New Delhi, July 8
Market regulator SEBI has said it will soon decide on allowing institutional investors to short-sell shares and putting in place a revised stock lending and borrowing scheme for them.

After a three-hour long SEBI’s Board meeting, here, its Chairman M Damodaran told reporters, “Stock lending and borrowing as well as short-selling by institutional investors have been discussed in the meeting ...it is my belief that every concern has been addressed in this meeting”. He said when you address concern you were obviously moving in the direction of decision making.

Denying to comment on the decision taken in the meeting, the chairman said, “There are issues here which are of technical nature and I don’t want to state inaccurately”.

Short-selling — selling stocks without actually owning them or selling them by delivering borrowed stocks — is currently permitted for retail investors.

The issue of allowing institutional investors to short sell is linked to the programme for stock lending and borrowing.

The stock lending and borrowing programme was in vogue for institutional investors until 1997 under FERA, which was replaced with FEMA in 1999-2000. Now the issue is whether proposed lending and borrowing programme could be allowed for foreign institutional investors under FEMA.

A revised scheme for lending and borrowing stocks was prepared after the stock markets experienced a huge volatility in May. — PTI

Kolkata, July 8
Allahabad Bank and Punjab National bank were in the process of forming a joint venture to start banking operations in Kazakhsthan, Allahabad Bank's Chairman and Managing Director O N Singh said today.

PNB would have 60 per cent equity and Allahabad Bank the rest. The initial capital required would be Rs 70 crore, he said on the sidelines of the bank's AGM.

The Reserve Bank of India and the regulator of Kazakhsthan, he said, had cleared the proposal and the subsidiary arm would begin operations shortly.

On Allahabad Bank's foray into the non-life insurance business, Mr Singh said Japanese partner Sompo would have to bring a clear certificate from its country's regulator after which the shareholders' agreement would be signed.

On core banking solution (CBS), Mr Singh said in the first two years, 900 branches of the bank would be brought under the technology platform and in the subsequent three years, the remaining branches would be under CBS. — PTI 

Shimla, July 8
The Confederation of Indian Industry (CII) has said the tariff order announced by the HP Electricity Regulatory Commission is reform oriented, but the expectations in respect of medium category industry have not been met.

In a statement issued here today, the Chairman of the CII, Mr Rajender Guleria, said the new tariff order had sent positive signals in the industrial circle. “The industry had been under tremendous pressure after the exorbitant increase imposed by the previous tariff order but now the small industries upto 20KW of load have got relief due to reduction by 15 paise per unit,” he said.

He said the tariff for the medium category had been rationalised by way of reduction in demand charges which was fixed component of the overall energy rate, but the increase in unit charge by 20 paise per KW has neutralised the effect of demand charges reduction. He added that the industry appreciated the direction of reduction of cross subsidy on industrial tariffs by way of reducing per unit charge by 10 paise.

Mr Guleria said it was being expected that the demand charges would be restored to a level of 80 per cent of contract demand in order to provide flexibility in operations. He said this demand had not been met despite being prevalent in all other states.

Mumbai, July 8
Tata-controlled Videsh Sanchar Nigam Ltd (VSNL) has purchased the complete asset of its South African second network operator (SNO) partner Transtel for $35 million.

Transtel is the telecom subsidiary of Transnet, which holds 13 per cent stake in the SNO consortium.

"We have purchased the complete asset of Transtel...this is not an acquisition and there would not be any change in our stake of 26 per cent in SNO," VSNL sources said.

Last year, VSNL along with other shareholders had signed an agreement to set up the second national operator (SNO) in South Africa.

The project allows the SNO to offer services similar to those currently only available through Telkom, the South African telecom giant. This includes voice, data and limited-mobility access.

The Tatas, through VSNL, own 26 per cent stake in SNO with CommiTel and two other consortiums each holding 12.5 per cent. Together these three groups control 51 per cent in the SNO.

The remaining shares are distributed between Nexus Connexion with 19 per cent, the state-owned Eskom Enterprises (Esitel) with 13 per cent and Transnet (Transtel) 13 per cent. — PTI

For several years, Germany was considered Europe’s popular hub. But now, with ‘Berlin Wall’ dismantled and FIFA World Cup staged magnificently, it has risen to be one of the favoured destinations in twin sectors of aviation and tourism.

Many Indian travel agents and tour operators among hundreds and thousands visitors for World Cup in June-July 2006 are Germany’s fans. The survey, commissioned by the German National Tourist Board (GNTB), reveals that ‘Germany now finds new groups of travellers’. Even those travel agents, who were on their maiden trip to Germany, assert that majority of airports and travel facilities are excellent.

“All the feedback we have had from our 30 offices around the world has been positive. There is a tremendous enthusiasm for destination Germany”, commented Petra Hedorfer of the GNTB.

Q: 1 Is it possible to set off short-term capital gains (STCG) against long-term capital loss when both are from share transactions in the last financial year dealt through stock exchanges?

2. Is it possible to set off short-term capital gains arising from mutual fund transactions against long-term capital loss from mutual fund transactions?

Is there any change in this treatment when the fund is an equity-oriented fund and when it is a debt-oriented fund?

— Lav Rajpal

A: No. The long-term capital gains (LTCG) as well as long-term capital loss from equity shares sold on any recognised stock exchanges in India or from equity-based schemes of mutual funds are exempt.

Q: My question has two parts 1) Equity diversified fund 2) ELSS tax saver fund:

In any equity fund the companies offer growth plan for capital appreciation and dividend reinvestment plan which adds more units as per dividend declared. Which plan will give more benefit to retail investor as per tax aspect for long-term horizon?

How will the dividend reinvested affect ELSS scheme? Are reinvested units considered in next three year lock-in? If dividend reinvested units undergo a new three year lock-in, it will be an endless cycle.

— Prashant

A: 1. We like growth because:
i) The dividend suffers from dividend stripping regulations.
ii) The reinvested dividend gets the colour of short-term asset if sold within one year from the record date.

Q: Equity-based mutual fund units are subjected to security transaction tax (STT) from 1.10.2004 and LTCG from such units after 1.10.2004 is exempted from income tax. Loss from such units cannot be set off against any gain if the loss is booked after 1.10.2004. Further, debt-based mutual fund units are not subjected to STT.

If I have booked a loss from the sale of equity-based mutual fund units before 1.10.2004 (in August 2004) and booked a profit from the sale of debt-based units after 1.10.2004 (On 20.10.2004), can the above long-term capital loss (from equity) be set off against the long-term capital gain (of debt-based mutual fund units).

In both the transactions, STT was not involved. In my opinion, I can set off.

— S. Natarajan

Q: My taxable income is less than Rs 1 lakh. I have made certain profit by trading in the shares during the year. Hence, it is short-term capital gain. If I add the capital gain with my regular income still my taxable income is less than Rs 1 lakh. Shall I be liable for short-term capital gain tax even though my taxable income is less than Rs 1 lakh? Please advise me.

— Amar

Q: I have a flat booked in my name and currently under construction in Mumbai. I am an NRI residing in the USA. Total cost for the flat is about Rs 50 lakh and all payments have been made through my NRE account. Flat is not yet registered. I want to “gift” this flat to my parents. What would the procedure be? Do I need any special permission to gift it to my parents? My parents are retired and pretty much dependent on me... I mean, they have no source of income. Is there any tax implication that I need to worry about before making the gift? Do I need to notify RBI or Income-Tax Dept? How do I make sure my parents don’t end up with any tax-related problem given a Rs 50-lakh house as gift when they have no income of their own?

— Santosh

A: 1. Yes, you can give a gift. Proper gift procedure will have to be followed for abundant precaution. All that is required is an offer by the donor and acceptance thereof by the donee in black and white. To safeguard against any hassles, the donee should request the donor for a gift and then the donor should remit the amount to the donee. Alternatively, the donor can offer the gift. In either case, it is necessary for the donee to accept the gift in writing (maybe through a thank you note). Only then it would be considered as a gift in India. It is preferable to mention the relationship between the donor and the donee.

It is better to prepare a gift deed and get it registered (with related stamp duty) in the case of high-value gifts, particularly those of real estate.

2. No special permission from any authority is necessary for giving a gift.

3. There will be no tax on this gift.

The authors may be contacted at wonderlandconsultants@yahoo.com