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Merger of Reliance Info into RCoVL okayed
GAIL discontinues marketing margin
Kinetic to unveil 170cc scooter
Emaar-MGF plans $4 b investment
Market
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Merger of Reliance Info into RCoVL okayed
Mumbai, March 12 Consequently, group's operations in mobile (GSM), long-distance telephony and international long- distance services, voice and data businesses have been brought under one single entity RCoVL within a week of its listing, the Reliance ADAG group said in a statement. The decision to reorganise the telecom business, where Reliance Telecom Ltd and Reliance Communications Infrastructure Ltd have become the 100 per cent subsidiary of RCoVL, was taken at the company's Board which met this afternoon under the chairmanship of Mr Anil Ambani. RCoVL said in a statement after the meeting that "India's leading and fastest growing integrated communications services company today approved a re-organisation of the ownership structure of all its major operating companies, valued at Rs 61,000 crore or $13.8 billion. Immediately after the decision, Mr Ambani said, "The proposed reorganisation upholds the highest principles of transparency, fairness and corporate governance and is a historic milestone in our endeavour to create the most valuable India- based global communications services company." While the reorganisation would not entail any cash outgo and be effected through share swapping only, the valuation of the telecommunication businesses, with over 19 million subscribers was done after two independent international firms KPMG and JM Morgan Stanley submitted their report. As a result of this exercise, interests of all shareholders would be converged into a single listed entity in the most transparent manner, the company statement said adding this would also create synergies and eliminate areas of potential conflict of interest and related party transactions. Consequently, the promoters' equity would increase to 63 per cent from about 40 per cent now in RCoVL. Foreign investors would hold 18 per cent equity while retail Indian investors would have another 14 per cent shares in the company besides 5 per cent holding of the domestic institutions and mutual funds. The increase in promoters' stake follows their decision to transfer their 64 per cent equity in Reliance Telecom, 55 per cent in RCIL and 35 per cent in Reliance Infocomm in the reorganised RCoVL that would come into place within four months after all necessary approvals are obtained. The proposed scheme of reorganisation will be prospective and take full effect from April 1, 2006, it said. RCoVL's existing equity shares would continue to trade normally on the stock exchanges with no impact on liquidity at any point of time during the proposed reorganisation.
— PTI
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GAIL discontinues marketing margin
New Delhi, March 12 This decision follows the Petroleum Ministry’s communication to GAIL, ONGC and OIL not to levy the margin on all categories of consumers covered under the Gas Pricing order of June. GAIL said it had been levying the marketing margin only on those customers paying the market-related price in terms of the gas pricing order and not on those customers to whom gas was sold at the APM rate. The financial implication of less than Rs 40 crore on GAIL due to the discontinuation of the marketing margin on its MRP customers is expected to be substantially mitigated by the income from the sale of sweet crude from its Cambay basin oilfield, the commercial sale of which commenced in September, 2005. Oil Ministry seeks explanation
The Petroleum Ministry has pulled up GAIL for making “false” claims on a tieup for LNG to restart the Dabhol power project, saying that such price-
sensitive news distorted the market perception. Reacting to reports that GAIL has tied up 2.5 million tonnes of LNG for Dabhol with first cargo of about 500,000 tonnes expected to land at Hazira in June, Petroleum Secretary M. S. Srinivasan on March 9 sought explanation from company Chairman P. Banerjee for “such irresponsible utterances”. “As far as we know, GAIL has been trying unsuccessfully for more than one year to tie up gas for the Dabhol power project on a short- term or long- term basis. It is in this context that Petronet LNG
Ltd (PLL) recently went to Qatar and has arranged LNG for two-and-a-half years commencing December ,2006, giving a breather to GAIL,” Mr Srinivasan wrote. Mr Srinivasan asked Mr Banerjee to identify the senior official of GAIL making claims that GAIL had arranged for LNG. Mr Banerjee, however, did not take calls for comment. PLL Managing Director P. Dasgupta said : Nobody has set foot into the RasGas office in Qatar from 2003 other than PLL. Some people have not even visited Qatar since then,” he said.
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Kinetic to unveil 170cc scooter
New Delhi, March 12 Kinetic plans to beef up its presence in the scooter market with a series of new launches. “We plan to launch the 170-cc scooter this month and follow this up with another new scooter eight months down the line which will be from our Taiwanese partner Sanyang Industry Co Ltd. The company planned to launch two models every
year. — PTI
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Emaar-MGF plans $4 b investment
New Delhi, March 12 “We have already signed an agreement with Punjab to develop integrated township projects with a capital outlay of Rs 4,000 crore,” Mr Shravan Gupta, MD, Emaar-MGF, said, adding that in Mohali alone an integrated township would come up spread over 2,000 acres. Besides projects in Mohali, Emaar-MGF would also take up projects in Ludhiana, Jalandhar and Amritsar with an initial investment of Rs 1,000 crore.
— PTI
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Market update by Lalit Batra Markets continued their upward move amid intense volatility. Sensex went on to make a new life-time high last week, ending with 1.6 per cent gains to close at 10,765. Nifty, too, gained 1.2 per cent to close at 3,183. Reliance Communications Venture Limited (RCVL), the telecom investments holding arm of the Anil Dhirubhai Ambani Group (ADAG), got listed this week. RCVL is the holding company of the three telecom ventures of the ADAG, Reliance Infocomm (RIC), Reliance Telecom (RTL) and Reliance Communications Infrastructure (RCIL). Last Wednesday’s sharp fall in the market proved a temporary blip to the prolonged bull run witnessed over the past few months. Sustained FII inflow remains the key driver of the ongoing bull run. The rally on the bourses was accentuated after the announcement of the Union Budget, 2006-07, on the reckoning that focus on infrastructure and rural growth in the budget would lead to continued strong economic growth. Strong liquidity has ensured that correction remained illusive. Inflows into emerging market funds remain strong and a large amount of money is being raised overseas for investment into Indian equities. I am of the view that investors should continue to book profit wherever the valuations seem rich. Associated Cement Companies (ACC) ACC is the oldest and the second largest cement manufacturer in the country. ACC commands 12 per cent industry capacity market share and has a pan India presence. India’s cement market is second largest in the world, next only to China. Currently, the industry is going through a consolidation phase with the top five players now accounting for nearly 50 per cent of the industry capacity. Cement producers are optimistic about the future of the industry as the demand for cement is expected to sustain at 8 per cent in the coming two or three years. This is primarily on the back of continued strong demand from the housing sector. The price of cement has been on the rise for the past couple of months took the retail price reportedly touching Rs 200 per bag in select markets of the country. This current strength could be attributed to the favourable market sentiment towards cement sector stock. While I continue to believe that the Indian cement sector is in for good times, considering the strong demand for the commodity on the back of housing and infrastructure activities, valuations of most cement stocks makes one wary. The ACC stock has more than doubled in the past one year from a low of Rs 318 to the current level of Rs 760. The stock has, in fact, gained close to 30 per cent in the past one month and is now quoting at a discounting of 26 times the earning, which seems high for a stock of a cyclic industry. Considering the valuation of the ACC stock, the investor should book profit at the current level.
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Tax Advice person with severe disability by S.C. Vasudeva Q. What is maximum non-taxable income for a person with more than 70% permanent, disability MS (Multiple Scheorosis – Cerebral Palsy for F.Y. 2005-06. (i) Whether income from equity dividends is bracketed with other income or not? — S.S. Bhatia, Ludhiana A. The answers to your queries are as under: (i) The maximum amount which is not chargeable to income tax in the case of an individual is Rs.1 lakh for the assessment year 2006-07. The same limit is proposed by the Finance Bill, 2006, for the assessment year 2007-08. In the case of a person with more than 70 per cent permanent disability, the aforesaid maximum limit is not reduced. However, a person suffering from a severe disability is entitled to a deduction of Rs 75,000/- from his total income, subject to furnishing a copy of the certificate issued by the medical authority in the form and manner prescribed in the Income Tax Rules, 1962, along with the return of income in respect of the assessment year for which the deduction is claimed. A person with severe disability means: (a) a person with eighty per cent or more of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996); or (b) a person with severe disability referred to in clause (o) of section 2 or the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999). (ii) The income from equity dividend is exempt under section 10(34) of the Act and, therefore, it would not be bracketed with any other income. Tax liability Q. Kindly compute income tax for the year ended 31.03.2005 (Assessment year 2005-06): Commission from L.I.C. 21,265/- Interest income from firm 28,629/- Short-Term Capital Gain from shares before 1.10.2004, 64,591/- Short-Term Capital Gain from shares after 1.10.2004, 93,472/- Accrued Interest on NSC 6,725/- Interest from IDBI – Bond 1,850/- Saving Bank Interest 1,863/- I have deposited Rs 50,000/- in P.P.F. A/c + Paid LIC premium Rs 16,216/-. — Surinder Kaur, Ludhiana A.
On the basis of the figures given in the query the total income, including short-term capital gain earned prior to 01.10.2004, works out at 2,07,957/- on which a total tax of Rs 10,744/- would work out for the assessment year 2005-06 after allowing a rebate of Rs 10,500/- for amounts covered under section 88. An education cess of 2% is chargeable on the aforesaid amount. The total tax payable would thus be 10,959/-. No computation has been made with regard to the interest payable under section 234A, 234B and 234C as facts in this regard are not available in the query. It may be added that for the purpose of above computation the interest from firm has been presumed to be an income from other sources.
NRI and PAN Q. I hold an Indian passport but serving on a Russian visa for the past 15 years. I don’t have Indian PAN as I don’t know whether I should do it or not. I have been repatriating every month to the extent of Rs1 lakh every month to India in dollars financing a loan to a DDA house. The loan will be over by year-end but I want to continue to repatriate the same amount to my NRI savings bank account with HSBC. My son, who is nine-year old, has been studying in Delhi and I want to secure his future with this money. What should I do and where should I invest the money for at least 12 years without tax liability?. — Alok Saxena, Moscow A. It seems from your query that you are a non- resident Indian and are not assessable to income tax in India. In view of specific exemption provided under Rule 114C(1)(b) of the rules, there is no necessity for such a non-resident to obtain a permanent account number. You may, however, require PAN for the purpose of your property transaction. As to the form of savings, the money invested in a non-resident account should be giving you a better rate of interest then the rates given by the European or American banks. Such interest is also not taxable in your hand. You can also invest the savings in equity mutual funds, RBI tax-free bonds as the income from such investments is not taxable in India.
TDS on NSS Q. I had deposited a sum of Rs 30,000/- in the NSS Scheme, 1992, with the Main Post Office, Sonepat, during 1999-2000 and claimed 20% relief under section 88. On my withdrawal on 20.07.2005, the post office has recovered the following tax on the total balance of Rs 49,647/- i) Tax 20% = 9,929/- ii) Surcharge 5% = 496/- Total = 10,425/- In my opinion they should have recovered tax etc. on the interest accrued only and not on the total balance of the deposit as NSS was not under 1987 scheme under section 80CCA in which case the entire amount is to be added in my income. Kindly advise if the action of the post office is correct, which I feel is not. — Triloki Rani, Sonepat A. The action of the post office in deducting TDS on the entire amount is correct. This is in accordance with the provisions of section 194EE of the Act, which provides that in case the amount payable is more than Rs 2,500/-, the tax shall be deducted at the rate of 20% from the amount payable to a person who had made such deposit. The only exception provided in the aforesaid section is in the case where the payment of said an amount is to be made to the heirs of the assessee.
Gift to relative Q. I have received Rs. 1 lakh as a gift from my mother on behalf of HUF status during F.Y. 2004-2005 i.e. 11.10.2004. I have received Rs 1 lakh as a gift from my mother on behalf of individual status during current year i.e. 02.09.2005. I am under the impression that gifts between the blood relations are exempted from income tax. If the gift to HUF status from mother after 01.09.2004 was not exempted than what penalty will be imposed on the donor.? — Anil Sharma, Patiala A. Your impression that gift between the blood relations are exempted from income tax is correct. Therefore, the gift of Rs1 lakh received by you in the individual status would not be covered within the mischief of the provisions of section 56(1)(v) of the Act. However, the definition of relatives given in the aforesaid section covers relatives of the individual only. The explanation to the aforesaid section seems to have overlooked the provision in the main section which covers HUF in respect of gifts from relatives. In the case of HUF therefore, it either means that exemption is available for gifts by the HUF from any person related to the karta or any other family member. It may also mean that since HUF cannot have relatives, all gifts received by HUF will be taxable. This inference obviously does not fall in line with the intent because the provision does contemplate exemption of the gift received by the HUF. Further, possible interpretation is that the exemption of gifts in the case of HUF would be limited for gifts by will or in contemplation of death of the payer. If the later interpretation is taken, gift by your mother to HUF would become taxable in the hands of the HUF. It may be added that it would be worthwhile to contest that the word ‘relative’ should be interpreted to mean a person related to karta or any other member of the family. This argument has a lot of force as none of the words can be interpreted to make the section inoperative in the case of HUF.
Investment by HUF Q. I am karta of HUF. I have read in your column in The Tribune that HUF cannot invest in KVP, NSC and PPF. Then tell me some instruments where HUF can invest to get rebate up to Rs 1 lakh. One tax consultant (my friend) told me to invest HUF funds in NSC in my name by giving a cheque from HUF (to show that the money was of HUF) and hence can claim rebate in HUF return. Will this be the right approach.? — Harjit, Nabha A. Section 80C of the Act does not prohibit the making of investment in Kisan Vikas Patra, NSCs or PPF. However, authorities accepting such deposits do not recognise an HUF and, therefore, the word ‘HUF’ or other title indicating the status of family cannot inscribed on such saving instruments. However, HUF can also contribute to PPF. in the name of its members. As per the recent notification, the aggregate contributions to the PPF accounts of an individual, his minor children, HUF or Association of Person of which he is a member cannot exceed Rs 70,000. You can buy the NSCs in the name of karta or any other member of HUF by investing from the HUF funds and it should be possible for HUF to claim the deduction under section 80C of the Act.
Tax liability Q. My total Gross salary is Rs 3,25,000. My saving is Rs 1,20,000. Kindly calculate my tax for the year 2005-06. — Dr Ajai Srivastava A. It is not possible to ascertain from your query whether the amount of Rs 1,20,000/- is covered under the provisions of section 80C of the Act. However, presuming that the same is covered, you will be entitled to a deduction of Rs 1,00,000/- from your total income of Rs 3,25,000. A tax of Rs 20,400, including education tax, would be payable on a sum of Rs 2,25,000/- for the assessment year 2006-07.
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