Don’t hike rates, Punjab warns bus chassis makers
Chandigarh, February 20
The Punjab Government issued a warning to manufacturers of bus chassis and bus bodies against any move to hike the rates following an expected rise in their demand from beneficiaries of the Golden Rozgar Yojana.

Jaiprakash to offload equity in subsidiary
Shimla, February 20
Jaiprakash Associates Limited, the flagship company of the Rs 3,000-crore Jaypee Group of Industries, has decided to offload 36.66 per cent of its equity shares in its wholly-owned subsidiary, Jaiprakash Hydropower.

Market scan

Transaction tax likely to be raised
The market has stayed almost flat during the last fortnight. Last Friday when the Sensex closed at 6584, it was only 48 points higher than its reading on February 7 (Monday), though the Sensex crossed the 6700-point high during this period. There was a lot of volatility and profit-booking.

• Vikas WSP Ltd

• Glaxo Pharma

Tax advice

Capital gain on sale of inherited property
Q. I seek your advice for the capital gain on the share of sale proceeds of property inherited by me as per the will. An amount of Rs 13,00,000 was received by me as my share of 25 per cent of the total amount of sale proceeds of my parental house in May 2004.

• Selling flat

• Capital gain Rs 4,52,559

Mumbai, February 20
After bringing mobile handsets within reach of rickshaw-pullers, Reliance Infocomm is going to launch Home Netway—an indigenously designed technological product that would converge television, video, Internet and telephony—by the year-end.

It will bring the Internet, cable channels and telephones within the reach of millions of Indian households, urban and rural, at an unthinkable price. May be below the monthly cable charges.

“Home Netway has been developed by an in-house team of Reliance Infocomm at the Dhirubhai Ambani Knowledge Centre here, and is currently undergoing testing at various locations, including Jamnagar. It is likely to be rolled out towards the end of this year,” says Mr Ajay Baijal, Group Head-Channels, (Wireless Business) Reliance Infocomm, while showcasing the technology at the company headquarters.

Unlike DTH technology that uses satellite for airing TV signals, the Home Netway is designed to utilise over 60,000-km optical network laid down by the company (to offer its mobile services) throughout the country. The company is now laying optical fibre in over 5,000 towns that would empower it offer the services in about 65 per cent of the rural habitats across the country during current year as well.

Riding on bandwidth of 100 MBPS, Netway will enable people to watch all present TV channels and several new ones with the facility of recording, video-on-demand, and facilities of the Internet, e-commerce, distance health care and telephony by using their present TV-sets or PCs without undergoing harassment from the cable operators.

What the customers will have to do, is just connect a “Choice pad and choicer” (like a set top box and remote) designed and manufactured by the Reliance itself with their home TV sets. To get the services, they will have to take a connection from the company to get signals at their home through optical fibre network.

Netway is designed to provide sub-titles for movies and translation for songs in 10 Indian languages including Punjabi, Hindi, Marathi, Bangla and Gujarati. The choicer connected with the TV set will work like keyboard, remote and telephone that could be used even for video-conferencing with the other Netway users.

After laying down optical fibre at the street level, the company has plans to connect households or to tie up with local partners to offer services.

One may think that costs of this product will be out of range of most of the customers. “No, no” says Mr Baijal: “ We plan to offer Netway at a much cheaper price than the Internet or cable connections though final prices are still to be worked out. Like Reliance mobiles, our aim is to bring this digital experience hitherto inexperienced anywhere in the world to the lowest income group of the country.”

While showing the prototype models of the Home Netway, Mr Mahesh Prasad, President, Applications Solutions & Content Group, says: “The new technology will do away with the requirement of VCD/DVD players and the need to visit libraries to borrow discs to watch favourite movies. The company will soon enter into an agreement with content providers and may develop in-house contents to meet the requirements of customers.”

The state-of the-art choicer pad, with 40 GB memory capable of storing nearly 10 hours of programming, will enable users to experience functions like “pausing live TV, live and pre-programmed digital recording and electronic programme guide.”

Mr Mukesh Ambani, Chairman of the company, is hopeful that the convergence of the telephony, Internet and TV would open up vast business opportunities for the group. It may be used to provide “on-demand health services, marketing of consumer durable and other services that cannot even be imagined today.

Market scan

by J.C. Anand

Transaction tax likely to be raised

The market has stayed almost flat during the last fortnight. Last Friday when the Sensex closed at 6584, it was only 48 points higher than its reading on February 7 (Monday), though the Sensex crossed the 6700-point high during this period. There was a lot of volatility and profit-booking. Both investors and traders were unwilling to build up long positions. The main reason was uncertainty about the Union Budget which is due to be presented in Parliament on February 28.

The Finance Minister is on the record that there will be radical changes in the Budget proposals. It is reported that the Communist parties went long-term capital gains tax on securities to be revived. This is unlikely to be accepted by the Finance Minister but it is almost certain that the security transaction tax will be raised upward, both of delivery and non-delivery-based transactions in the stock exchanges. Income tax slabs may be revised on higher incomes. Service tax might be both extended and rationalised.

The stock market is likely to stay flat till the Budget proposals are announced in Parliament. The economy is doing well and the government expects the economy to grow by 6.9 per cent for this fiscal year, though this would be lower than the last year’s growth rate of 8.5 per cent. The inflation rate has also eased down to 5.01 per cent for the week ended February 5. The FIIs investments in India till now are on a positive note. Public response to Jet Airways IPO has been excellent. It was fully subscribed within minutes of the opening day and it is estimated that it has already been subscribed 5.2 times.

Vikas WSP Ltd

This company was at one time doing very well and its Rs 10 face value scrip was quoting around Rs 550 to Rs 600. When the stock split of Rs 10 face value to Re 1 face value was made by the company, even then the Re 1 face value scrip was transacted around Rs 50-70 per script. It was claimed that the company was the third largest in the world in the Guard Gum industry.

Some two years back, however, dark clouds of disputes among promoters and bad management began to descend on the company. It almost disappeared from the stock market except for some ugly rumours about it. The shareholders, excepting a few, did not receive their annual reports or any information about the company. Now, according to an annual report received by a shareholder for the year ended 31 March 2004, the company has made a net profit after tax Rs 977.43 crore as against a loss of Rs 7945.71 crore in the previous year. The carry-forward loss now is Rs 13,994,075,882. It is still unlisted on the stock exchanges. The subscribed paid-up capital is Rs 106,202,240 but its “general reserve“ stands at Rs 2,383,500,000 and “premium reserve” at Rs 578795925.

During the last fortnight, there was a lot of activity about buying equity shares of the company from the shareholders at around Rs 10 to 12 for Re 1 face value script. It is not clear whether these purchases were being made by the management or some Jaipur-based persons who are keen to take over the company.

Glaxo Pharma

On February 15, Glaxo Pharma announced its annual results for the year ended December 31, 2004. Its net profit stands at Rs 33,309 lakh on the equity capital of Rs 8,732 lakh. Its EPS stands at Rs 38.1. It has announced a dividend of Rs 24 per share (of which Rs 11 is a special one-time dividend). The company is also considering a buy-back proposal.

The scrip is a good investment at Rs 706 per share as the company has excellent management and the leadership position in the pharma market in India with prospects of introducing patented new medicines and buy-back prospect.

Tax advice

by S.C. Vasudeva

Capital gain on sale of inherited property

Q. I seek your advice for the capital gain on the share of sale proceeds of property inherited by me as per the will. An amount of Rs 13,00,000 was received by me as my share of 25 per cent of the total amount of sale proceeds of my parental house in May 2004. This house was constructed during 1961-62. An amount of Rs 60,000 was spent on the cost of the plot and the construction thereon. The value of this property as on April 1 1971 was worked out to be Rs 1,35,800 as per the valuation report made by a registered valuer, in February 1992. I request you to kindly advise me on the following points:

(a) What will be the capital gain on the amount received by me?

(b) What is my liability on this LTCG?

(c) Can this LTCG be set off against the Long Term Capital Loss of Rs 1,68,244 incurred by me by sale of residential flat during April 2002 This loss has been shown in the IT returns for the assessment year 2003-04 and carried over for next years. No mention of this loss has been mentioned for the IT returns for the assessment year 2004-05.

(d) What is my liability for the cash amount and the shares of the companies inherited by me as per the will of the deceased?

— Rakesh Verma

A. (a) & (b) For computation of the capital gain, in addition to the details given by you, I need the year in which the property has been inherited by you because the cost inflation index of that year would have to be taken for computing the capital gain. There are two ITAT decisions, which have held that cost inflation index can be taken on the basis of original date of holding of the asset. As the issue is not free from doubt it will be better to compute the capital gain on the basis of date you inherited the property to avoid litigation.

© As per the provisions of the Act, the loss is carried forward each year and, therefore, if you have not mentioned the same in the return for AY 2004-05, you are advised to file a revised return first specifying that the loss of AY 2003-04 is being carried forward for set off in the subsequent year. Thereafter, in your return for AY 2005-06 you can set off the loss of Rs 1,68,244.

(d) Amount received as cash as per the will of a deceased person is not taxable as income. The shares inherited by you would also not be taxable.

Selling flat

Q. I was allotted a flat by DDA at a cost of Rs 98,000 in March 1989. I spent about Rs 10,000 on its improvement in the year 1989 (April/ May). The flat was initially leasehold but later but later on I got converted into freehold after making a payment of Rs 6,000 in the year 1998 and also spent Rs 17,000 in getting the conveyance deed from the department in 2001. Now I want to sell the property for which I am likely to get Rs 8 lakh.

My question is what shall be the capital gain, if I sell the property. In order to save from paying any tax, what is the best course (option) available? If I want to re-invest in a property, in how much period I may have to do that?

My son is working in a bank and wants to buy a flat by raising loan from employer but that is not enough to meet the cost. Can I give him the sale proceeds of my property and get capital gain tax exemption?

If it is not permitted, in that case I may become co-owner with my son and will that give me exemption from capital gain tax? Kindly advise.

— R.K. Sharma

A. (a) Amount of capital gain 8,00,000

Sale consideration

Less: Index cost of acquisition & improvement

98,000 x 480 2,92,174

161

10,000 x 480 27,907

172

6,000 x 480 8,205

351

17,000 x 480 19,155 3,47,441

426

Capital gain Rs 4,52,559

(b) In order to avoid payment of capital gains tax you may invest the proceeds either in specified bonds or another residential house property. The specified bonds have to be purchased within six months of the date of transfer

(c) The capital gain on the sale of property used for residence, if invested either one year before or two years after the date of transfer for purchase of a residential house or in construction of a residential house within a period of three years of the date of transfer will be exempt from tax. The amount of gain not so appropriated before the date of filing the return in which the capital gain is earned will have to be deposited before such date in a bank or institution as specified and utilised as per the notified scheme. The return of income has to be accompanied by the proof of such deposit.

(d) No exemption would be available if the amount is given to your son for the construction of a house.

(e) The capital gain has to be invested in purchase or construction of a house that has earned such gain. If you become co-owner, investment in the residential house in respect of your share only would be exempted from tax.