B U S I N E S S

Nod for IndusInd Bank, IndusInd Fin merger
Ludhiana, August 24
The Boards of Directors of IndusInd Bank Limited (IBL) and IndusInd Enterprises and Finance Ltd (IEFL), have approved the merger of IEFL and IBL. The scheme is subject to approval of shareholders of both companies. This was disclosed by the Manager (Operations) of the bank here today.

Panacea Biotec net profit at Rs 1.01 cr
Chandigarh, August 24
Panacea Biotec has registered a Rs 1.01 cr net profit in the quarter ended June 30, 2002, against Rs 96 lakh in the corresponding period last year. The results were declared today by Mr Rajesh Jain, Joint Managing Director of the company at its Board meeting at its Lalru plant near here. The company would start production of “Enivac HB” a Hepatitis B vaccine next month at the plant, Mr Jain added.

Insurance firms promote infrastructure investment
A glaring omission in the recent Budget is the absence of positive action to trigger infrastructure investment through long-term domestic savings. The role of insurance companies as channels of long-term savings for fulfilling the infrastructure needs of the country has not received due recognition in the budget.

In the wonderland of investment
Q: Will dividend from mutual Fund Dividend schemes also be taxed at my 30 per cent slab? If so is it wise to switch to growth options and book Long Term capital gains at a lower tax rate instead as I am long term investor?

SALES TAX ISSUES

Q: We are registered as a dealer under the provisions of the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956. We were issued with exemption certificate in terms of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991.

AVIATION NOTES

Scanners for Delhi, Mumbai airports
THE Kerala Travel Mart (KTM) in Kochi from October 3 to 5 will provide new dimensions to aviation and tourism. About 400 buyers from more than 120 countries have already consented their participation in the Mart which, according to experts, will be much more successful than the one held in 2000.

• Talks fail

• Airport scanners

Nod for IndusInd Bank, IndusInd Fin merger
Tribune News Service

Ludhiana, August 24
The Boards of Directors of IndusInd Bank Limited (IBL) and IndusInd Enterprises and Finance Ltd (IEFL), have approved the merger of IEFL and IBL. The scheme is subject to approval of shareholders of both companies. This was disclosed by the Manager (Operations) of the bank here today.

The Boards of both companies have agreed on a swap ration of one share of IBL to be issued for each share of IEFL. The share exchange ration is based on the recommendations of SBI Capital Markets Ltd. and A.F. Ferguson and Co. who were retained by IndusInd Bank and IEFL to conduct feasibility study on the merger proposal and act as independent valuer to the arrangement. The appointed date for the merger is proposed to be April 1, 2002.

The scheme will, however, come into effect after filing of high court order with the Registrar of Companies and is subject to the RBI and other applicable approvals.

IEFL, as one of the promoters holds 24.86 per cent of the paid-up equity capital of the bank and is registered with the RBI as an NBFC. IEFL is a debt-free company.

IndusInd International holdings Ltd (IIHL) holds 51 per cent of IEFL’s equity and is also a co-promoter of the bank, having invested Rs 40 crore in the bank’s initial capital. IIHL currently holds a 25 per cent stake in the bank’s capital.

As a result of liberalisation and economic policies of the government, all businesses which are being carried out by the NBFC s, can now be carried on by commercial banks as well. It is believed that when the business of IEFL is combined with that of the bank, the amalgamated company would have better utilisation of resources.

The network of the merged entity will increase to Rs 618 crore as of March 31, 2002. The capital adequacy ratio of the bank will stand improved to 14.06 per cent as of March 31, 2002 as against 12.51 per cent.

Besides the financial consolidation, the merger will result in broad-basing the capital of the bank.

Panacea Biotec net profit at Rs 1.01 cr
Tribune News Service

Chandigarh, August 24
Panacea Biotec has registered a Rs 1.01 cr net profit in the quarter ended June 30, 2002, against Rs 96 lakh in the corresponding period last year. The results were declared today by Mr Rajesh Jain, Joint Managing Director of the company at its Board meeting at its Lalru plant near here. The company would start production of “Enivac HB” a Hepatitis B vaccine next month at the plant, Mr Jain added.

At present, the company manufactures this vaccine at its factory in Delhi. He said only five firms manufacture Hepatitis B vaccine and Panacea Biotec is one among them. “Panacea Biotec medicines are the best as these comply with the norms set by the USA, Europe and the WHO”.

The company has also forged an alliance with Biotech Consortium of India for manufacturing and marketing anti-Anthrax medicine developed by JNU. Panacea Biotec is entering into collaboration with national and international laboratories to fund research in the areas of genomics, identify new drug targets and for developing new molecules and drugs primarily in the area of diabetes and asthma.

The investment in R&D would be raised to 15 per cent of the turnover by 2004, from 3 to 4 per cent at present. Throwing more lights on financial position of the firm, Mr Rajesh Jain said the company had achieved a turnover of Rs 36.70 crore against Rs 25.64 crore, recording a growth of 43 per cent over the corresponding period. Payment of 100 per cent dividend (10 per share) for the financial year 2001-2002 was also approved.

Insurance firms promote infrastructure investment
R. Krishnamurthy

A glaring omission in the recent Budget is the absence of positive action to trigger infrastructure investment through long-term domestic savings. The role of insurance companies as channels of long-term savings for fulfilling the infrastructure needs of the country has not received due recognition in the budget.

Insurance firms have been at the forefront of triggering the infrastructure boom in several countries, making massive investment in roads, bridges, airports, railways, power plants, industrial estates and a host of long gestation projects. The 32 top life insurance companies in the world hold collective assets of US $ 5.3 trillion as of end 2000.

The budget seeks to abolish the tax rebate of 20 per cent of the amount invested by tax payers in designated avenues. This tax-rebate has at present a limited bias for infrastructure investment, directly or indirectly. Investors now claim tax rebate for investment for as short as three years through insurance policies or subscribing to infrastructure bonds.

Issuers of most such securities qualifying for tax rebate have no compulsion to prove the end use of funds mobilised in identified infrastructure projects. This has led to such issues ending up supporting their general corporate treasury needs by lowering the average cost of funds.

The proposal to abolish the incentive altogether for all those earning above Rs 5 lakh is a step in the wrong direction. We need positive fiscal measures to encourage long-term savings that can support investment in projects with long gestation. Japan has over the years provided a positive bias for long-term household saving, such as offering tax relief to funds parked in saving accounts opened by anyone without regard to income levels at post offices for long duration. This has resulted in postal savings accumulating to trillions of yen that flow into long-term projects.

We need this positive bias to give a boost to our infrastructure. The Expert Group on Infrastructure set up by the government had recommended that our annual investment in infrastructure is now Rs 60,000 crore which should go up by three times by 2006, and that 85 per cent of the amount should be domestically financed.

The life insurance companies are the best medium to play this role. Life insurance contracts for 10 years or longer should enjoy a strong fiscal support, through enhanced level of tax rebate at the hands of individuals. Those who take such long-term life cover are in fact providing for the financial security of their families, given our poor social security system.

Life insurance companies have technical capabilities to evaluate the risks of long gestation projects. They have the skills and resources to monitor the completion of projects and the cash flows as per agreed financial covenants. Representatives of insurance companies sit on project monitoring committees in several countries to keep vigil on the usage of funds, and fulfilment of project funding conditions such as escrow mechanism or toll collections. They provide valuable collateral support to promoters to identify risk areas in a timely manner.

In most infrastructure project funding today, especially projects promoted by state level agencies through public issue or private placement of debt, there is no worthwhile monitoring by any responsible outside agency. Such fund mobilisations are mostly backdoor borrowing by state entities to support their revenue budget. Involvement of life insurance companies would over a period raise the level of accountability of public projects.

Life insurance companies prefer long dated investments. They wish to lower their asset liability mismatch by picking investments that have long-term horizon, since life insurance contracts are long term in nature. Insurance companies are keen to minimise reinvestment risks arising from the interest income they receive not finding matching fresh investment opportunities. Ideally they look for zero coupon investments of varying maturities, which would get redeemed at face value implying no reinvestment risk.

We need to provide a positive bias for long-term life insurance contracts to receive liberal tax treatment for household savings. Only through sustained long-term savings that are channelised in productive avenues with the help of agencies such as life insurance companies, can we hope to raise the quality and standards of our infrastructure.

In the wonderland of investment
A.N. Shanbhag

Q: Will dividend from mutual Fund Dividend schemes also be taxed at my 30 per cent slab? If so is it wise to switch to growth options and book Long Term capital gains at a lower tax rate instead as I am long term investor?

— Sandeep Kumar

A: The dividend from mutual fund schemes will be taxable in the hands of the investor. These will be tax-free U/S 80L upto Rs 9,000 (alongwith interest from NSC, P.O. schemes, Bank accounts, NSS92, ICICI/IDBI bonds and Dividends from Indian companies etc.). Whatever is in excess over this limit will be taxed at the slab rate applicable to the investor. However, income from the units of open-ended equity oriented funds of the UTI/MFs, arising on or before 31.3.03 shall be taxed at a concessional rate of 10 per cent. Small mercy! The guillotine will fall but after one year.

I have been advising investment only in the growth option of Pure-growth, Open-ended, Debt-based schemes since last so many years. Even when the income from MFs was made tax-free (with dividend tax paid by the MF) I had protested and advised all my readers to refrain from opting for dividend option. The dividend tax paid by the MF was paid out of the funds of the investors without any credit to the investor and was a direct loss to the investor since it reduced the NAV. The loss was not visible to the illiterate investors who were lured by the magic phrase ‘tax-free’ and blindly jumped for the dividend option.

You may switch to the growth option as soon as possible. For your day to day needs you may use the systematic withdrawal plan to get regular (monthly, quarterly etc.) withdrawals which are extremely tax-efficient.

Q: 1. My husband inherited a house from his parents on their death. It was sold by him and sale proceeds invested in NABARD and REC Bonds.

Can the dividend from them be repatriated? Presently it goes into an NRO account. If yes, how do we go about doing this? My husband and I are both NRI’s (U.S. citizens).

2. NABARD had deducted tax at source on dividend. Do we have to pay tax at source? If yes, can we get credit on our US tax return.

3. We read in your article that assets inherited can be repatriated upto $ 1,00,000 a year.

Mrs Mariam Vaz, Florida 32217

A: 1. You can repatriate the interest received from NABARD and RECL bonds. You may have to get a tax clearance certificate from your ITO (or get a certificate from your accountant who is not in your employ) in India and approach your bankers to effect the repatriation.

2. You may file a tax return in India for your earnings in India and claim refund of TDS if your total earnings in India are less than Rs 50,000.

3. No. This is strictly not true. As per Regulation 4(2 &3), a citizen of foreign state, not being a citizen of Nepal or Bhutan or a PIO, who.

a) has retired from an employment in India, or

b) has inherited the assets from an ROI who held assets in India when he was a Resident of inherited from a Resident, or

c) is a widow ROI and has inherited assets of her deceased husband who was an Indian citizen resident in India may remit an amount, not exceeding Rs 20 lakh per calendar year.

You may apply to the RBI for repatriation indicating your need and it normally grants special permissions.

Co-op banks told to invest 25 pc in govt securities

Jalandhar, August 24
To curb the chances, of scams and, to bring transparency in the functioning of the co-operative Banks throughout the country, the Reserve Bank Of India had instructed these co-operative banks to invest 25 per cent of their Demand and Time Liabilities in government securities. According to the guidelines issued by the RBI, all the co-operative banks had been told to conduct such transactions including sale and purchase of government securities in D-Mat format.

Mr Pradeep Shankar, General Manager, State Bank of Patiala, said that some unscrupulous elements in the co-operative banking sector had committed big frauds in the recent past, which had shaken the faith of thousands of customers across the country. OC

SALES TAX ISSUES

by A.K. Sachdeva

Q: We are registered as a dealer under the provisions of the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956. We were issued with exemption certificate in terms of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991. During the currency of the exemption certificate we sold finished goods in the course of inter-State trade or commerce without collecting from the buyer Central Sales Tax and form ‘C’ as prescribed under the Central Sales Tax Act, 1956. Accepting the returns, the assessing authority completed the assessment and computed notional tax liability considering the claim of concessional rate of tax being inter-State sales made to registered dealers without requiring us to file forms ‘C’. Subsequently, however, the revisional authority re-opened the assessment on the ground that the claim of concessional rate of tax on inter-State sales in the absence of forms ‘C’ was wrongly allowed and as such the orders of assessment passed by the assessing authority is liable to be revised. The objection filed by us to the show cause notice issued is not found acceptable by the revisional authority.

— Ram Sharma, Ludhiana

Ans: It would be appropriate to refer here to a notification No. S.O. 44/CA 74/56/S.8/95 dated November 03, 1995 that came to be promulgated by the State Government providing that no tax under the Central Sales Tax Act, 1956 by the industrial units holding exemption certificate, so long as it remains operative, under the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 in respect of inter-State sales of manufactured goods shall be payable subject to the condition that such sales do not exceed the quantum of entitlement or the period of exemption.

A careful reading of this notification shows that no condition of form ‘C’ has been imposed so far as the benefit of tax exemption on the inter-State sales of manufactured goods is concerned. Obviously, therefore, production of form ‘C’ in support of the benefit of concessional rate of tax that is to be computed on notional tax basis cannot legally insisted upon. The action initiated by the revisional authority proposing computation of notional tax liability at higher rate is, therefore, altogether unwarranted, illegal and contrary to the decisions of the Sales Tax Tribunal, Punjab, Chandigarh delivered on identical point. Reference may be made to the case of A.S. Cycle Industries, Amritsar v. State of Punjab (2001) 18 Punjab and Haryana Taxes 219 wherein it was held that a unit claiming the benefit of tax exemption under the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 is not required to furnish form ‘C’ with the assessing authority in support of the returns disclosing inter-State sales of manufactured goods on which concessional rate comes to be claimed.

Q: We carry on business in Haryana as a registered dealer. Last month we dispatched a consignment of goods to a place situated outside the State and issued the documents such as sale bill, goods receipt and form ST-38 (outward) in support of it. While issuing the transit challan in form ST-38, our employee did not punch the required column relating to date and month. The goods were detained and a penalty of 30% of the value of the goods sold was charged from us for what the checking officer described non-punching constituted an offence under sub-section (6) of section 37 of the Haryana General Sales Tax Act, 1973. Please enlighten us on this issue.

— H.S. Batra, Hissar

Ans: The provision of sub-section (6) of section 37 of the Haryana General Sales Tax Act, 1973 can be invoked by a checking officer only when it is established that the person carrying the goods has attempted to evade the payment of tax due under the Act.

However, mere non-punching of the column relating to month and date does not lead to such an inference when other particulars of the transit challan are found correct and complete.

Penalty under the fiscal statute, as it well laid down in a large number of decisions by the Hon’ble Supreme Court of India, cannot be levied simply on technical errors. Therefore, the omission to punch the transit challan at the appropriate place does not constitute an offence within the meaning of the aforesaid provisions of laws. The orders levying penalty for this lapse cannot be called in question by way of an appeal before the Joint Excise and Taxation Commissioner (Appeals) within whose jurisdiction the assessee happens to be registered as a dealer.

AVIATION NOTES

by K. R. Wadhwaney

Scanners for Delhi, Mumbai airports

THE Kerala Travel Mart (KTM) in Kochi from October 3 to 5 will provide new dimensions to aviation and tourism. About 400 buyers from more than 120 countries have already consented their participation in the Mart which, according to experts, will be much more successful than the one held in 2000.

More tourists visit India, the better will be the aviation scenario. The experts opine Kerala is far more fascinating and pulsating centre than any over-exaggerated spots worldwide.

The low crime rate and reasonable packages for tourists make Kerala highly attractive. Kerala is heaven for tourists who are looking for adventures like staying on tree-tops and canopy walks. There are wildlife sanctuaries and beautiful beaches which are affordable for even low-budget tourists.

The national boat race will be held during the Mart duration. P.T. Usha and Shiny Abraham (Wilson) will be available for entire duration to provide new meaning to the Mart.

Talks fail

Virgin Atlantic has not been allowed to operate third flight out of India as terms and conditions offered by the London-based carrier are unsatisfactory”.

Talks that remained inconclusive at Mumbai, as Virgin wanted to operate the third flight out of Delhi on the day Air India operated its flight. A highly unreasonable demand, Air India officialdom put its foot down. Instead of supplementing Air India’s efforts, Virgin seems to nurture the desire of entering into direct competition with the national carrier.

Virgin airline had already resorted to tactics that were hurting the interest of Air India. It had changed its plane from Boeing 747 (390 seats) to Airbus 340 (255 seats). Low capacity on flight means low block selling by Air India. Virgin, it is learnt had changed the plane without consulting Air India.

Contrary to earlier threats, Virgin will continue to operate two weekly flights from Delhi to London and back.

Airport scanners

In order to streamline security at international airports, the Home Ministry and the Civil Aviation authorities will instal eye scanners to fight terrorism. The eye scanners will initially be installed at Delhi and Mumbai airports. It is a highly sophisticated bio-metric system, which will identify persons engaged in smuggling, criminal activities and terrorism. The system, in use in some developed countries, is the unique equipment which provides details of voice, eyes and faces.

At 40 airports, the CISF has already taken over the security. It is felt that the single agency operations at airports will make for better coordination. Many experts opine there should be a trouble-shooter to head every international airport. He should be able to coordinate functions of several units that operate at every international airport. As it is, there is duplicity and each unit enjoys its own autonomy causing confusion and chaos during emergency.

BIZ BRIEFS

HDFC Bank
Chandigarh, August 24
The HDFC Bank, which had started its operations about eight years ago, has become a major player in the retail banking sector. The total business volumes of the bank, as per balance sheet, had reached Rs 22,000 crore by March 31, 2002. Mr Neeraj Swaroop, Country Head — Marketing, Retail Lending & Branch Banking disclosed that despite stiff competition in the market, the HDFC Bank had succeeded in winning the confidence of 2.5 million customers. The bank has set up more than 500 ATMs in 97 cities, and was determined, he said, to expand its network through wider geographical spread. In view of the large segment of NRIs in the region, he said, the bank was offering special services to them, including international debit cards. TNS

Mediclaim policy
Jalandhar, August 24
Oriental Insurance Company Limited has decided to launch a mediclaim insurance policy on September 1, under which the medical expense incurred on the treatment of a policy holder would be released immediately to the hospital authorities after discharge of the patient. This was disclosed by Chairman-cum-Managing Director of the company S.L. Mohan, who was in the city to attend a seminar organised by the Punjab chapter of the Institute of Insurance Surveyors and Adjusters here today. OC

Union Bank
Chandigarh, August 24
Union Bank of India has bagged first place under RBI Rajbhasha Shield Pratiyogita for excellent implementation of official language during the year 2001 in “Region B”. Mr V. Leeladhar, CMD of the bank, received the shield from Mr Bimal Jalan, Governor, RBI yesterday. The bank house journal “Union Dhara” also bagged fourth prize in the category of bilingual house journals of public sector banks/financial institutions. TNS

Customer meet
Amritsar, August 24
A customer meet and lending disbursement function was organised by PNB here today. Mr S.S. Arora, Chieg Manager, Regional Office, said the bank bas earned a profit of Rs 202.15 crore in the first quarter of the current year. OC

Loan distributed
Pathankot, August 24
Allahabad Bank organised a loan camp here which was inaugurated by Mr Vijay Kumar Chopra, A.G.M., Jalandhar. The bank distributed Rs 58,00,000 to 76 employees of Municipal Council. OC

Shellers meeting
Chandigarh, August 24
The State Bank of Patiala also organised rice shellers meeting at Sangrur and Sunam today in which more than 150 rice shellers participated. The meets were presided over by Mr N.S. Deshpande, DGM Patiala Zone. Mr Subhash C. Madan, AGM highlighted the various sops provided to the rice shellers. TNS