail on a bond of Rs 10,000 and two sureties of equal amount. He also surrendered his passport to the court.

A court had, on March 5, granted anticipatory bail to him on the condition he surrender within 10 days before the magistrate hearing the Satyam case. The prosecution has claimed that he was a director in 50 of the 357 companies floated by Ramalinga Raju.

In a related development, the magistrate extended by another 14 days the judicial custody of Ramalinga Raju, his brother and former Satyam managing director B Rama Raju and former chief financial officer V Srinivas and two former PriceWaterhouse auditors — Gopalakrishnan and Srinivas Talluri.

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Investor Guidance
No rebate on PO senior citizen scheme
by A.N. Shanbhag

Q: I want to know that under the Post Office Senior Citizen Scheme income tax rebate is allowed or not.

— Raj Kumar Aggarwal

A: No income tax concession is available for investments in any of the post office schemes other than NSC, PPF, and 5-yr Post Office Term Deposits. Each of the aforementioned instruments is eligible for deduction under Sec. 80C. While the maximum limit in the case of PPF is Rs 70,000, for NSC and term deposits, the limit is Rs 1 lakh per annum.

Loan from parents

Q: If I take loan from my parents for the purpose of buying a house, how should it be treated?

Will I be able to claim the interest deduction of Rs 1.5 lakh as well as the principal repayment of Rs 1 lakh? Secondly, will my husband and I both be entitled to individual deductions of Rs 1.5 lakh and Rs 1 lakh separately if we take a joint loan and pay from that account? The registry would be in our joint names.

— Poonam Jain

A: In case you take a loan from parents for buying a house, you will be able to claim deduction of interest but not of the principal amount (Rs 1 lakh u/s 80C). The repayment of principal amount is deductible u/s 80C if the loan has been obtained from certain specified sources like a bank, housing finance company, LIC, NHB, the assessee’s employer etc. Loan taken from parents is not covered.

For joint loans (joint registry required), both deductions can be claimed individually by each owner. So, total interest deduction of Rs 3 lakh and principal deduction of Rs 2 lakh may be claimed. Of course, for claiming principal deduction, the loan has to be from a housing finance company etc and not from an individual.

Bonus on MIS scheme

Q: I am a retired senior citizen of 77 years age. I invested some of my retiral benefits in Post Office Monthly Scheme (MIS) in April 2003 and am getting regular interest of 8% on the same. This scheme will mature in April 2009. I wish to know if I am entitled to get 10% bonus on my principal money invested. I shall be grateful if you can provide me with the order number giving me this entitlement.

— Dr S. P. Singal

A: The bonus which was payable at maturity @10% of the corpus was deleted by notification GSR 59(E) dt 10.2.06 for accounts opened on or after 13.2.06. The bonus was reinstated @5% for accounts opened on or after 8.12.07.

Since you had entered into the scheme in April 03, you would be eligible for the 10% bonus. Please note that the bonus will be treated as interest paid for purposes of taxation.

Presumptive tax

Q: Suppose we want to show business income of a person to be less than Rs 1,20,000 to avoid maintaining account books. In such case, in return form ITR-4, on what basis should we show gross receipts, gross profit, expenses, debtors, creditors, cash balance stock etc? Is it necessary to show all these items or only those which we are somewhat sure of?

— Ahuja

A: To relieve some special class of assessees from maintaining books of accounts, provision of payment of presumptive tax is made for assessees engaged in business of — i) Civil construction or supply of labour for civil construction @8% of the gross receipts provided the receipts are under Rs 40 lakh u/s 44AD. ii) Plying, hiring, or leasing goods carriages @ Rs 3,500 per month or part of the month for heavy vehicles and @ Rs 3,150 for other vehicles u/s 44AE provided the assessee does not own more than 10 vehicles. iii) retail trade in any goods or merchandise @5% of the gross receipts u/s 44AF where the turnover does not exceed Rs 40 lakh.

It is obvious that you will do well by maintaining books of accounts, if necessary, by taking some professional help.

Form 15-G

Q: I retired from service in January 2007, and invested my retirement benefits in a nationalised bank as fixed deposit earning quarterly interest of Rs 36,000. I have no other income other than the interest which I am earning on my fixed deposits. The interest income is withdrawn regularly for meeting my household expenses. I am continuing my PPF account and after investment in the PPF my balance interest earning are below the taxable limit. The bank is deducting TDS on my interest accruals on the plea that since the interest earned is more than Rs. 10,000 I cannot submit form 15H and as such I am required to seek refund of income tax deducted at source after filing the income tax return. Please guide.

— Sukhlal Soni

A: The bank has erred. In fact, Form-15G/H is necessary only when the interest is Rs 10,000 or more during a financial year paid by the branch of the bank. The question of TDS does not arise when the interest is lower than this amount. You can file form 15G (presuming you are not a senior citizen i.e. of age 65 years or over) or Form 15H if you are a senior citizen since your interest income is below the tax threshold of Rs 1,50,000. The bank will not apply TDS on receipt of your form 15G.

Deduction on interest

Q: I am a US born Indian. I own two properties in India, both of which are under lock and key. These properties were bought using mortgage finance. I was recently told that there is no limit on the interest that can be claimed as a tax deduction on the second property. Even if this is true, since I do not have any taxable Indian income, how will I benefit from this? In the US, there is a provision where you can carry forward losses. Does a similar provision exist here such that in future if I earn taxable income in India, I would be able to setoff the same against my carried forward losses? Please give me a detailed reply.

— M Chaitra

A: The general rule, as defined by Sec. 70 allows setoff of loss from any source falling under any head of income against income from any other source under the same head. Thereafter, Sec. 71 allows balance losses, if any, under one head of income to be setoff against income under any other head (other than capital gains). The excess loss, if any, can be carried forward for 8 subsequent years immediately succeeding the year for which the loss was first incurred. Yes, the loss suffered during the FY can be setoff against income under any other head but strangely, the carried forward loss can be setoff only against income under the same head.

PPF account

Q: I am an US citizen currently on visit to India. My query is regarding the PPF account that I had opened when I was an Indian resident. Can I continue to operate and invest in PPF since the investment is for duration of 15 years out of which only 9 have elapsed? If not, what happens to my PPF investment balance? Can the same be repatriated?

— Mhatre

A: With effect from 25.7.03, NRIs are not eligible to open fresh accounts in any of the NSO schemes, namely the Post Office SB, RD, TD, Monthly Income Scheme, Senior Citizens Savings Scheme accounts or purchase National Savings Certificates or Kisan Vikas Patras. They cannot even open a PPF account. Similarly, the 8% RBI Savings Bonds are out of the reach of NRIs. The existing accounts (opened when the NRI was resident or opened before 25.7.03 by NRI) can be continued up to their maturity but cannot be renewed or extended. As and when the irregularity comes to the notice of the authorities, the money will be returned to the depositor without any interest.

The authors may be contacted at wonderlandconsultants@yahoo.com

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