Sunday, June 9, 2002, Chandigarh, India





National Capital Region--Delhi

THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

Diesel price hike hits HP transport corpn
Shimla, June 8
With the Dhumal government in no mood to revise bus fares, the latest hike in the diesel prices will spell doom for the State Road Transport Corporation which is already on the verge of collapse.

Nabard farmer clubs enhance recovery
Chandigarh, June 8
Officials of Nabard — the nodal agency to finance rural people — have claimed that the initiative of the bank to form farmer clubs in association with cooperative, commercial and other banks in the region had substantially increased the recovery of agricultural loans.

In the wonderland of investment
Q: Our father had built a house in 1973. He died in 1997 and the house stood in his name. We are six brothers and sisters. Our mother and all of us now want to sell this house. It is learnt that for ancestral property, not registration stamp papers need to be bought for transfer of property from the name of the deceased to the names of his successors.

INVESTMENT PLANNER

Eicher good for medium investors
Q: Should I buy Eicher Motors for the medium term?
— A.P. Singh, Ambala
Ans: Eicher Motors is a decent investment bet considering that it has been outperforming the light commercial vehicles sector for the past six years. Having soft launched its new HCV offering late last quarter, the company expects to clock sales of 1000 vehicles in FY2003.



EARLIER STORIES

 

AVIATION NOTES

Law protector or lawbreaker?
The Bureau of Civil Aviation Security has been entrusted with the responsibility of investigating the vulgar behaviour of a sky marshal on Alliance Air’s Agartala-Guwahati-Kolkata flight recently.

LABOUR LAWS

Entitlement to quarters
Q: Where ex-servicemen are employees of Port Trust, can they add their military pension to emolument received from Port Trust for the purpose of type of accommodation?

SALES TAX ISSUES

Q: We are registered as a dealer under the provisions of the Haryana General Sales Tax Act, 1973 and the Central Sales Tax Act, 1956. We filed with the assessing authority statutory returns in relation to the assessment year 1999-2002 with all relevant details relating to the purchase as well as sales effected by us.

LETTER

National policy on older persons
It is enjoined upon the government and the society that old people do not rue old age. If wrinkles must be written on their brows, let them not be written upon their hearts.
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Diesel price hike hits HP transport corpn
Rakesh Lohumi
Tribune News Service

Shimla, June 8
With the Dhumal government in no mood to revise bus fares, the latest hike in the diesel prices will spell doom for the State Road Transport Corporation which is already on the verge of collapse.

The rates of diesel have been increased twice since October, 1999 but the government has neither revised the bus fares nor compensated the corporation for the loss. Consequently, the cumulative loss of the corporation has touched the Rs 300-crore mark. With the recent hike in diesel prices and the concessions and benefits announced to woo the employees, the losses are expected to cross the Rs 350-crore mark by the end of the current financial year.

The gravity of the situation could be gauged from the fact that the corporation has not been able to even deposit the provident fund of the employees regularly. It has also not been paying the overtime and night-halt allowance to drivers and conductors and the arrears on this account come to over Rs 16 crore, including that of the provident fund. Salary is being paid somehow by withholding the payment of suppliers.

The average expenditure per bus per km has increased from Rs 14.28 in 1997-98 to almost 17.50 at present. The average income has, however, registered a modest increase from Rs 13.11 to Rs 13.83 per bus km during the period.

The corporation is losing about Rs 35 crore annually for fulfilling its social obligation by plying buses on uneconomical routes. Besides, the concessional and free travel facility being given to freedom fighters, media persons, handicapped, students and other categories of passengers costs it another Rs 40 crore. However, it was receiving only Rs 27 crore as grant-in- aid from the government annually.

The high-powered committee on passenger transport services, which submitted its report in August last year, had recommended an increase of 15 per cent in bus fares and the discontinuation of concessional travel facility for all categories of passengers. However, the government put the report of the committee into cold storage. The ever-increasing burden of salaries and rise in cost of diesel and spare parts have further increased the operational costs.

The officers of the corporation maintain that after the latest hike, even a 30 per cent increase in fair would not be enough to offset the annual operational losses of about Rs 50 crore.

Though one of the best-managed road transport undertaking in the country, the corporation is financially in a bad shape due to the inability of the government to take bold decisions. It has a fleet of 1740 buses with the highest utilisation of over 98 per cent in the country with annual mileage of 14.25 crore km. It has improved its fuel efficiency from 3.43 km to 3.54 km to a litre of diesel, but the losses continue to mount.
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Nabard farmer clubs enhance recovery
Tribune News Service

Chandigarh, June 8
Officials of Nabard — the nodal agency to finance rural people — have claimed that the initiative of the bank to form farmer clubs in association with cooperative, commercial and other banks in the region had substantially increased the recovery of agricultural loans. The bank has so far facilitated the formation of 575 clubs in Punjab and Haryana, and plans to form 90 clubs during the current financial year.

Mr A. Ramanathan, Chief General Manager, Nabard, claims that farmer clubs are aimed at building credit discipline among the rural fraternity and to encourage the upgradation of technology and better farming practices. The bank has so far formed 350 clubs in Haryana and 225 in Punjab.

Regarding the performance of these clubs, Dr S.S. Sangwan, Deputy General Manager, Nabard, says: “The evaluation of these clubs has revealed that they have proved very successful in Bhiwani, Kaithal, Yamunanagar and Ambala districts of Haryana and in Sangrur, Hoshiarpur and Jalandhar districts of Punjab. The participation of farmers in the training programmes organised by the clubs in collaboration with banks, agriculture universities and other institutions has built a momentum for improvement in banking practices.”

He disclosed that the regular monitoring reports of the clubs had shown that the formation of active farmer clubs in rural areas had not only boosted the recovery of loans by 10 to 20 per cent, but the take-off credit has also increased. He said: “The programme had been conceptualised as an experiment in social engineering in the field of rural banking. Of the 350 clubs in Haryana, 107 are maintained by regional rural banks, 113 by district Central Cooperative banks, 73 by commercial banks and 57 by land development banks. The coordination between the bank managers and the farmer clubs has encouraged other farmers to repay the loans on time.”
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In the wonderland of investment
A.N. Shanbhag

Q: Our father had built a house in 1973. He died in 1997 and the house stood in his name. We are six brothers and sisters. Our mother and all of us now want to sell this house. It is learnt that for ancestral property, not registration stamp papers need to be bought for transfer of property from the name of the deceased to the names of his successors. Can we sell the house and can it be transferred from our father’s name direct to the purchaser? What is the procedure? The point is that we want to avoid the heavy expenses of transfer of house first in our names and then in the name of purchaser. Please advise.

— Mr K. Goyal, Patiala

A: The transfer of property to the successors on death of a person does not require payment of stamp duty. If your father has made a will favouring all of you, your mother and six brothers and sisters, there should be no problem in getting the property transferred to your names. I am afraid, you will have to get the house transferred in your names before selling it.

Q: My mother who is 82 years old had purchased 5 Shubh Labh Bonds of ICICI in 1996 at Rs 6,000 per bond. The bond consists of two parts. Part A principal amount of Rs 6,000 and Part B, a Detachable Premium note tradable 3 years after the deemed date of allotment. Part A would be repayable by ICICI after 3 years (which it did in July 1999).

The Detachable Premium note matures to Rs 10,000 in ten years and is repayable on 15.07.06. In view of the recent amendment (Finance Bill 02-03) would my mother have to declare the accrued interest? She does not have any taxable income now and will have no taxable income in 2006 when the premium notes are repayable by ICICI. She will receive Rs 50,000 for the 5 Detachable Premium notes on 15.7.06. Will TDS be deducted on this Rs 50,000 assuming the present tax laws prevail? Is there any legitimate way in which she may avoid TDS in view of the fact that 15F form for TDS on bonds is discontinued now?

If I were to purchase these premium notes from her just before maturity would it amount to transfer and therefore attract capital gains in her hand? Would the transfer have to be recorded with ICICI? I am the second named holder. They are tradable as securities, but to the best of my knowledge have not been traded so far and hence no market quotes are available.

— Jamshed Sorab Balsara, Mumbai

A: The new proposal would possibly be beneficial to your mother. She may declare the yearly accrued interest every year in her returns. In my opinion, she can file Form-15H because though she will receive Rs 50,000, the deemed interest during the redemption year (and for every year during its tenure) will be less than Rs 50,000, the tax threshold.

Yes, the proposal contemplated by Mr Sinha does not give any regard to the various rebates and to that extent he is unkind to senior citizens and non-senior females. But your mother is not affected by this atrocity. Hopefully, Mr Sinha will realise his unkindness to senior citizens and non-senior female citizens and make corrections while passing the Bill through the Parliament.

I would not advise you to buy the Bonds from her. If you do so, she will benefit a little, but you shall suffer more. The difference in the original investment (and not the cost to you) and redemption will be treated as interest in your hands. Realise that the cost of acquisition for Part-B of this Bond is nil!

Q: Please clarify whether Service Tax collected by insurance companies/paid by the assessee is also deductible u/s 80D or only net premium is to be deducted from Gross Total Income.

— Atul A. Kulkarni

A: As long as the premium is paid by cheque out of your income chargeable to tax to effect or to keep in force an insurance on the health of yourself or your wife or dependent parents, you are entitled to the deduction in respect of medical insurance premiums. Service tax is a part of amount paid to keep in force the insurance and therefore you are entitled to the deduction.

Have you noticed that the words ‘out of income chargeable to tax’ have been omitted from Sec. 88 but not from all the sections contained in Chapter VIA. This is the way our legislators work. Having found that these words give rise to lots of litigations along with the associated ‘Inspector Raj’, one would feel that they will take a total action. I am sure that they will take the necessary action in bits and pieces spread over next few budgets. In the meanwhile this lacuna will provide fun and funds to the ITOs.
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INVESTMENT PLANNER

by Ashok Kumar

Eicher good for medium investors

Q: Should I buy Eicher Motors for the medium term?

— A.P. Singh, Ambala

Ans: Eicher Motors is a decent investment bet considering that it has been outperforming the light commercial vehicles (LCVs) sector for the past six years. Having soft launched its new HCV offering late last quarter, the company expects to clock sales of 1000 vehicles in FY2003. Given these numbers, the heavy commercial vehicles (HCVs) division may not manage a financial break-even (at the PBT level) this year, although it should post a cash profit.

Needless to say, earnings growth would be under check this year, also considering that the company has targeted a sales growth of only around 8 per cent for the year. But if the 40 per cent volume growth in April is any indication, an upside to the company’s outlook cannot be ruled out. Without doubt, the results were a dampener — having posted a 52 per cent jump in pre-tax earnings in the nine-month period till December 2001.

Therefore, although the results seemed disappointing at first glance, attributing the sharp correction in the stock price entirely to the disappointment over results would not be correct. For the fiscal ended March 2002 sales were Rs 475.8 crore, PBIDT was 9 per cent, net profit was Rs 18.5 crore and the EPS was Rs 9.2. For the quarter ended March 2002 sales were Rs 159.5 crore, PBIDT was 8.9 per cent and net profit was Rs 5.3 crore. At current levels, Eicher Motors looks attractive for medium term investors.

Q: Is Whirlpool a good buy?

— Sumeet K. Sharma, Hoshiarpur

Ans: After consolidating its core business, Whirlpool is now trying new avenues for growth and is thereby enhancing its existing product range by entering into new segments like AC, microwave, cooking range and cloth dryer. It has already made a foray into the AC segment with a national rollout in February 2002.

The management expects to achieve a market share of 6-7 per cent in CY 2002 and between 12-15 per cent next year. It expects the room AC segment to be as big as the refrigerator segment by 2005. Besides ACs, it has also launched microwaves and cooking range. The company is also planning to launch cloth driers, specialised cooking products in the third quarter of CY 2002.

The parent company is also looking at developing manufacturing facilities in India as an export base for the Asian region. Management expects the industry to grow between 7-10 per cent in CY 2002 and between 10-15 per cent in the next two years. The strategy of diversification will reduce the dependence on the refrigerator segment and will help it withstand the vagaries of economic cycle and competition. Margins are, however, expected to remain under pressure due to cost structure of the industry. For the fiscal ended December 2001 sales were Rs. 986.8 crore, PBIDT was 10.3 per cent net profit was Rs. 9.1 crore and the EPS was Rs. 0.7. For the quarter ended March 2002 sales were Rs. 216.3 crore, PBIDT was 9.5 per cent, net profit was Rs 0.6 crore. The stock can be accumulated at current valuations.

Q: Please throw some light on the prospects of Federal Bank?

— Phadtare Shankar, Shimla

Ans: Apart from a booming treasury, the banking sector has been abuzz with expectations of private banks acquiring south-based banks to get a foothold in the south. That has been a factor behind the run in south-based bank stocks. Federal Bank was one such candidate, and ICICI had accumulated close to 15 per cent. Thus, expectations were of ICICI Bank acquiring Federal Bank. After the recent merger of ICICI-ICICI Bank, that possibility has been sidelined for the immediate term by the management. ICICI Bank is the largest shareholder currently and because of its distributed holding structure, a hostile bid by another bank seems remote. Further before acquiring the bank, a look must be had at its asset quality.

Federal’s position on that front is not encouraging. In FY2001, while capital adequacy was 10.29 per cent, its non-performing assets were a whopping 10 per cent. Although the bank has managed to improve this picture marginally in FY2002, NPAs still accounted for 8.6 per cent of total assets and capital adequacy ratio stood at around 10.63 per cent. For the fiscal ended March 2002 sales were Rs 1262.8 crore, PBIDT was 70.7 per cent, net profit was Rs. 82 crore and the EPS was Rs. 37. For the quarter ended March 2002 sales were Rs 317.9 crore, PBIDT was 68.2 per cent and net profit was Rs 18 crore. The Federal Bank stock has been fuelled by acquisition expectations. But there’s little doubt that, with the gilts boom petering out, bank bottomlines will no longer look so healthy. The high NPA levels will also keep Federal’s valuations under check, barring any news or expectations of a takeover.
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AVIATION NOTES

by K.R. Wadhwaney

Law protector or lawbreaker?

The Bureau of Civil Aviation Security has been entrusted with the responsibility of investigating the vulgar behaviour of a sky marshal on Alliance Air’s Agartala-Guwahati-Kolkata flight recently.

Confirming this, airline’s Managing Director Manik Paes said: “We have received the complaint against the sky marshal and the BCAS is investigating the matter.”

According to the air hostess complaint, the sky marshal abused himself when he was reprimanded for making lewd remarks.

It is a case of a law protector turning into lawbreaker and become a nuisance on the flight. To abuse oneself in the presence of a hostess and passengers is a serious incident and the sky marshal deserves to be punished.

The hostess’s jobs is not a bed of roses. Apart from her usual arduous functions, she has to face the wrath of some passengers and pampered commanders. Now if a sky marshal, who is expected to ensure safety of passengers and air crew, indulges in in obscene behaviour it becomes all the more problematic for the hostess to function efficiently.

According to reports, the sky marshal had already been charged with sexual harassment. It is shocking that the airline authorities should show laxity to those who bring disrepute to the organisation.’

The cabin crew of Air India; Indian Airlines and Alliance Air claim that they encounter rough behaviour from many passengers. They often make written complaints but airline bosses ignore them instead of acting into the matter. There have been instances when political bigwigs have also misbehaved with hostesses on flights. But sky marshal’s self-abuse is the fit case to be handed over to the police to investigate.

Airbus Industries has secured certification from the authorities concerned for its new cockpit doors, which protect the crew from unauthorised entry. The doors are bullet proof and are fitted with electrical latching. Airbus Industries has taken several other measures to make flying safe. It indeed deserves to be complimented.

But all these measures would come to naught if the law enforcers become law breakers. The Alliance Air authorities have to take swift action and threw out such sky marshals who are positive threat to the airline.
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LABOUR LAWS

by Praful R. Desai

Entitlement to quarters

Q: Where ex-servicemen are employees of Port Trust, can they add their military pension to emolument received from Port Trust for the purpose of type of accommodation?

Ans: S.C. was answering this question in Hemant Kumar Raval and others v Kandla Port Trust (2002-I-LLJ-23).

Those who are receiving “emoluments” below Rs 500 are entitled to Type A quarters and those who are getting emoluments from Rs 501 to Rs 1,099 are entitled to Type B. The appellants claimed that by adding to pension which they receive from the Central Govt. as ex-servicemen to their salary received from the Port Trust, they fall in the range of emoluments from Rs 501 to Rs 1099, entitling them to Type B quarters.

The learned Single Judge had rejected the writ petition on the ground that the appellants would have to go before the Industrial Court. A Division Bench heard the appeal and by applying the amendment made to the Regulations on 21-2-99, it stated that it was the ‘basic pay’ that was relevant for the purpose of allotment of the type of quarters and not the total “emoluments.”

The respondent submits before the S.C. that this amendment has been issued by way of clarification and is retroactive. On the other hand, the appellants submits that the amendment can only be prospective and the appellants are governed by the preamended Regulations in force when they filed the writ petition, which used the word “emoluments”.

Even going by the unamended Regulations which use the word “emoluments”, the S.C. was of the opinion that “emoluments” in the context of the Port-Trust Rules mean “emoluments” received from Kandla Port Trust and cannot include the pension component which is received by the appellants from the Central Govt. towards their ex-military service. If that amount of pension is excluded, then in that case, even under the unamended Regulations, the appellants are not entitled to Type B quarters.

The appellants further raised a plea that the respondents are deducting a higher amount towards license fee for the quarters than payable if their emoluments is based only on the pay paid by Port Trust. They can’t make deduction towards license fee which is applicable for the amount of “pay plus military pension”. appellants thereopon submitted that if the pension is to be disregarded for allotment of quarters, it also be disregarded for the purpose of deduction from the licence fee.

The S.C. directed that in view of the above submission, it is held that the excess deduction already made from the salary of the appellants towards the license fee for quarters should be adjusted in the future salary that is payable to the appellants.

The appeal in that way was partly allowed.
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SALES TAX ISSUES

by A.K. Sachdeva

Q: We are registered as a dealer under the provisions of the Haryana General Sales Tax Act, 1973 and the Central Sales Tax Act, 1956. We filed with the assessing authority statutory returns in relation to the assessment year 1999-2002 with all relevant details relating to the purchase as well as sales effected by us. We also submitted documents under self-assessment scheme, 1999 with the assessing authority seeking completion of assessment under Section 28-C of the Haryana General Sales Tax Act, 1973 and sub-section (2) of section 9 of the Central Sales Tax Act, 1956 as the conditions imposed in this context stood fulfilled. However, the assessing authority has not issued an acknowledgement in form S.A.S.I.

Now a notice has been issued calling upon us to file a copy of the trading account along with a reconciliation statement for finalisation of the assessment under deemed assessment scheme. Kindly advise if the assessing authority is authorised in law to withhold the acknowledgement of self-assessment and instead call for a copy of trading account at this stage?

R.K. Sharma, Bhiwani

Ans: Once the documents come to be submitted in terms of clause (4) of the self-assessment scheme, 1999 by a registered dealer with the assessing authority, it becomes obligatory for him to finalise the assessment according to the returns as clause (5) of self-assessment scheme, 1999 formulated by the Excise and Taxation Commissioner, Haryana, Chandigarh in unambiguous language stipulates “on receipt of the statements mentioned in clause (4), the appropriate assessing authority will issue an acknowledgement to the dealer in form S.A.S.I. for the relevant year”.

Having regard to this scheme, it was the bounden duty of the assessing authority receiving the documents to have immediately issued an acknowledgement as a proof of having completed the assessment on self-assessment basis. The directions issued by the assessing authority insisting upon production of a copy of trading account along with reconciliation statement are wholly without jurisdiction and fall beyond the scope of his statutory powers.

Q: We purchased a consignment of electrical goods from Delhi for being carried to our place of business situated in the State of Punjab and got necessary papers issued from the seller and the transport company. On reaching the information collection center, Punjab, the checking officer points out “documents seems to be non-genuine”.

The consignments have been seized under sub-section (6) of Section 14-B of the Punjab General Sales Tax Act, 1948. Kindly advise if the checking officer is justified in detaining the consignment on the aforesaid ground more especially when the documents produced in support of the consignment are in order and quite genuine.

Ans: The powers relating to the detention of the goods under sub-section (6) of Section 14-B of the Punjab General Sales Tax Act, 1948 can be exercised only if either the goods are not covered by proper and genuine documents or that the person carrying the same is attempting to evade the payment of tax due under the Act. This satisfaction cannot be subjective and that the checking officer has to show prima facie as to how the documents being produced before him are not genuine? The provisions of law do not authorize the officers exercising powers just to proceed on surmises and conjectures.

Moreover, it is even otherwise difficult for the checking officer to infer evasion of tax due under the Punjab General Sales Tax Act, 1948 simply on the ground that the bill of sale issued by the Delhi is not genuine when the party registered in Punjab is declaring the same along with transaction for being brought on record. The detention, therefore, is not in conformity with law and as such the queriest is well advised to approach the Assistant Excise and Taxation Commissioner-cum-Officer In-charge of the information collection centre where his consignment has been seized.
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LETTER

National policy on older persons

It is enjoined upon the government and the society that old people do not rue old age. If wrinkles must be written on their brows, let them not be written upon their hearts.

Over the years, the pitiable plight of the aged — 60 years and above — has been the most enervating social phenomenon. Yet the successive Union Governments have done precious little to provide necessary relief in terms of financial and social rehabilitation.

Article 41 of the Constitution of India made it obligatory for the state to initiate measures to secure the rights of the aged persons to public assistance, and make provisions for their well-being. Nevertheless, it took the government almost half a century to formulate the National Policy on Older Persons (NPOP). Under the NPOP, the Union Government set out a plan of action 2000-2005. But so far under the plan of action, not much has been done. Nor the Union Finance Minister in the 2002-3 Budget provided any relief to the senior citizens.

Since the total population of the aged persons in the country is only 8 per cent, the political parties also do not pay much attention to the woes and sufferings of the aged persons, as they are small in number, scattered all over the country, and do not constitute any formidable vote bank.

Since senior citizens largely depend on the interest earnings for their living, the reduction of interest rate on PPF and other saving schemes, is certainly a retrograde step. The least the government should do is to allow the higher rate of interest to the senior citizens on their deposits in the PPF and other National Saving Organisation schemes.

It is suggested that the period of commuted portion of pension should be reduced from the present 15 years to 10 years, and the special rebate under section 88-B of the Income Tax be enhanced from Rs 15,000 to Rs 25,000. Further, an aged person has to pay tax on NSS deposits if he withdraws the same in his life time. But after his death his heir enjoys tax free benefits. This anomaly must be removed. NSS deposits should be exempted from tax if the aged person withdraws the same in his life time.

Furthermore, the society should utilize, in honorary capacity, the accumulated experience of the aged persons for development works. This would provide some work to the senior citizens without putting any fiscal burden on the government. And this will also restore the status and respect to the aged persons in the society.

C.D. VERMA, Faridabad
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GRAPEVINE

Theatrics galore

There is a buzz that the company that manages India’s largest Imax dome is ‘in the moolah’ following a spurt in demand for its ‘theatre management’ skills. Remember who had tipped you off on this development nearly 45 days ago!

Loan restructuring

The grapevine has it that a prominent institution is now set to restructure another set of loans for a leading textile sector player whose denim product is once again finding better acceptance in the overseas market. Good for the company, but what about the institution?

Shipping in troubled waters

The buzz in the corporate cocktail circuit in the business capital is that there is more to the upswing in the price of the shipping PSU on the block. Chances are some potential bidders would be dissuaded by the inflated price. Who’s responsible? Watch this space.
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