HOW I STARTED

‘I spotted a vacuum and filled it’
“IN a short time when I assisted my father in selling batteries, I realised two important things that made a lot of difference to my life and guided my destiny in the years to come. The first lesson that I learnt what that a satisfied customer is a customer for life, while a disgruntled customer is an impediment to growth. Besides, I was convinced that one must pursue a career that one finds interesting. This led to my deviation in the filed of electronics that eventually became my professional forte”, says Mr. Manmohan Singh Managing Partner, Kundan Electronics that has given the state many products like the Kundan T. V and Kundan Power Inverters.

• Initial phase

• Growth led to diversification

• Major setback

• Strategy

• Future plans

• Compensation

• Rebate on house loan

Steel industry rues 4 pc entry tax
FOR Punjab industry it is a period of gloom. Prices of steel have gone up by over 25 per cent with prospects of a further rise. The state government is proposing higher taxes to deepen this gloom. Prices of finished products are either stable or showing a downward trend.

MARKET SCAN

The market is in a bad way
LAST fortnight many analysts, including myself, thought that the stock market was poised for a rise. Actually, the market had a major fall. The Sensex was down by 220.35 points, a fall of 6.79 per cent. Partly, this sharp decline in the market was caused by a melt-down in the global stock markets. The US stock market was nearing its 1970 low. The FII’s inflow of funds also dried-up. But the main reason was a highly depressed market sentiment due to erratic monsoons, with floods in eight North Eastern States and drought in the rest of India, particularly in UP, Rajasthan, Haryana and Punjab.

• Inflation rises

Video

After the initial hiccups like the disastrous departure of Kentucky fried chicken, pizza and burger corporate houses are now heading the traditional way. (28k, 56k)

Few options for salaried class to save tax
Manoj Kumar
Tribune News Service

THE recent statements of newly appointed Union Finance Minister, Mr Jaswant Singh, to provide some relief to the salaried class in income tax might have raised some hope among households. Otherwise, the Union Government’s proposed changes in the Income Tax Act has left little options for the income tax assessees to make investments to save tax.

The assessees are finding it hard to gulp down the withdrawal of tax rebates, cut in interest rates. Government’s claims to introduce ‘Saral’ forms to facilitate the filing of returns and improvement in services at IT officials have few takers. Mr Rajesh Girotra, a leading Chartered Accountant, feels, ‘‘The new Saral form, to be applicable for next year returns, has more than 10 pages. It is difficult to comprehend by an average assessee, consequently they would have to hire the services of consultants. In fact, the Finance Ministry makes changes in the IT Act so frequently that it becomes difficult to follow.’’

Interestingly, the government’s scheme to file returns through employers, has not shown much positive results so far. Under the bulk filing of IT returns scheme, any employers with more than 50 employees can submit their returns to the department. The IT officials disclosed that though the scheme is open till August 31, however, no employer has come forward so far in the Chandigarh circle. The officials say that since the government has not given any incentive to the employers to implement the scheme, which would lessen the department’s work, they are not interested in taking that extra burden.

The employees blame the government for overburdening the salaried class in comparison to business class. They say that IT rebate has been slashed down despite the fact that household expenses especially on rents, education, transport and apparel have gone up manifold over the past few years. On the other hand, income tax officials feel that most of the problems faced by the assessees are caused by their own attempts to evade tax.

A senior official in the IT office here, claims, ‘‘Though the salaried class claims to be the honest tax payer, however, most of them are often found concealing their income, especially interest and income from other sources, resulting in detailed scrutiny by the department and unwanted delay in refunds.’’ However, insiders in the department point out that number of assessees has increased many times in comparison to the proportionate increase in staff strength. Consequently, people has to stand in long queues or grease the palms of IT employees even to file their returns or to get the refunds.

Options to save tax

The income tax experts say that the new Income Tax Act has decreased the tax rebate from 20 per cent to 15 per cent, for those assessees, whose annual income is between Rs 1.5 lakh and Rs 5 lakh. The persons with annual taxable income below Rs 1.5 lakh would continue to avail 20 per cent rebate u/s 88, however, persons with more than Rs 5 lakh annual income would not get any rebate under that section. The surcharge on income tax has also been raised from 2 per cent to 5 per cent.

The tax experts point out that under the Financial Bill 2002, the rate of tax on annual taxable income between Rs 50,000 to Rs 60,000 is 10 per cent, for Rs 60,000 to Rs 1,50,000 is 20 per cent and for income above Rs 1,50,000 is 30 per cent.

Investment to save tax

Another Chartered Accountant Mr D. K. Singla, laments, ‘‘The Central Government has increased the surcharge as well as reduced the interest rates on different investment plans. Though the limit for investment u/s 88 has been raised to Rs one lakh — Rs 70,000 for regular investment scheme, and Rs 30,000 for infrastructure bonds.’’ He says the employees can now invest up to Rs 70,000 in provident fund, Public Provident Fund, LIC, National Savings Certificates, National Saving Scheme 1992 and in equity linked saving schemes, whose interest income shall qualify for rebate u/s 80L. One can also invest up to Rs 30,000 in ICICI, IDBI and other infrastructure bonds, whose interest income is totally exempted from income tax.

Pension scheme

The employees in the middle age group, says Mr Singla, should take up a pension policy. Since investment up to Rs 10,000 under any pension scheme run by LIC or other mutual funds could be deducted u/s 80CCC. Further commuted value of the pension is fully exempted, but pension to be received every month would be taxable In case of death of the assessee, the amount given to the nominee at the time of death is fully exempted.

Medical insurance

Any insurance premium paid by individual for health insurance of the assessee, spouse, dependent parents and children is allowed as deduction but with a maximum limit of Rs 10,000 per annum u/s 80 D in a previous year. For senior citizens, the rate is actual premium deposited or Rs 15,000 per annum, whichever is less.

Special provisions

Mr Girotra points out that women assessees are allowed a standard deduction of Rs 5000 on total tax and senior citizens can avail rebate of Rs 15,000 on total taxes. A deduction of up to Rs 40,000 is allowed for medical treatment of handicapped dependents u/s 80 DD. The deduction on repaying loans, taken for higher education, by the assessee is allowed u/s 80 E.

Mr Singla reminds that the last date of filing IT returns for individuals is July 31, for bulk filing, August 31 and for companies, it is October 31. For the next assessment year, he says, the telephone subscribers have been exempted from compulsory filing returns. Now under the one by six scheme, only cellular phone holders would be considered.

Suggestions

The assessees feel that the Union government should make it mandatory to file returns on behalf of the employees. Mr Girotra says, regarding the income from other sources, the employees may be asked to give an affidavit about that income, to make them accountable. Similarly, the refunds of the employees should be send to their accounts through electronic clearing within given time and with interest. The employers can be given some incentive to collect returns for the department. All the IT departments should be fully computerised to speed up the process of tax collection and refunding. A specific period should be fixed by the department to solve the problems of the assessees on the spot or in a specific time period.

CHECK-OUT

 by Pushpa Girimaji

MR S. L. Chopra sent from Lucknow, a registered parcel to his daughter in Pune. Despite Mr Chopra’s complaints and reminders to the post office, the parcel was never delivered.

Mr Chopra then took the step of filing a case before the District Consumer Disputes Redressal Forum, which awarded Rs 1,790 towards the cost of the items and Rs 1,000 as compensation. The post office promptly filed an appeal before the State Consumer Disputes Redressal Commission. It did not dispute the fact that the parcel was not delivered. In fact it admitted that its enquiry had established that the parcel had not reached Mr Chopra’s daughter. However, its contention was that Section 6 of the Indian Post Office (IPO) Act granted it immunity from liability for loss, delay or damage to any postal article in the course of its transmission by post. It also quoted rules that limited the liability of the post office in case an uninsured parcel to Rs 100, irrespective of the value of the parcel.

After referring to Section 6 of the IPO Act and Rules 41 and 42 of the Post Office Rules, the State Commission upheld the contention of the post office that its liability towards loss or non-delivery of the parcel was limited to Rs 100 only as the parcel was not insured.. However, it pointed out that despite several reminders from Mr Chopra, the post office had failed to deliver the parcel, thereby causing him lot of suffering and harassment. Even later, there was no justification on the part of the post office in not settling his claim despite several visits to the post office. And these constituted deficiency and negligence in the service rendered by the post office for which the consumer was entitled to compensation under the Consumer Protection Act. It, therefore, awarded Rs 1,650 as compensation and Rs 500 towards costs.

The National Consumer Disputes Redressal Commission before which the post office filed a revision petition, agreed with the reasoning of the State Commission. However, it said the State Commission was not right in awarding Rs 1,650 over and above the compensation of Rs 1,000 awarded by the District Forum. It, therefore, modified the order of the State Commission to the effect that besides Rs 100 towards the cost of the article, the consumer would be entitled to Rs 1,000 as compensation and Rs 500 as costs, totaling Rs 1,600.

This brief order (Chief Post Master, General Post Office, Hazrat Ganj, Lucknow vs S. L. Chopra, RP no 718 of 1998) has enormous significance for consumers because it finally removes almost all barriers that prevented consumers from seeking relief before consumer courts against deficient services rendered by the postal department.

Till now, if a consumer sent a parcel by post and if it was not delivered, or delivered in a damaged condition, the liability of the post office was limited to the amount stipulated by it. And in view of Section 6 of the Indian Post Office Act, consumer courts too did not grant relief to consumers , unless of course the consumer could prove that the deficient service was a result of a fraudulent or wilful act or default on the part of an employee of the Postal Department. And this was not easy to prove.

In one of the earliest cases, for example (Senior Post Master, GPO, Pune vs Akhil Bharatiya Granhak Panchayat), where the parcel sent by Mr V. P. Sardana from Pune to Mhow was lost in transit, the National Commission had expressed its inability to grant compensation in view of Section 6 of the Indian Post Office Act and had set aside the orders of the lower consumer courts granting compensation to the consumer.

Given this scenario, the apex consumer court’s order (in the case of S. L. Chopra), upholding the State Commission’s decision to grant compensation to the consumer has far reaching significance as it finally paves the way for consumers to haul up post offices for negligent services. In fact, the first step in this direction was taken by the National Commission in September 2001 in the case of Post Master Ranipet HO vs N. B. Janakiraman (FA no 129 of 1995).. In this case, the Postal Department had taken two months to deliver a telegraphic money order, but had argued that the Consumer Forum could not award compensation for its deficient service in view of the exemption from liability granted under Section 48( C ) of the Indian Post Office Act. Dismissing this argument, the National Commission had pointed out that 48 ( C) did not give blank immunity to the post office. If there was fraud or wilful act or default on the part of any officer of the post office, the service provider was liable. And in this case, the default or deficiency on the part of the post office was so extensive that there was no need for the consumer to prove fraudulent or wilful act or default.

Together, these two orders give consumer courts the power to grant compensation against deficient postal services, despite the immunity from liability granted to the Postal Department under the Indian Post Office Act.

HOW I STARTED

‘I spotted a vacuum and filled it’

“IN a short time when I assisted my father in selling batteries, I realised two important things that made a lot of difference to my life and guided my destiny in the years to come. The first lesson that I learnt what that a satisfied customer is a customer for life, while a disgruntled customer is an impediment to growth. Besides, I was convinced that one must pursue a career that one finds interesting. This led to my deviation in the filed of electronics that eventually became my professional forte”, says Mr Manmohan Singh Managing Partner, Kundan Electronics that has given the state many products like the Kundan T.V and Kundan Power Inverters.

In 1971 I had just finished my graduation when my father asked me to join him in marketing Exide batteries for which he was a distributor. I assisted him for six year, but wanting to do something of my own, in August 1977, I got Kundan Electronics registered with the Department of Industries.

Initial phase

Being a simple graduate, I had no background of electronics, but at the same time I was sure that with a poor power situation in the state, an emergency light would sell like hot cakes. Besides, such a product would also boost our battery sales. I set up a small research and development unit and came out with an emergency light. It was a very crude product that had to be switched on and off manually. Over the years I improved the product with the help of my team and my brothers helped in the marketing of the product. Eventually this emergency light took the shape of the power inverter and we became one of the first power inverter manufacturers in the northern region.

Growth led to diversification

Around 1985, we decided to diversify into manufacturing televisions and setup a unit in the city. Kundan TV was the first television manufacturer in northern India to have a tie up with a multinational. Kundan TV became a partner of Toshiba International of Japan for the production of colour televisions.

Major setback

In early 1990 West Bengal Electricity Board got privatised with the Goenka Group taking control. This drastically improved the power situation in the state, shrinking the power inverter market. Around the same time, in Punjab the sales tax exemption granted to the electronic units in the state by the Akali government until March 31, 1990 ended. Due to Governor rule in the state the exemption could not be extended and the very next day on April 1, 1990 most television units in the state had to shut down because the product was no longer competitive in pricing without the sales tax exemption. This caused major losses to Kundan Electronics and the TV unit had to be closed down.

Later the government allowed an exemption in sales tax for a period of ten years, but imposed sales tax on the components used the electronic industry. This amounted to giving with one hand and taking away with the other.

Strategy

The strategy adopted by the company is to ensure quality products. An important part of the power inverter is the batteries, so we got our own batteries designed and get them manufactured strictly as per our own specifications and control to ensure quality and better service. Today, we only consider Su Kam (imported from Taiwan) and Luminous (which is much more expensive) as our competitors despite the presence of hundreds of local brands in the market. We have eliminated middlemen and do direct marketing of our product passing on the price cut to our valued customers.

Future plans

We are contemplating exports to other developing countries that face similar power situation as in India. In the past too we have exported our product to African countries in liaison with Avon Cycles.

(As told to Naveen S. Garewal)

TAX & YOU

by R. N. Lakhotia

Compensation

Q: The facts of my case are:

(I) My daughter was married and had a child;

(II) Unfortunately her husband expired in a road accident;

(III) A case was lodged before the Motor Accident Tribunal;

(IV) The Motor Accident Tribunal awarded certain amount as compensation. The motor accident tribunal accordingly got issued F.D. Rs in the names of my daughter, granddaughter and the Nazir of the court of the Tribunal with the direction that the interest of all these F.D.Rs be credited in the saving bank account of my daughter i.e. the main applicant.

(V) The interest being credited to her saving bank account pertains to the following FDRs:

(a) FDRs issued in her name;

(b) FDRs issued in the name of her minor daughter;

(c) FDRs issued in the name of Nazir of the court;

My question is:

1. Whether the entire compensation money is to be treated as her income liable to Income Tax.

2. Whether the entire interest being credited to her account is taxable in her hands.

— Surinder Bhasin, Jalandhar City

Ans: The compensation amount will not be taxable as income in the hands of your daughter. The interest income on fixed deposit arising to your daughter as well as fixed deposit interest from the fixed deposit in name of her minor daughter would be liable to be taxed as income in the hands of your daughter.

Rebate on house loan

Q: I have purchased a flat after taking a housing loan of Rs 6 lakh from HDFC. In case I give it on rent then will I be entitled for following tax benefits from the rent received:

(i) One fourth amount towards repairs, white washing, etc.

(ii) Full amount paid as interest towards housing loan taken from HDFC.

(iii) Rebate @ 20 per cent (maximum of Rs 20,000) under Section 88 towards repayment of principal amount of housing loan.

Whether drawing and disbursing officer is empowered to give the above benefits, while deducting TDS from the salary? Please clarify the above through your column ‘Tax & You’.

— J.S. Grewal, Patiala

Ans: Now-a-days the deduction from rental income on account of repairs as well as collection charges, etc. is 30 per cent and not 25 per cent. The entire interest on loan paid towards housing loan would be allowed as a deduction. The tax rebate u/s 88 would be permissible @ 20 per cent on maximum sum of Rs 20,000 on account of repayment of the principal amount of housing loan. The disbursing officer is empowered to give the above tax benefit. However, you should of your own submit Form No. 12C to your employer.

Steel industry rues 4 pc entry tax
P. D. Sharma

FOR Punjab industry it is a period of gloom. Prices of steel have gone up by over 25 per cent with prospects of a further rise. The state government is proposing higher taxes to deepen this gloom. Prices of finished products are either stable or showing a downward trend. Power hike is another blow being awaited with bated breath. Banks are using their clout to further tighten grip over customers. Surprisingly the Prime Minister, Mr Atal Behari Vajpayee, is proposing an additional generation of one crore jobs. Does this match with the prevailing situation?

The steel prices are being raised through the monopoly route. Is it the essence of free market economy concept? Since April 4 price hikes have been made totalling 25 per cent. Steel products being manufactured by Punjab’s small scale sector have around 75 per cent raw material content. If the prices of the raw material go up by 25 per cent. What is the end result? Obviously disastrous! Steel makers say that in China the rise in the prices of hot rolled coils is to the tune of Rs 6,000 while they have raised prices by only Rs 3,500 to 4,000. If we have to compare our business situation with that in China or any other country then all business related facts have to be considered. It is Chinese products which are beating Indian products in the international market on the price front. What are the hidden factors?

If international prices have also gone up then why put embargoes on imports. Let users import steel. But is being discouraged. Every imported product must conform to BIS. This also includes steel. For finished products BIS is understandable but why on raw materials like steel. The government is thus encouraging monopolies itself when it is supposed to curb them. To ease the situation the government should encourage steel imports. During April-June 2002 imports of steel have declined by 11 per cent and exports by 10 per cent. If our steel prices are cheaper why has export declined.

The state industry meets its sizeable requirement of steel through local production. Here the Punjab Government has played its part to multiply the woes. It has imposed 4 per cent entry tax on steel scrap etc. Bulk of steel scrap and total spong iron comes from out of the state. These are the essential raw materials for the production of steel. It means steel prices will further go up by 4 per cent. The state government takes the plea that an off set against 4 per cent tax can be availed to make it tax neutral. When there is no sale tax on steel at first stage how can the set off be taken. So the state government should withdraw the entry tax.

MARKET SCAN

by J. C. Anand

LAST fortnight many analysts, including myself, thought that the stock market was poised for a rise. Actually, the market had a major fall. The Sensex was down by 220.35 points, a fall of 6.79 per cent. Partly, this sharp decline in the market was caused by a melt-down in the global stock markets. The US stock market was nearing its 1970 low. The FII’s inflow of funds also dried-up. But the main reason was a highly depressed market sentiment due to erratic monsoons, with floods in eight North Eastern States and drought in the rest of India, particularly in UP, Rajasthan, Haryana and Punjab. The forecast of the Meteorological Department last fortnight that the rains have only been delayed and will be back within the next five days proved wrong.

The corporate results announced during the last fortnight were a mixed lot with lower profits swamping higher profits. The technological shares were particularly badly hit. Wipro’s 1st quarter net profit was lower by 24 per cent at Rs 162.7 crore as against Rs 214 crore for the same period last year. Satyam Computer’s net profit was down by 10.72 per cent. Mascot Systems’ 1st quarter net profit declined by 40 per cent.

Hindustan Lever’s sales fell by 9 per cent and net profit was down by 4 per cent and its Rupee one face-value share, which was quoting a month back at Rs 250/-, closed at Rs 173.60 when the market closed last week. Even when some companies like Tisco and Telco reported good results, the market did not respond and the market prices of even these shares declined. Glaxo’s results for the quarter ended June 30, 2002, indicate 10 per cent fall in the net profit, though its half year results for six months are better. Novartis 2nd quarter results are excellent with its net profit booming-up by 138 per cent (from Rs 7 crore to Rs 16.7 crore). The market did not move up in the case of Novartis but moved down in the case of Glaxo. The corporate results declared for the 1st quarter in general were just moderate. Gwalior Rayon’s results were rather moderate but Indian Rayon’s results were better. Clariant’s net profit was only marginally higher. Gujarat Alkalis & Chemicals registered a net profit of Rs 1.37 crore for the 1st quarter compared with a net loss of Rs 5.28 crore in the corresponding period of the previous year. This share needs to be watched for its 2nd quarter results.

ITC has scored 15.2 per cent growth in next profit but it closed lower (from Rs 636 to 615). There is hardly any scrip which has escaped the market’s depressed sentiment. All gains made in B1 and B2 listed shares during the past three weeks have either got diluted or been completely washed down.

Sensing the market sentiment, I do not expect the market to recover this week. It may even move down lower. There was a press report that the Finance Minister may announce some tax concessions in Parliament this week but it appears unlikely. The drought like conditions in several states have placed greater strain on the Centre’s finances. The market can only recover if the monsoon rains return; otherwise the stock market will dry-down further. It is not the time for the investors to pickup shares for long-term investment. When the stock market stabilises and starts moving up, that will be the appropriate time to make long-term investments.

Inflation rises

New Delhi, July 28
Inflation rate registered a 0.49 per cent increase to touch 2.48 per cent for the week ended July 13 due to hike in primary articles and fuel prices. PTI