B U S I N E S S

Rs 4,700-crore revival fund for tea industry
Centres proposed in Cairo, Teheran to market tea 
Kolkata, May 21
In order to revive the Indian tea industry, the Centre has launched an ambitious special purpose tea fund (SPTF) of Rs 4700 crore for replantation in tea gardens over 15 years with active cooperation from the banking and other financial sectors.

Market plunge bleeds MFs
New Delhi, May 21
While Finance Minister P. Chidambaram looks to mutual funds to salvage the sinking market, it turns out that last week’s market mayhem did not spare even MF investors.

Ms Catherine Mansan, Head of Christie’s Public Relations in Europe and West Asia, displays an art work by Farid Belkahia of Morocco prior to Christie’s first public modern and contemporary art sale in Dubai on Sunday. — Reuters

Market Update
Time to invest in good cos
The markets fell sharply amid concerns of global meltdown and also news of possible changes in the taxation policy as it would have led to an increase in the tax liability for foreign institutional investors (Flls).

Dena Bank hikes term deposit rates
Mumbai, May 21
Dena Bank has hiked interest rates on term deposits with effect from May 22. For maturity period of three years to less than five years, the interest rates have been hiked by 25 basis points to 7 per cent for deposits up to Rs 15 lakh.

Tax Advice
Rule 6 F not applicable if annual receipt is below Rs 1.5 lakh
Q. I have annual income of Rs 3,90,000 . Please throw some light on books of account like what is this and how we should prepare it. If you can show a small sample it would be best for everyone who has to make it.

Rs 4,700-crore revival fund for tea industry
Centres proposed in Cairo, Teheran to market tea 

Kolkata, May 21
In order to revive the Indian tea industry, the Centre has launched an ambitious special purpose tea fund (SPTF) of Rs 4700 crore for replantation in tea gardens over 15 years with active cooperation from the banking and other financial sectors.

Announcing the introduction of the SPTF with an initial contribution of Rs 100 crore from the Union Government, Union Minister of State for Commerce and Industry Jairam Ramesh said here today the first disbursement of the fund would be made in November this year.

Highlighting the special features of the SPTF, Mr Ramesh said the entire money would be used for the purpose of re-plantation of saplings in all tea gardens in the country where no fresh tea plantation was made in over 50 years, making them absolutely useless.

The Union Minister said while 50 per cent of this fund would be used for the revival of Assam- based gardens, the remaining 50 per cent would be equally divided between gardens in West Bengal and Kerala and other south Indian tea- producing states.

The Centre had decided to open two international tea marketing centres in Cairo and Teheran this year in order to re-capture its dwindling global market share in tea, Mr Ramesh said.

Mr Ramesh said the best and good- quality Indian tea would be marketed in West Asia and African countries through these two centres, which would come up later this year.

Mr Ramesh said besides increasing the export volume the Tea Board had decided to lay special emphasis on sale of Indian tea to Pakistan, Iran and Egypt, the three most tea-consuming countries in the world.

It was very unfortunate that despite enjoying the best of diplomatic relations Pakistan imported only about 10 million kg of Indian tea against its total demand for 140 million kg per annum, Mr Ramesh said and pointed out the similar picture in Iran and Egypt

“We have, however, already taken some positive steps and organised a visit of an Indian tea delegation to Pakistan last month. In return a similar tea delegation of Pakistan is also coming to India in July to explore the possibilities of further import of good-quality Indian tea instead of importing the commodity from Sri Lanka or Kenya,” Mr Ramesh said.—UNI

Market plunge bleeds MFs

New Delhi, May 21
While Finance Minister P. Chidambaram looks to mutual funds to salvage the sinking market, it turns out that last week’s market mayhem did not spare even MF investors.

The average returns across all equity and hybrid fund categories turned negative, both on weekly and monthly basis, according to an analysis of one-week and one-month returns for the period ended May 19.

Equity funds were overtaken by the debt and gilt funds in terms of higher weekly and one-month returns after the share markets witnessed a record high one-day fall of 826 points on Thursday, followed by another 453-point free fall on Friday.

Before last week’s bloodbath on the Dalal Street , Sensex was quoting at nearly 95 per cent above the year-ago levels, while a host of equity-linked MFs were giving one-year return of more than 100 per cent.

While the equity funds are still maintaining a big lead over the debt and gilt funds in terms of one-year returns, the current average one-year returns across various categories have fallen back sharply from their higher levels a week ago.

The chart of pure-play equity fund categories was led by other-specialty segment with an average weekly return of 8.52 per cent in the red while hybrid-monthly income segment topped the league of hybrid schemes with a negative 1.76 per cent return.

Among the sector-specific equity funds, the banking segment recorded the best weekly performance with a negative average return of 9.10 per cent for the period ended May 19, followed by a negative return of 9.70 per cent in the technology segment.

The technology segment had topped the chart of all equity fund categories with a weekly average return of 1.03 per cent in the previous week ended May 12.

Industry experts expect significant changes in the portfolios of those fund houses who are already heavily invested in the market, while the future capital collections might be also impacted due to the impact of recent plunge in equity markets on the overall investor sentiments.

An analysis of individual schemes presented similar disappointing results, as none of the equity funds recorded positive return for the one-week period, while just two each from the open-ended and closed-ended equity segments managed to keep their one-month return in the positive territory. — PTI

Market Update
Time to invest in good cos
by Lalit Batra

The markets fell sharply amid concerns of global meltdown and also news of possible changes in the taxation policy as it would have led to an increase in the tax liability for foreign institutional investors (Flls).

Sensex recorded its biggest weekly fall in more than four years. Finally, Sensex fell by 11 per cent to close at 10,938 while NSE Nifty also tumbled by 11 per cent to 3,2,46.

The Central Board of Direct Taxes (CBDT) drafted a circular proposing new guidelines that will try to distinguish stock traders from investors, which prompted Flls to press the panic selling button.

Margin call from the brokers also contributed to the fall. Weakness in the LME market and other Asian markets also led to the downfall.

Going forward we are of the view that this decline or a further fall should be taken as an opportunity to invest and build a long-term portfolio. Retail investors should continue to invest in good companies with sound business models from a two or three-year perspective and one need not worry about the day-to-day market movements.

Deccan Aviation

Deccan Aviation Limited (DAL) commenced its operations as a chartered service provider (helicopters and fixed-wing aircraft). In 2003, it entered the scheduled airline business through the launch of Air Deccan — India’s first low-cost, no-frill airline. Starting with a single ATR aircraft, Air Deccan now has a fleet of 29 aircraft (18 ATRs and 11 Airbus jets) that operate on 85 point-to-point routes, serving 52 destinations across India.

Among the many private players that began operations following the deregulation (post-1986), only two continue to operate-Jet Airways and Air Sahara.

The company targets the rail passenger (the A/C II-tier and III-tier travellers) by offering competitive rates. Despite challenges on newer routes, the management is willing to take a long-term view (like the route-expansion), which is commendable.

There are certain threats to the company. Significant additional increases in the fuel price can have an adverse impact on the financial performance of the company as it may not be able to pass on the entire burden to the consumer. Also, the competition is on the rise. In order to break even, the company will have to continuously maintain a high load factor without cutting fares. This will be difficult, considering DAL’s aggressive fleet expansion plans, inadequate infrastructure and higher competition.

Given the fact that the company may not be able to break even for the next two years and rising input costs, I suggest investors to avoid its public issue for the time being and wait for it to list on the bourses.

Dena Bank hikes term deposit rates

Mumbai, May 21
Dena Bank has hiked interest rates on term deposits with effect from May 22. For maturity period of three years to less than five years, the interest rates have been hiked by 25 basis points to 7 per cent for deposits up to Rs 15 lakh.

Further, the bank has increased the interest rates on deposits for maturity period of five years to 10 years by 50 basis points pegging it at 7 per cent.

For term deposits for Rs 15 lakh to less than Rs 1 crore, the bank has introduced differential rates of interest.

The rates for such deposits are 25 basis points higher than that of less than Rs 15 lakh slab, the bank said.

Oriental Bank

Oriental Bank of Commerce (OBC) has launched online funds transfer facility for Internet-based securities trading for its customers of core banking solution (CBS) branches.

The OBC signed an MoU with Delhi-based stock broker, DB (International) Stock Brokers Ltd, having membership of both the NSE and BSE, for this purpose.

''Initially, 104 branches of the bank will provide this facility and later on it will be extended to all 800 CBS branches,'' OBC CMD K.N. Prithviraj said. The bank reached a total business of Rs 86,600 crore as on date and a gross profit of Rs 1,192 crore in 2005-06.— Agencies

Tax Advice
Rule 6 F not applicable if annual receipt is below Rs 1.5 lakh
by S.C. Vasudeva

Q. I have annual income of Rs 3,90,000 . Please throw some light on books of account like what is this and how we should prepare it. If you can show a small sample it would be best for everyone who has to make it.

—Nitin Sharma

A. Rule 6F of the Income-tax Rules 1962 provides for the books of account and other documents to be kept and maintained by a person carrying on certain profession. These include legal, medical, engineering, architectural. accountancy, technical consultancy, interior decorator, authorised representative or film artist. The above rule does not apply in case the gross receipt of any person do not exceed Rs 1,50,000 in any one of the three years immediately preceding previous year, or, where the profession has been newly setup in the previous year, his total gross receipts in the profession for that year are not likely to exceed the said amount. The specified books of accounts are (a) a cash book (b) a journal, if the accounts are maintained according to the mercantile system of accounting (c) a ledger (d) carbon copies of bills whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoil of machine numbered or otherwise serially numbered receipts issued by him (e) original bills wherever issued to the person and original receipts in respect of the expenditure incurred by the person. In case no bills are issued and expenditure does not exceed Rs 50 payment voucher prepared and signed by the person. These books are required to be maintained at a place where he is carrying on the profession.

Personal loan

Q. I am a government employee. I have taken Rs 1 lakh as personal loan from the SBI in the financial year 2005-06. I want to enquire whether this amount will be included in my annual income for the year or not?

—Ravi Shankar

A. The loan received is not an income and, therefore, the same is not includible in the year’s income.

NRO account

Q. As per the tax advice imparted in this column in The Tribune dated 22.08.2005, a non-resident Indian (NRI) or a person of Indian origin (PIO) is allowed to remit up to 1 million every year out of balance held in his non-resident ordinary rupee account, out of sale proceeds of assets for all bonafide purpose.

Where as the learned author under same column in The Tribune dated 19.09.2005 imparted as under "In accordance with regulation (3) of the FEMA, a non-resident Indian or a person of Indian origin is allowed to remit an amount not exceeding $ 100,000 per calendar year out of balance held in NRO account."

In view of the two different advices on the same matter i.e. 1 million and $ 1 lakh, the issue needs clarification.

—Y.D. Arya

A. It seems that there is a printing error. The figure should have been $ 10,00,000 instead of $ 1,00,000 in the answer to query published in September 2005. The error in printing is regretted.

Section 80 DD

Q. I am a Punjab Government employee and income tax assessee. My mother is 50 pc disable permanently due to hemipanesis and depends upon me. I have the certificate regarding her disability issued by the Civil Surgeon, Bathinda. Please guide me how can I get the income tax benefit from my salary and oblige.

— Krishan Chand Bagga

A. Section 80DD of the Act provides that in case an assessee, being an individual or an HUF who is resident in India, has during the previous year incurred any expenditure for medical treatment (including nursing), training and rehabilitation of dependent, being a person with disability or paid or deposited any amount under a scheme framed in this behalf by the LIC or any other insurer, administrator or the specified company subject to the conditions specified in sub-section (2) of the section and approved by the Board in this behalf for the maintenance of a dependent, being a person with disability, the assessee shall in accordance with and subject to the provisions of the section, be allowed a deduction of a sum of Rs 50,000 from his gross total income in respect of the previous year. In case of a severe disability the amount of deduction permissible is Rs 75,000. The term disability for the purpose of this section has the same meaning as assigned to it in clause (i) of Section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) (and includes "autism", "cerebral palsy" and "multiple disability" referred to in clauses (a), (c) and (h) of Section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).

In case your mother has disability which is covered within the definition given in the above enactments and you have incurred the amount towards the medical treatment of your mother, you would be entitled to a deduction of the specified amount subject to your furnishing a certificate issued by a medical authority in the prescribed form and manner along with the return of income in respect of the assessment year for which deduction is claimed.

Excess payment

Q. I am a government employee. My department issued me a notice to recover about Rs 70,000 due to wrong fixation of my pay from 01.09.1996 during the Financial Year 2005-06. For that I have started the deduction from my pay from May 2005 and the recovery will end in February 2006. The rate of recovery is Rs 7000 per month. Can this amount be deducted from my gross income for the financial year 2005-06? If yes under which Section?

— P.N. Sethi

A. There is no specific provision in the Act for allowing the deduction of the recovery made for excess payment of salary thereby bringing net amount of salary to tax. However, there is a tribunal decision of Delhi Bench ‘E’ in the case of Rajat Lal vs. DCIT (66 ITD 333) in which the hon’ble ITAT has held that excess salary received in earlier years is allowable in the year when it is refunded. You can make a claim on the basis of the above said decision in your return for the assessment year 2006-07.

Tax liability

Q. Please inform where I should invest in order to save my tax, I am working with BSNL. My gross salary per month is Rs 21,000 i.e. my gross salary for the year 2006-07 will be Rs 2,52,000 + Rs 15,000 (medical + bonus etc.) = 2,67,000. My GPF contribution will be Rs 96,000 (Rs 8,000 per month) and PLI contribution is Rs 4,500 (Rs 375 per month).

My query is in order to get the benefit for the assessment year 2006-07, where should I invest and what will be the total amount of tax to be paid with above amount. How the tax will be calculated for the year 2006-07.

— Dinesh Kumar

A. The maximum deduction allowable under Section 80C of the Act for various saving schemes is Rs 1,00,000. On the basis of figures given in the query, you need not make further investment as the deductible amount on the basis of such figures (Rs 96,000 + Rs 4,500) exceeds the permissible amount of Rs 1,00,000. Your tax liability including education cess on a total income of Rs 1,52,000 would work out at Rs 5,508.