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New pharma policy on anvil
RBI asks ICICI Bank to submit report
SEBI opens separate window for block deals
Compact Disc to set up knowledge park
Aviation Notes |
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Investor guidance
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New pharma policy on anvil
New Delhi, September 3 In this regard, a meeting has been called by the Ministry of Chemicals and Fertilisers of the industrial representatives next week, which was earlier scheduled this week, to work out a consensus and discuss the proposed new pharmaceutical policy and the Dr Pranob Sen Committee report submitted recently. Official sources said the proposed policy is expected to be announced soon and would emphasise on strengthening the industry, to develop India as a pharmaceutical hub and ensuring “reasonable prices of life saving drugs for the public.” The ministry is concerned over the exorbitant rise in prices of some essential drugs in recent past, especially for cancer and AIDS diseases. They said faced with strong opposition of the pharmaceutical companies to bring more drugs under price control and the pressure of the Left to check the rising prices of various drugs after the implementation of the amended Patents Act, the government has decided to bring out a new Pharmaceutical policy. Since the industry had strongly opposed the recommendations of the Sandhu Committee set up the ministry, which had desired to bring more drugs under price control, Dr Pranob Sen Committee had been constituted by the Prime Minister Office to suggest alternative mechanism other than price control, to ensure reasonable price of the drugs. The committee has reportedly recommended doing away with the present price control mechanism, while proposing to fix the “ceiling price of the formulation on the basis of weighted average of brand leaders.” According to Minister of Chemicals and Fertlisers Ram Vilas Paswan, the new policy will be based on the recommendations of the Sandhu Committee, Dr Pranob Sen Committee and the feedback from the industry. Critics said the proposals of the committee, if accepted, may lead to increase in drug prices since the price of branded drugs is generally 200 to 500 per cent higher than the generic drugs. The ministry has also proposed the inclusion of 65 bulk drugs under price control regime to comply with the Supreme Court order in a bid to bring all essential drugs under price control. Meanwhile, the National Pharmaceutical Pricing Authority (NPPA) has sent recommendations to the ministry to do away with the exemptions to the small pharmaceutical units, and bring them under price monitoring mechanism. Mr Paswan has maintained that he would try to convince the industry to ensure reasonable prices of essential drugs in the domestic market, while focusing on exports, which are likely to reach Rs 15,000 crore this year.
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RBI asks ICICI Bank to submit report on lapse
Mumbai, September 3 The RBI has also asked the ICICI Bank to explain the causes of the lapses in the bank’s internal control system and what measures are to be taken to rectify these lapses for non-occurrence in the future. ICICI Bank has already initiated an inquiry in its treasury operations following the bank’s breach in the limit of overnight exposure in foreign exchange in the first week of August, which caused a loss of Rs 1 crore to the bank, according to an ICICI official. “Investigations are still going on and we had informed the Central Bank on the issue on August 8,” the official said. The initial investigation led to the irregular trading involving five treasury officials, who were suspended by the bank. According to ICICI officials, two currency traders of the bank had built up long positions in the euro currency, which weakened against the US dollar, resulting in a loss of Rs 1 crore. The development has highlighted the role of internal control system of the country’s second largest commercial bank. The back-office of ICICI bank, which is supposed to monitor the trading limits, was unable to identify the violation of irregularity in trading involving several treasury managers of the bank. The bank has 120 treasury managers and has a daily average market exposure of over Rs 3,000 crore that includes majority deals in government securities, foreign exchange, money market and bullion trading. — UNI
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SEBI opens separate window for block deals
Mumbai, September 3 A trade with a minimum quantity of five lakh shares or a minimum value of Rs 5 crore executed through a single transaction on this separate window of the stock exchange will constitute a `block deal’ as distinguished from `bulk’ deals earlier, the market regulator said in a release here. The window will be kept open for trading for a limited time period of 35 minutes from the beginning of trading hours, i.e. 9.55 am to 10.30 pm, it said, adding a single block deal order has to be for a minimum quantity of five lakh shares or minimum value of Rs 5 crore. — PTI
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Compact Disc to set up knowledge park
Mumbai, September 3 The state-of-the-art park complex will span 10 acres and will have four identical multi-storied business towers, each covering an area of 200,000 sq ft, and an exhibition centre equipped with modern facilities, the company informed the Bombay Stock Exchange. With a capital outlay of Rs 500 crore, the park will help generate 15,000 jobs. For this purpose, the company has held talks with a number of investors and international organisations willing to invest in the park and also mulled over the feasibility of various locations, it said. Compact Disc will use its own facility to develop and create 2D/3D animation, multimedia & special effects for films, corporate presentations, gaming and mobiles in the park. — PTI
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Aviation Notes
INDIAN designers have come of age . Many of them are roaring loudly on the international circuit. Some of them have acquired the reputation of being inferior to none. Air-India’s uniforms and outfits have thus far been praised by its rivals worldwide.
The Indian dresses, designed by Indians, are vibrant, creative, impressive and captivating. Be it saris, churidar-kurtas, pant-tops and skirts, these provide a distinct look to cabin crew. The dresses not only speak loudly of Indianness but subtly touch upon Indian sensibilities. Such being the
scenario, it is not understood why Air-India is looking to ‘Phoren’ when Indian designers are prepared to do a better job. Some designers are up in arms against the Air-India management. Their protests are not unjustified. If Air-India does not opt for Indian designers, who would” One of the disappointed designers asked: “How would chairman and Managing Director V. Thulasidas react if a foreigner is inducted in Air-India as CMD”? Air-India is expected to have a fleet of new and young aircraft. While providing them with new dresses to look smart, the cabin crew should also be impressed upon to display friendliness and courtesies to passengers. Indian designers, Indian image-builders and Indian public relations will make an all-important hat-trick of companies to provide the needed take-off to Air-India, which is eagerly looking for the return ‘maharaja’ days. All three Indian products are reputed. The ‘PR’ outfit, for instance, has partnered various leading companies for 13 years in the country in creating and managing their communication programmes. The new tie-up may help Air-India build the desired image. Currently, Air-India’s reputation is that it is a costly flying bicycle. Its image, according to aviation analysts, may change for the better if its management depends upon Indian outfits instead of going “phoren”. ATF prices As aviation turbine fuel (ATF) prices are expected to rise substantially, the airlines will be
constrained to raise fares. The airlines are undecided whether to raise fares or charge a levy from passengers. Regardless of how it is charged, the passengers will be obliged to pay more. The increase in oil prices — a regular
occurrence — has been causing deep concern to airlines, particularly new carriers. The no-frill airlines will be particularly affected because any increase in prices will upset their plans. As it is, most of private airlines are running in heavy losses, although these don’t show losses in their balance sheets. The over-all airlines scenario is not rosy. Poaching in pilot section continues. Qualified commanders are few and the atmosphere in Indira Gandhi Uran Academy) (Rae Bareli) is far from satisfactory. Some airlines may be forced to recruit foreign pilots. Judging from the existing scenario, there is a possibility of only a few ‘fittest’ airlines to continue operations. The other ambitious carriers may close shop or abandon operation. Aviation analysts say that the running of the airlines is the safest bet to burn money. Air show A ‘Brand India’ pavilion will feature at the ninth International aerospace Exhibition, Dubai, 2005 in November. This will be for the first time India will participate in the exhibition. The Dubai show will provide a lot of scope to Indian aero-companies to display their products.
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Investor guidance by A.N. Shanbhag Q: (1) After my death how do the funds of HUF (Hindu undivided family) get distributed in a situation where I leave behind, my wife and three married daughters having children? I have no son. (2) Since after my death, the HUF stands dissolved as no male member or co-parcener is there who is authorised to sign bank cheques and distribute the money. How can money be withdrawn from bonds, mutual funds? Who is authorised to act? (3) What action can I take now to simplify the legal and procedural complication for withdrawal of money then e.g. nomination, will etc. Of course the best course is to dissolve the HUF now when I am alive but then I lose one more file for income tax assessments and money of the HUF distributed now and invested shall add to my income & my wife’s income as we both are in 30 per cent bracket. — Ramesh Bhatia A: When an existing HUF is reduced to only women members, it can still continue as an HUF. This is in view of the existence of the potential coparcenary as any widow can induct a coparcener into the family by adoption. Your case is a little complicated because all your daughters are married and have ceased to be members of your HUF. If we understand you correctly, your wife will be the only surviving member of your HUF. A single person, male or female, cannot constitute an HUF. A family with single individual is a contradiction in terms. An individual, who has obtained a share on partition of a joint family, has potentialities of creating a joint family; but until he marries, he alone cannot be considered as a joint family. There must be at least two members to constitute a family. All said and done, you will do well to continue with your HUF and derive the benefit of an additional file for income tax. After your death, if your wife survives you, she has to show the income of the HUF as her individual income. Tax on gift
Q: I want to make a gift to my maternal aunt. One of my CA friends warned me that the transaction could be taxable for my aunt. However, I was under the impression that gifts made between relatives are still exempted. Can you kindly clarify? —- Nilesh A:
This is an excellent question since it catches one of the anomalies in the law. Budget 2004 sought to tax gifts between unrelated parties by specifying that the donor has to be a relative of the donee. However, sometimes, this gives rise to the anomalous situation where between two parties, A qualifies to be a relative of B while B may not qualify to be a relative of A! The law is as under : Where any sum of money exceeding Rs 25,000 (Rs 50,000 from 1.4.06) is received without consideration by an individual or an HUF in any previous year from any person or persons on or after September 1, 2004, the whole of such sum will be charged to income tax of the recipient under the head, income from other sources. “Provided that this clause shall not apply to any sum of money received a) from any relative; or b) on the occasion of the marriage of the individual; or c) under a will or by way of inheritance; or d) in contemplation of death of the payer. e) from any local authority. f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in Sec. 10(23). g) from any charitable trust or institution. “Relative” means i) spouse of the individual; ii) brother or sister of the individual; iii) brother or sister of spouse of the individual; iv) brother or sister of either parents of the individual; v) any lineal ascendant or descendant of the individual; vi) any lineal ascendant or descendant of the spouse of the individual; vii) spouse of the persons referred in clauses (ii) to (vi).” In your case, you intend to give a gift to your maternal aunt. Since you are the donor, you need to qualify as a relative of the recipient as per the above definition. You will observe that you don’t fit in any one of seven clauses. However, if it was your maternal aunt that was intending to give you a gift, you will notice that she will qualify as your relative by means of clause (iv) above. Therefore, the conclusion one can draw is that you are not a relative of your maternal aunt while she is indeed your relative! To conclude, as per the provisions of the law, the gift that you give your maternal aunt will indeed be taxable in her hands.
Section 80 CCA
Q: I was maintaining funds under NSS, 1987, since 1989 and the total amount accumulated as on June 13, 2005, was withdrawn. Rs 2,59,879 which was taxed at the rate of 20 per cent plus 5 per cent surcharge on the full amount, which is inclusive of principle and interest. I am a tax assessee and would like to know whether I am entitled to have indexing benefit . As such the NSS over the years was used by me as only savings option rather than tax savings. —- M R I Magdum A:
The entire amount is required to be added to your income and tax paid at the rate applicable to you. Obviously, you will go into the 30 per cent tax bracket. Consequently, you will have to pay tax over and above the tax deducted at source. However there is a ray of hope. The relevant portion of Section 80CCA states — “Where any amount standing to the credit of the assessee under the scheme in respect of which a deduction has been allowed together with the interest accrued on such amount is withdrawn in whole or in part in any previous year, an amount equal to the whole of the amount shall be deemed to be the income of the assessee...”. If we have understood you correctly, you have not claimed any deduction from your income for the year during which contributions were made. In that case, you may claim that only the interest portion is taxable. The authors may be contacted at
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