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FM to convince Left that FDI in retail is right
Guidant accepts J&J offer of $24.2 billion
Sonalika promises hydrogen car by 2008
Aviation
Notes
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FM to convince Left that FDI in retail is right
New Delhi, January 14 “I think the tax rates are reasonable... I am not going to increase any rate. I am going to improve the tax administration,” he said, while emphasising that the retail sector would be opened up to FDI and the dialogue with Left parties in this regard was on course. “I can’t promise a date but we will begin to see consensus on opening up the retail sector in a selective manner. The consensus is in favour of opening up retail sector and the question is in which part of retail sector will you allow it (FDI),” Chidambaram told Karan Thapar in an interview for CNN-IBN channel. “FDI will come. It is already coming in cash and carry sector. It has come in the wholesale sector. Retail is the next step. It will come... We are looking at several options. I think the Commerce Minister (Kamal Nath) has spoken about it. Single brand is one option. Metro cities are another option. These options are being discussed.” The government needed to find a large number of jobs in farm, non-farm, in manufacturing sector and in the low- endeavour services sector, he said emphasising “that is why we are arguing for opening up the retail sector.” However, he made it clear he was not promising anything at this stage on retail in FDI and that he would persuade Left on this issue. On disinvestment, Mr Chidambaram said his government has reached an agreement with Left that cash-rich navratna PSUs would be kept out. In non-navratnas, the government could divest small portions of equity to raise funds and put it in the National Investment Fund. “What is important is that we able to identify three or four companies to begin the disinvestnemt this year. The answer is Yes,” he said, adding that disinvestment is a continuous programme until we build a huge fund. He declined to give names of the PSUs that are likely to divested this year, saying “We don’t announce these decisions.
— PTI
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Guidant accepts J&J offer of $24.2 billion
Boston, January 14 The joint announcement last night of J&J’s bid and Guidant’s acceptance came about 24 hours after Boston Scientific increased its offer by about $330 million (Euro 274.11 million) to $24.98 billion (Euro 20.75 billion), and about three hours after passage of a deadline Boston Scientific had set for Guidant to respond. The Boards of both J&J and Guidant have unanimously approved the new J&J offer, which Guidant shareholders will consider in a January 31 vote, the companies said. Guidant’s Board had previously accepted J&J’s earlier $23.2 billion (Euro19.27 billion) offer presented Wednesday night, but Boston Scientific’s move to raise its proposal Thursday night prompted J&J to increase its bid a second time. Yesterday’s move came after more than a year of contentious deal-making between Johnson & Johnson and Indianapolis-based Guidant, which sued J&J in November to try to force the New Brunswick, New Jersey-based company, to complete its acquisition of the device maker following recalls and regulatory investigations involving Guidant products. J&J reduced its original $25.4 billion (Euro 21.1 billion) offer to $21.5 billion (Euro17.86 billion). Boston Scientific entered the picture with an unsolicited offer December 5.
— AP
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Sonalika promises hydrogen car by 2008
New Delhi, January 14 “In collaboration with Banaras Hindu University (BHU) scientists, our engineering team is working on a hydrogen-driven four-wheeler. The work is at a fairly advanced stage, and we are confident to showcase it within the next two years,” Mr L.D. Mittal, Chairman, Sonalika Group, told The Tribune at AutoExpo here today. He said the company was hopeful that on the pattern of CNG fuel, the government would promote hydrogen as the future fuel for the country. The company is committed to bring out hydrogen-run vehicle on roads at the competitive price with same features of conventional vehicles. “Our target is to produce a hydrogen-driven car at a price of around Rs 5 lakh, which will be able to use conventional fuel as well,” said Mr Mittal. The company has also tied up, he said, with the Ministry of Non-Conventional Energy Sources and IIT, Delhi, to develop a compressed air fuelled car, perhaps first time in the world, but the work is only at an initial stage. Delphi plans Rs 500-cr expansion
Delphi-TVS Diesel Systems, India’s largest supplier of rotary diesel fuel injection systems for passenger cars, today announced to invest Rs 500 crore to manufacture common rail fuel injection systems and set up a state-of-the-art technical centre for carrying out product development activities in India. “We are targeting to achieve a sales level of Rs 1,200 crore by 2010 from Rs 330 crore today”, said Mr T K Balaji, MD, Delphi-TVS Diesel Systems, at a press conference at the 8th Auto Expo today. Delphi-TVS plans to invest Rs.50 crore for the creation of a state-of-the-art technical centre at its existing facility in Chennai. This centre will complement the current engineering facilities.
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Private players plan code-sharing pact to stay afloat
by K.R. Wadhwaney Two national airlines, Indian and Air-India have been bearing the weight of intense competition, occasionally unethical, from foreign carriers and private operators. There is, however, a minor difference. Indian has already taken off towards stabilisation, while Air-India is on the anvil of finding its feet as it inked a huge 68-plane deal with Boeing. For the third successive quarter ending on December 31, 2005, Indian has posted a sizable net profit. The steady growth has been rendered steadier with the unified efforts. The study shows that the airline’s financial health has recorded improvement not by acquiring heavy passenger-load but by employing effective economy measures. A bulk of savings has been brought about by effective channelising of insurance premium. Expenses on two vital sections — cockpit and cabin crews — have been kept under check while perks and over-time payments have been reduced considerably. The Alliance Air (subsidiary of Indian) chief Anil Goyal is more than satisfied with his airlines doings although he will be retiring in another 3 to 4 months. Despite rising complaints from passengers for inordinate delays (passengers spent five hours inside stationary plane), unwarranted trouble between male and female in-flight supervisors and lack of rapport between executives and operation department, Air-India is chugging along. As new fleet (in phases) joins the family, the ‘maharaja’ may once again breathe free. What is, however, hurting the airline is the total lack of discipline in the organisation. The UK regional director, Capt A.K. Sharma, for example, has overstayed by more than a year. He has been served with transfer order. Even a substitute official had flown from Paris to London to take charge. But Capt Sharma has refused to more out of London with Air-India and Ministry of Civil Aviation no more than mute observers. When such indiscipline is obtaining in the airline, one can imagine what all must be happening at the headquarters in Mumbai. There is nothing much to rave about health of the private operators. While two private airlines may enter into an alliance, some others are trying to enter into code-sharing to keep afloat. Whatever may be the claims of some airline barons, the position of private airlines is very fluid. A new entrant in airline trade continues to be on the ‘conceiving posture’. The airline’s operational birth is delayed s the manufacturer is unable to honour the commitment of “schedule of delivery of aircraft”. The delay of six months or more is causing innumerable problems to the airline bosses because they have already appointed pilots, operational and other staff. If airline can be liable to pay for the delayed flights, why cannot manufacturers be asked to compensate the airlines for the delayed delivery. The flying industry continues to stay in turmoil. The passengers are totally neglected on the ground and in air. A reputed foreign airlines treated Indian passengers with scant respect at Paris Airport on January 11, 2006. Because of airline’s mishandling, some passengers missed connecting flights. When a passenger requested for being accommodated on earlier flight as his father had expired, the airline official had the temerity to say: “That is not my problem”. The flying has become totally impersonal and passengers are nobody’s concern. Gone are the days when passengers were treated with care and respect.
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Bonus stripping not applicable on equity shares
by A.N. Shanbhag Q: I bought 100 shares on August 20, 2005 @ Rs 500 per share of company A . The company declared 1:1 bonus. As a result 100 bonus shares were credited in my DP account. I sold the original 100 shares @ Rs 350 on November 26, 2005 (markets were open on that day which was Saturday). Can I book STCL of Rs 15,000 and also, if I buy more shares of same company and sell with profit, shall my bonus shares be treated to be sold first. What do I have to do so that my bonus shares remain intact and I may continue to buy and sell shares of company A. 2. I bought shares of a company on 10 different dates (from October 10, 2004 to March 31, 2005) and variable rates (Rs 20 to 35) and accumulated 12,000 shares. Now I am selling these in piecemeal (small lots) according to the market movement. Some transactions are within holding period of one year and others are now after one year. How shall I calculate STCG and LTCG on these? — Neha Sharma A: Yes, you can claim STCL. Bonus stripping is not applicable for equity shares. For dematted shares, the FIFO system will apply and hence if you have dematted the bonus shares first, then the same will be considered to be sold first. 2. Again, if the shares are dematted, then the FIFO system will apply. Shares held for more than 12 months would be considered long-term, else the shares are short-term assets. Mutual funds
Q: What tax exemptions are applicable on the amount put in tax-saving mutual funds? Also, what is the maximum limit one can put in the tax-saving mutual funds for saving purposes? — Shravan A: Under Section 80C, contributions by an individual or HUF to some specified schemes (PPF, LIC, NSC, ELSS, etc.) up to an aggregate limit of Rs 1 lakh qualify for a deduction from gross total income. There are no ceilings on deductions for individual schemes, unless the rules of the schemes provide for their own limits. The limit of up to Rs. 1 lakh is only for the purpose of deduction from gross total income for arriving at the total income on which tax is leviable. There is no limit on the amount one can put in the
ELSS.
Open-ended ELSS
Q: I have started investing in ELSS schemes of MF by opting for Systematic Investment Plan (SIP) for Rs 2,500 per month. The government has again given a clarification that all existing ELSS would be treated as open-ended with three years lock-in. Till which date would this be applicable? Will all ELSS in future be close-ended with a 10 years lock-in? You always suggest treating mutual fund investments at least for five to 10 years. You are absolutely right but if I want to start another SIP or want to invest lump-sum next year (as I will get arrears of salary rise), shall I consider ELSS or regular equity funds? — Nilesh A:
Frankly, as of now we don’t have answers to some questions. The open-ended schemes were introduced by the authorities in December 1998, replacing the 10-year close-ended product, presumably to many problems such as — 1. Understandably, the MFs launched their new schemes every year at the fag end of the financial year. Therefore, the investor could not invest as and when he had funds on hand. This forced him to keep the funds idle for long. 2. The performance of the schemes got linked with the market conditions prevailing at the end of the year. 3. The investor could not pick and choose any scheme since he neither knew the track record nor the portfolio, which got constructed only after the closure of the offer of the scheme. 4. At the end of the term of 10 years, the MF would be forced to unload all its holdings, irrespective of the then prevailing market conditions and the investor would be forced to receive the money, even if he did not need it at that point of time. Open-ended ELSS has added value to its structure. Reintroduction of the close-ended schemes without any change in its previous structure is tantamount to going back to square one without any rhyme or reason. There is already another notification clarifying that the investments in open-ended ELSS existing or newly-introduced ones will also be eligible for deduction u/s 80C. We suggest you may contribute to an open-ended ELSS, which has performed well, through SIP.
Investment in bonds
Q: I request you to kindly guide me on the following peculiar tax matter for my wife (below 60 years) for 2006-07: Net long-term capital gains (LTCG) on sale of plot is about Rs 3 lakh after set off B/f long-term capital loss (LTCL) & difference of her exempted income limit of Rs 1,35,000 (less other estimated income for the year of Rs. 60,000). She has already invested Rs 2 lakh in bonds u/s 54EC. Can she adjust Rs 1 lakh LTCG by investing in mutual fund like equity linked savings schemes (ELSS) u/s 80C? Or has she to invest all LTCG in bonds in order not to pay any LTCG tax? Sale of plot was in end June, 2005. So investment in bonds, if any, has to be made by end December, 2005. Please advise accordingly. — Vispi Dhala A:
Long-term capital gains are to be treated as a separate block and Section 80C deduction is not available for the same. Hence, she will have to invest in the bonds. This investment has to be made within 6 months of sale. Therefore, if she has sold the plot in June 2005, the investment in bonds has to be completed by December, 2005.
POs and NRIs
Q: I shall be grateful if you kindly advise the exact date when post office investment was stopped for NRIs. I am an NRI and invested some amount in National Savings Certificates (NSCs) in November 2002. The postal authorities did not object to its investment as I mentioned my local (Indian) address as well as foreign address while submitting application for opening/purchasing NSCs in India during my visit to India in November 2002. I understand such restriction was proposed in the Budget w.e.f. April 1, 2003 and earlier such investment and income on such investment was free of income tax for NRIs Kindly clarify the exact date of stopping of such investment in NSCs by NRIs by the Government of India. — Lajpat Rai Thakral A:
Sale to NRIs of NSC VIII is not allowed to NRIs (notification dated July 25, 2003). Yes, you are right. The accounts opened earlier continue to be valid. These are not and were not tax-free for either residents or NRIs. Incidentally, the law does not hold any post office or accounts office responsible in case of issue of certificates or opening of accounts in irregular cases. The law merely states that when the irregularity comes to the notice of the issuing office, the amount may be refunded to the account holder without any payment of interest.
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