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Monday,
November 18, 2002, Chandigarh, India  
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UT Rent
Act: tenants need not worry
LIC offers
‘Anand and Rekha’
Q: Ours is a company duly registered as a dealer under the provisions of the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956. We carry on business principally of manufacturing and selling non-ferrous metal products. |
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Q. My
wife is a house wife with no source of income. The house we live in
stands in her name. We now intend to sell it. Is the capital gain tax
on the sale of the house exempted if a residential plot/house is
purchased within a period of 3 years? What benefits accrue to a senior
citizen in the matter of Income-tax liability?
Time
ripe for long-term investors
Adlabs
to score in future
* New initiatives taken by software companies may buoy investor sentiment, says a broker. Fiat
small car to take on Maruti-800
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UT Rent Act: tenants need not worry “Fools build houses and wisemen live in them.” As long as this sarcastic saying prevails by its literal meaning, there can never be any substantial change in the burgeoning problem of housing shortage. Only the end-users having the affordability to construct their own houses will come forward to invest in buildings. Be it any trade, business or industry, an investor besides expecting guarantee of assured returns need safety and security too for the investments made. But under the prevailing lopsided rent laws, applicable in most of Indian states and territories, investors feel totally unsecured. In majority of the cases the supremacy of tenants prevails. On the one hand the tenants are vacating or sub-letting their premises on hefty premiums and on the other, the landlords, who are the real builders of the city, get meager monthly returns which hardly meet the means for their livelihood. Rent agreements between landlords and tenants, under the prevailing legal provisions, are being breached more often than followed, resulting in bloody feuds are endless litigations. Till now there has been a common practice with many influential people like lawyers, politicians and police personnel to buy occupied properties at throw-away prices and thus make a quick buck by selling these at market value after getting them vacated. In case of occupied leasehold commercial properties the sale price being offered to the owner is far less even the government share of unearned profit calculated on actual market value of the property. Not able to sell, the proposition remains struck around the neck of the owner for ever. Factors like shortage of accommodation and a wide gap in the demand and supply have created a fear psychosis among tenants as well as landlords. A tenant, once in possession of a property on certain amount of rent, neither wants to increase the rent even on agreed terms nor to part with the possession of the property. In majority of the cases even non-payment of the agreed rent regularly is a common practice as courts take years in deciding rent cases. And on the other hand, investors, in certain cases,
prefer to keep their premises vacant just out of fear, thus creating artificial scarcity. Not only this, an investor has always been disinterested in investing in real estate propositions under the existing legal provisions. Long-drawn recessionary conditions and stagnated economic slowdown in the country have forced the planners to devise ways and means to revive the situation. Boosting investment in the construction and housing sector and overall urban development by reforming the obsolete laws governing the real estate sector are a few steps on top of the agenda of the Centre. Under the newly envisaged programme of economic revival, the Union Government has earmarked Urban Development Incentive Fund (UDIF) with Rs 500 crores as initial instalment with a view to adequately incentivise those states and territories who will come forward to reform the out-dated laws governing real estate, especially the rent laws. Toeing the policy line of the Central Government, the Chandigarh Administration after reducing the stamp duty from 12.5 to 6 per cent has taken a second bold and investor-friendly step in the direction of reformation by repealing the East
Punjab Urban Rent Restriction Action, 1949, extended to Union Territory of Chandigarh on the land and buildings rented at Rs 1500 and above a month. A section of the public, especially the tenants of commercial premises, is apprehensive about the outcome and consequences of the step. They fear mass-scale evictions at the hands of their landlords. But it is totally unfounded. In the neighbouring town of Mohali no rent Act till date is applicable but nothing of the kind being apprehended is witnessed. In fact changes will bring positive results with more investors coming forward to invest in the field thus offering more accommodation for the existing number of tenants. Otherwise, too, irrespective of financial status, no one has the right either to usurp another person’s property or live in it as a tenant for life. Besides bringing cordiality in the landlord-tenant relationship and minimising the unwanted tenant-landlord disputes, the step will help in rationalising rent rates and creating more housing accommodation as well. In addition it is certainly going to have long lasting effect on the overall development of the area. The expected boost to the construction sector will help in generating ample
employment opportunities, besides providing better and affordable accommodation on competitive rent as the investors will come forward to invest more freely in the housing sector, as they will feel themselves more secure under the changed scenario. Besides providing much needed protection to the old landlords who are experiencing hard to survive on the meager returns of their properties built with life-time earning in their early days to secure their old age, the step will prove to be a balancing act to the otherwise lopsided rent Act in favour of the tenants. However, certain protective measures, especially for commercial tenants having apprehensions that their businesses would be affected by shifting the business from one area to another, may be added to the amendments. These may include certain time schedule for shifting, fixed increase in existing rent to bring the rent on a par with market value, linking the rent with the price index etc among others suggested by an expert committee, specially constituted for the purpose.
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LIC offers ‘Anand and Rekha’ Despite the presence of a dozen players in the insurance sector, the LIC continues to enjoy not only the largest market share, but also the confidence of most Indians. Most new entrants into the insurance sector have or are completing one year of operations with not much threat to the LIC that continues to maintain a place of its own. Gearing up to the new challenges from private insurance companies, the LIC has come out with some new endowment schemes that can help people planning their retirement. Jeevan Anand The Jeevan Anand was introduced earlier this year with the objective of combining the whole life plan and the endowment assurance plan. The policy comes with a profit assurance plan. The plan provides the pre-decided sum assured and bonuses at the end of the stipulated premium paying term, but the risk cover on the life continues till death. Jeevan Anand comes with benefits such as the survival benefits wherein the sum assured along with all vested bonuses become payable at the end of the premium paying term (endowment term). In case of a death of policyholder, the sum assured and bonuses are payable. The policy comes with simple reversionary bonus that accrues during the premium paying term and is payable at the end of the premium paying term or on earlier death along with final additional bonus, if any. The policy also offers accident benefit that can be purchased for a cover up to Rs 5 lakh. The policy is available to all between the age groups of 18 and 65 years while the maximum age at the end of the premium paying term cannot be more than 75 years. The premium paying term can vary between 5 and 57 years depending upon the age of policyholder at the time of purchasing the policy. The minimum sum insured can be Rs 1 lakh for which LIC offers flexible terms of payment.
Jeevan Rekha The LIC is updating its products keeping in mind the competition from private insurance companies. Jeevan Rekha is what the LIC calls “the first policy of its kind in India — a never before combination of money back and a whole life policy”. The policy aims to offer both regular returns all through the term and a lifelong cover. The objective is to provide a security umbrella for life yet at the same time return some money to take care of needs and obligations. The Jeevan Rekha offers survival benefits to the tune of 10 per cent of the basic sum assured every five years from the date of commencement. In case of death the next of kin receives the sum assured along with vested bonuses irrespective of survival benefits paid already. Under the policy, simple reversionary bonus accrues during the lifetime of the life assured and is payable on his/her death, along with final additional bonus, if any. The policy also offers an accident benefit option up to Rs 10 lakh. This is inclusive of the maximum limit of Rs 10 lakh placed under other life insurance plans. Premiums for accident benefit are quoted separately for various ages at the entry and premium paying terms. Jeevan Rekha is available to those who have completed 13 years but are yet to reach the 65-year mark and are willing to take a policy of minimum Rs 2 lakh and multiples of Rs 10,000 thereafter. The LIC also offers some rebates on premium paid in a certain manner. The policy does not offer any loans, but the policy can be surrendered for cash after the policy has run for at least three years. The minimum guaranteed surrendered value allowable is equal to 90 per cent of the total premiums paid for single premium policies and 30 per cent of the total premiums paid for policies other than single premium policies, excluding the premiums for the first year and all extra premiums and/or additional premium for accident benefit. A policy under this plan acquires paid-up value after at least three full years’ premiums have been paid. Existing bonus additions, if any, remain attached to the paid-up policy, provided the policy has been in force for at least five years.
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by A.K. Sachdeva Q: Ours is a company duly registered as a dealer under the provisions of the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956. We carry on business principally of manufacturing and selling non-ferrous metal products. Weighing machines constitute an integral part of the manufacturing process we have employed in our unit. The question that arises is if we being a dealer registered under the provisions of the Sales Tax Act are entitled to have weighing machines specified in the sales tax registration certificates for the purpose of “use in the manufacture of goods?” Kindly advise us on this issue. Anupam Garg, Batala Ans: As per the existing provisions both under the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956 governing the procedure for issuance of registration certificates, any item that is required for “use in the manufacture of goods for sale qualifies to be specified in the registration certificate.” It may not sometimes be necessary that the given goods are not directly required to be used in the manufacture of finished goods but their link may be indirect with the manufacturing process employed in a unit. The Courts have consistently held that all machinery and equipment that is necessary to make the manufacturing unit in the state of operational integration pertain to its manufacturing process, because there could not be any manufacture unless this operational integration was achieved after installation of the plant and machinery goes operational. It is the consistent opinion of the Judicial Courts in India that any machinery or plant having a link, however minor, in the total process of the total operational integration should be taken as machinery or plant pertaining to the manufacturing process. Interpreting the statutory provisions on identical issue, the Supreme Court in what came to be known as the case of J.K. Cotton Spinning and Weaving Mills Co Ltd v. The Sales Tax Officer (1965) 16 STC 563 held “The expression “in the manufacture of goods” should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression “in the manufacture of goods.” Viewed accordingly, weighing machines, if constitute, integral part of the manufacturing process are entitled to be specified as such in the registration certificates on the ground that they are required “for use in the manufacture of goods.”  |
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by R.N. Lakhotia Q. My wife is a house wife with no source of income. The house we live in stands in her name. We now intend to sell it. Is the capital gain tax on the sale of the house exempted if a residential plot/house is purchased within a period of 3 years? What benefits accrue to a senior citizen in the matter of Income-tax liability? Om Parkash, Amritsar Ans: The long-term capital gains on selling the old residential house property will be exempted only if the amount of net capital gain is invested in new residential house property within three years from the date of sale. Merely investing in a plot alone will not result into tax saving. To a senior citizen a special tax rebate of Rs 15,000 under Section 88B of the Income-tax Act, 1961, is permissible from the income-tax payable by him. Q. I travelled to Sri Lanka and Singapore along with my younger sister who is unmarried, employed in private company and is income-tax paper. Expenditure on air tickets, boarding & lodging was met through advance cheque by my father who is a retired employee and is filing income tax returns regularly. Overseas expenditure was met by my sister with whom I travelled. In this case, am I required to file income tax return under 1/6 scheme and apply for PAN when I am unmarried and had very little income which is not taxable? If income tax return under 1/6 scheme is required to be filed, then last date by which to be filed for financial year 2001-2002, be kindly intimated”. Shikha Aggarwal, Panchkula Ans. On the facts mentioned by you, there is no requirement of compulsory filing of income-tax return as the expenditure on foreign tour is not met by you. Q. Accumulation of interest on Deep Discount Bonds, hitherto was required to be taxed at the point of maturity. I understand that now it is made obligatory to show the same as accrued income in I.T. Returns, on year to year basis starting from the current financial year. Please advise whether an income-certificate from the company will have to be obtained for this purpose or simple mention of it in the return will suffice? Also, kindly explain the treatment of interest for the period that already has elapsed. M.S. Bhatia, Mohali Ans: The circular issued by the Central Board of Direct Taxes in respect of Deep Discount Bonds is applicable only in respect of Deep Discount Bonds issued after the date of the circular. In future, you must obtain a certificate in respect of accrued interest. As regards the old Deep Discount Bonds held by you the interest either can be shown on year-to-year basis or on maturity in one year. In case the old Deep Discount Bonds are sold prior to the maturity date, then the resultant amount would be treated as capital gain. |
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by J.C. Anand Time ripe for long-term investors After the muhurat trading on Divali, the market continuously declined till Bill Gates’ visit and his business meeting with software executives. The Sensex gained 47 points in a day and closed at 3033.91 points on November 15. It may be noted that Sensex recorded its a 6-week high mark. The main gainers were Satyam, Wipro and Infosys. Satyam was higher by more than 7 per cent at Rs 265.35. Infosys was up by 4.8 per cent at Rs 4,333.80 while Wipro moved up by 4.37 per cent at Rs 1,598.90. Bill Gates combined his philanthropic grant to deal with AIDS scourge in India with his business meeting with software company’s executives and declared that Microsoft would invest $ 400 million in India over three years in education, business partnership and software development activities, the largest investment that the company has ever made outside the USA. There were also some other good news. After the discovery of huge gas reserves in the Krishna-Godavri basin in Andhra Pradesh, there was another news that gas reserves had discovered by a Canadian company near Surat in Gujarat. The Centre for Monitoring Indian Economy (CMIE) has revised its earlier forecast of industrial growth in 2002-03 upward from 3 per cent to 4 per cent, though it noted that while the first 5-months of the current financial year had registered a growth of 4.9 per cent, the remaining months will see slower growth, as a result of the bad monsoon. The Index of Industrial Production (IIP) has also risen to 6.1 per cent in September, 2002, from 2 per cent in corresponding period last year. Another good news was that Morgan Stanley Capital International (MSCI) has raised the country’s
weightage in its Asia-Pacific Ex-Japan Index from 3.12 per cent to 3.14 per cent. In the Emerging Market’s Index, India’s weightage has increased 4.25 per cent from 4.21 per cent, a little closer to the 5 per cent. Global Fund managers allocate assets to countries which have a rating of 5 per cent mark and above. The MSCI has also increased Hindustan Lever’s weightage from 8.08 per cent to 11.1 per cent in the index. This should help HLL’s market rating. It has, however, deleted Hughes Software Systems from its series. It is also possible that FIIs may get interested in re-entering in the Indian stock market as active investors once again. While looking back on the stock markets during the Samvat 2058 which closed on November 4 this month, there is a lot to worry about the dismal performance of the stock market. The BSE Sensex today is only marginally above what it was 10 years ago. Apart from sunshine during the technology boom, there has been in general nothing but gloom over the performance of the stock market. Some of the reasons are quite obvious; the deep economic depression in the USA, disinclination of the American fund investors to risk their money in emerging markets, deep depression in many Latin American countries some of which are closed to bankruptcy. The poor monsoon this year is also a major reason for depressed stock markets in our country. Delays and uncertainties in privatising many PSUs is also another factor in restricting flow of foreign funds into the economy. Some sectors of the industry which are doing well are: software, automobiles, textiles, exports and food products. It appears that the stock market has now bottomedout and should register some substantial gains in January next year. It is the right time for long-term investors to invest on long-term in blue-chip companies. One interesting feature of the present stock market is that while some sectors of the industry move up in the market some other sectors continue to slug. Generally in the past when the market indices went up, almost all sectors of the industry doing reasonably well made almost uniform gains. At present, Glaxo, Pfizer, Novartis are quoting at rates much below their intrinsic worth and future prospectus. There is also a market rumour that the Swiss management of Novartis India may plan to buyback of shares of the company from Indian investors. |
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by Ashok Kumar Adlabs to score in future At a time when market continue to flounder lower-priced potential, multi-baggers with limited downside have become the flavour of the day. One such stock that our research team has identified and backs is Adlabs. Adlabs was started in 1978 by Manmohan Shetty and Vasanji Mamania as a partnership firm to undertaken the processing of advertising films. It, later, diversified to set up a motion picture processing lab for documentaries and short films. At present, it provides a one-stop production facility to film producers. The company has been a pioneer of sorts by setting up world’s biggest and India’s first IMAX theatre at a cost of Rs 39 crore. This company came out with an initial public offer (IPO) in December, 2000 at a price of Rs 120 per share aggregating Rs 52.80 crore. Adlabs has recently decided to foray into film production — through its stake in Entertainment One — and theatre management. Let us commence this company’s SWOT snapshot by zeroing in on its weaknesses and threats. The company’s exhibition business has been suffering from low occupancy levels. Specifically, the company’s pet project of the 520-seater IMAX dome theatre has performed much below the expectations, with occupancy levels of around 33 per cent. Even the multiplex theatres have seen low occupancy of around 43 per cent due to the absence of any blockbuster movie. The company has approximately a 70 per cent market share in west India where proximity to Bollywood has helped. Then, in the current fiscal, the film processing business dipped due to the absence of any mega movies. The incremental operating profits of the company expand more than proportionately with the increase in the number of prints for a particular movie. This means that total number of films processed remaining constant, bigger copy size of a blockbuster film processed remaining constant, bigger copy size of a blockbuster film will earn higher margin than processing multiple films. This explains the drop in company’s margins, as topline grew strongly for the current fiscal, while the bottomline faltered. These negatives quite explain why the share price of this company now stands at half its IPO price. However, once we zoom in on the strengths and opportunities next week, it will come clearer as to why we back this company to score in times to come. |
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* New initiatives taken by software companies may buoy investor sentiment, says a broker. * Considering the swift run up in prices, Reliance is likely to go through a consolidation phase before the next upmove, says a broker. * A domestic brokerage has come out with an overweight rating on the Tisco stock and says it expects the company’s performance to remain encouraging, driven by cyclical factors. * The disappointing Q2 numbers have certainly not shaken the belief of the HLL fan club in the company’s current growth strategy. The Leading foreign brokerage houses are advising their clients to view sharp declines as a buying opportunity, considering that the long term fundamentals of the stock are in place. * With the Adlabs stock having received the acknowledgement of a couple of leading fund houses, some more may follow suit. Or perhaps the same set of players would have come back for fresh purchases, in a bid to stir action at the counter. * Falling interest rates generally result in a higher PE rating being assigned to the equity markets and this makes it very lucrative to be invested in stocks that are trading at very low PEs, says a fund manager. * A fresh wave of buying interest propelled the Glaxo stock. The all too familiar profit booking may be seen at the counter after the recent powerful performance, says a technical analyst. |
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Fiat small car to take on Maruti-800 New Delhi, November 17 “We have a new ‘A’ segment (entry level) car ready in Europe scheduled for an international roll-out in 2003. We may consider launching this product in India as well after studying the market and consumer preferences,” Fiat India Chairman and Managing Director M.P. Bianchi told PTI. He, however, declined to give details about the car. At present, only market leader Maruti produces the ‘A’ segment car Maruti-800. This car is the highest selling passenger vehicle in the country with sales of over 1.2 lakh units annually.
PTI |
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Inflation rises to 3.14 pc FII net buyers Alert system Housefed net up |
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