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India plans to invest $5 billion in Russia
N-deal: US firms ink prelim pacts in anticipation
Vanaspati industry seeks duty cut on palm oil
Mittal justifies JV with Wal-Mart
Aviation Notes
Investor Guidance
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India plans to invest $5 billion in Russia
Mangalore, December 2 "We are targeting one billion barrels of oil and oil-equivalent gas from Russia," ONGC Videsh Ltd (OVL) Managing Director R.S. Butola said at the function to receive the first oil from Sakhalin I project. Though he did not elaborate on the proposed projects, but sources said the total investment could be to the tune of $5 billion. Petroleum Minister Murli Deora said India plans to get more oil and gas from Russia to diversify sources of energy. At present, India imports more than 70 per cent of its crude oil requirement and most of it comes from the West Asian countries. Mr Butola said ONGC's total exposure in Sakhalin I has come down to $1.5 billion after Russia's Rosneft prepaid the $1.2 billion loan that the Indian firm had extended to it as part of the agreement to get OVL to get into Sakhalin. Rosneft had in 2001 asked OVL to finance Rosneft's 20 per cent stake in Sakhalin I. This loan was to be repaid in the form of crude oil, but the Russian company paid it in cash. Mr Butola said the total project cost of the Sakhalin I stands at $12.8 billon and OVL would chip in its share through revenues generated from crude oil sales. Mr Butola had earlier said ONGC has proposed an exploration venture with Russian state-run firms to explore for oil in that country. "We have proposed a joint venture with either Rosneft or Gazprom or both for exploration and production of oil and gas," he had said on November 2. ONGC has proposed to hunt for oil in all of Russia and even third countries. The Russian company would hold 51 per cent stake in the proposed venture while ONGC would have the remaining 49 per cent. Separately, OVL had proposed to team up with Rosneft to bid for the giant Sakhalin-III project in far-east Russia. OVL, the overseas arm of ONGC, has 20 per cent stake in Sakhalin-I project. It has shipped 90 thousand tonnes (700,000 barrels) of crude from its share in the project. It will ship second cargo by the month-end. ONGCs' subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL) will process the Sakhalin crude. Sakhalin-I project will reach the peak rate of 12 million tonnes per year once a new onshore crude processing unit is commissioned this month. ExxonMobil holds 30 per cent in Sakhalin-I, with the remaining equity owned by Russia's Rosneft (20 per cent) and Japan's Sakhalin Oil and Gas Development Co (30 per cent). It is currently producing around 50,000 barrels per day. — PTI
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N-deal: US firms ink prelim pacts in anticipation
Mumbai, December 2 Two major nuclear suppliers from the US had already announced that preliminary contracts had been signed with Indian buyers and were awaiting the Indo-US nuclear deal to go through before they could begin supplies of critical material. Representatives of W M Mining said the company had signed a contract with the public sector Nuclear Fuel Complex to sell 500 metric tonnes of uranium a year. Wallace M Mays, president W M Mining said the contract was for a period of five years and could be extended. “The annual business for WM Mining from the Nuclear Fuel Complex would be worth $ 1.3 million,” Mays has been quoted as saying. The uranium, in the form of uranium oxide, will suffice for two pressurised heavy water reactors. However, both organisations were still negotiating the price of uranium. Another nuclear player, Thorium Power Ltd, is pitching to build thorium-powered reactors in India. According to its CEO Seth Grae, the company is in talks with several private sector players in addition to the public sector Nuclear Power Corporation. The big players in the business like General Electric and Westinghouse remained tight lipped as to the progress of their negotiations in India. But sources here said representative of Tata Power, Reliance Energy and Torrent Power had held talks with these companies over setting up of nuclear power plants in the country. However, existing rules do not permit the private sector companies into the field of nuclear power generation. With the Indo-US nuclear deal getting the green signal, it is felt that India’s private power companies may be permitted to expand into nuclear energy as well. Lobbyists from America and Indian companies are openly pressing for liberalising nuclear power generation in India. So far, only Anil Ambani of Reliance Energy has openly admitted to ambitions in the nuclear power sector. The American nuclear industry estimates that India would have to spend as much as $ 40 billion in the international market to build at least 30 new reactors of 1,000 MW each to take care of its power needs. With the US industry valuing the complete nuclear business from India at $100 billion, there is considerable excitement among international nuclear suppliers.
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Vanaspati industry seeks duty cut on palm oil
New Delhi, December 2 In a joint letter to Prime Minister Manmohan Singh, the chiefs of two leading industry bodies - Vanaspati Manufacturers’ Association of India (VMA) and Indian Vanaspati Producers’ Association (IVPA) - have demanded that canalisation of duty-free import of vanaspati from Sri Lanka by Nafed should be restored. They also demanded that tariff rate quota (TRQ) of duty-free vanaspati import from Sri Lanka be reduced to 100,000 per year. The India-Sri Lanka free trade agreement since its operation has become a cause of concern for the vanaspati industry. The Indian industry is largely affected by the surge in cheap imports. The cheap imports have been possible as Sri Lanka has allowed import of crude palm oil (CPO) - an essential raw material - against a low duty. “This is a long-term and sustained solution for correction of the unviable FTA terms with these countries,” IVPA Executive Director I R Mehra said. The Directorate-General of Foreign Trade (DGFT) in a recent notification has allowed imports of 250,000 tonne duty-free vanaspati per year from Sri Lanka without canalisation by any agency.
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Mittal justifies JV with Wal-Mart
Kolkata, December 2 Responding to queries, Mr Mittal told reporters that as per the MoU, Wal-Mart would provide the back-end support in terms of setting up cold chains, while Bharti would do the retailing under the cash-and-carry format. Mr Mittal said it was a partnership of equals, adding that both the companies would make substantial investments. While India has not allowed FDI in multi-brand retail format, foreign investment is permitted in wholesale trade as well as logistics and back-end support. Commerce Minister Kamal Nath had said that the government would examine whether the agreement was within the rules and regulations. Mr Mittal said the nationwide roll-out of their retail stores would begin from August 15, 2007. — PTI
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Reform aviation sector: experts
by K.R. Wadhwaney Experienced analysts are shouting hoarse that India is the only country where money and image earning sectors of aviation and tourism have sadly been built for yesterday instead for tomorrow. Two vital examples, which render this observation realistic, are: (1) government and non-government airlines have placed orders for more aircraft than existing parking bays and hangers. Such is the situation that planes for flights from Delhi and Mumbai will have to be parked at neighbouring airports and (2) hotel rooms are in actue paucity although several countries have already held road shows for bringing in additional number of tourists. These realities and other instances were highlighted in the vision statement by the Federation of Hotel and Restaurant Association of India (FHRAI) officials, Mr Rajesh Mishra (President) and Mr Kamal Sharma (Secretary-General). Suggesting several reforms, including uniform taxation policy by the state government and union territories, Mr Mishra emphasised that aviation and tourism should be declared essential services so that national and international passengers and tourists are not stranded because of uncalled for bandhs and hartals. Calling this as “uncivilised behaviour”, Mr Mishra advocated for legislation to help tourists enjoy their holidays. The 51-year-old FHRAI is considered an important organ for promoting and popularising civil aviation and tourism, which according to analysts, will further improve country’s economy. “Several countries like, Thailand, Singapore, Malaysia and Sri Lanka are prospering through aviation and tourism”, said team of officials of the FHRAI, adding, “India can also look bright and shine if the government reduces red tapism for these sectors. Sri Lanka’s campaigns
Sri Lanka is a small country but its doings in aviation and tourism are big; bigger than India’s. Its promotional campaigns are aggressive, based on realities. Blending superbly, the Sri Lanka Tourist Board (SLTB) together with the Convention Bureau and Sri Lankan Airlines are now looking for “double gains”. Happy at constant and continuous growth of tourist traffic from India, the trio has now taken effective measures to promote these sectors, including meetings, incentives, conferences and exhibitions. “We have wherewithals and several state-of-the-art convention centres and facilities to woo Indians”, said SLCB Chairman Haniffa Ishak, adding: “We will offer Competitive incentives in terms of discounted accommodation rates and competitive fares with group check-in facilities. His observations were whole-heartedly endorsed by Mr Udaya Nanayakkara, Chairman, SLTB, and Mr Sharuka Wickrama-Adittiya, airlines Area Manager. |
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Interest income on NRO deposits taxable
by A.N. Shanbhag
Q: I have a query about exemption to 33 pc tax deduction at source in NRO account. I have heard that if my total income (including interest income on NRO account) in India is less than Rs 50,000 then TDS may be exempted. Please advise. A: The interest on NRO is fully taxable at the rates applicable to residents. But there is no income threshold under which TDS is not chargeable. However, TDS is applicable @30.6 pc. The only practical recourse open is to claim refund by filing tax returns. In case the interest payable is over Rs 10 lakh from the same branch of the bank, there is a surcharge of 10 pc taking the total tax to 33.66 pc. Short-term gains
Q: I seek a clarification from you. In case I sell the shares within one year, I believe the gain, if any, is termed as short-term gain. A: No, that would lead to double taxation. The tax is 10 pc of the gain amount only. The same income does not have to be subjected to tax again. Please also note that if your other normal income chargeable to tax falls below the tax threshold applicable to you, the gains would be reduced by the amount by which the total income so reduced falls short of the threshold and the balance of the gains would be taxed at the rates applicable. In short, where the tax liability arises only because of inclusion of the capital gains in the total income, tax is levied at the corresponding flat rates on the excess over the minimum taxable limit. Tax on EPF dues
Q: I worked for a company X in Delhi and my EPF account was opened in May 1999. I worked there for 3 plus years till August 2002. I joined another company Y in January 2004 and in my EPF Account in this company Y, the amount of EPF account from the company X was transferred in December 2004. I have left the company Y in January 2006, and am now working in a different profession where there is no EPF facility. I got the withdrawal of the combined EPF Account (started in May 1999 and transferred to other company in Dec. 2004) from company Y in November 2006 now, and the amount received is Rs 5 lakh plus with about Rs 1,400 TDS deducted. A: According to Rule 8 of Part A of the Fourth Schedule of the ITA, the accumulated balance due and becoming payable to an employee participating in Recognised Provident Fund shall be excluded from the computation of total income. No income tax is payable thereon if the employee has rendered continuous service with his employer/s for 5 years or more. The service could be with more than one employer with continuation of the PF contribution. This requirement of 5 years shall not be applicable where the service has been terminated by reason of the employee’s ill-health, or by the contraction or discontinuance of the employer’s business or other causes beyond the control of the employee. The condition is also not applicable where the employee obtains employment with any other employer and transfers the corpus to any recognised provident fund maintained by the other employer. If an employee leaves the service before completion of 5 years, Rule 10 of Part A of Schedule IV, requires the trustees of the recognised PF to deduct tax when the accumulated balance due to an employee is paid. This payment is to be treated as income chargeable under the head ‘Salaries’. Coming to your case, it is possible that your employer Y feels that your total employment with both the companies has not completed 5 years. Moreover, in the case of ONGC Ltd. v Income-tax Officer (TDS), Dehradun ITAT Delhi Bench ‘A’ observed, “Accumulated balance due to employees ] as provided in rule 2(f) of Part A of the Fourth Schedule, to the Income Tax Act 1961, would mean the balance due or claimable by an employee on the day he ceased to be the employee of the employer maintaining the provident fund and, therefore, such balances would imply amounts credited to the accounts of employees during their employment. It was only these balances that were exempt from tax u/s 10(12). The assessee, a recognised provident fund, had made the impugned credits to persons who were no longer employees of ONGC. The cessation was not due to their ill-health, the discontinuation of the employer’s business or for any other cause beyond their control. The amounts credited in the accounts of former employees would not be exempt from tax.” Your employer Y may have felt that since there was a large gap between your two employments, the corpus in the account while joining Y was taxable. Capital gains tax
Q: Please clarify my doubt. When I disposed off my property in August, after computing full value of consideration of the house sold, I was left with about Rs 25 lakh of capital gain. Can I use this money u/s 54 in the next 2 years to buy a house or in the next 3 years for constructing a house without investing within 6 months, the amount of capital gain i.e., Rs 25 lakh, in infrastructure related bonds. Because, I was given to understand that if I don’t use up this capital gain within this financial year namely till Mar 2007, I will have to pay 20 pc of the unused amount as capital gain tax when I file my next return by July 07. To add, I have already been allotted a flat for which I have to pay the cost of the same in instalments within the next 2 years, the value of which is more than Rs 25
lakh. A: Your understanding is perfect. Reinvesting in a residential flat and buying the Bonds are two different avenues for saving the tax on long-term capital gains. Both can be used either separately or in conjunction. In the case of a residential house, the amount which is not invested before the filing of returns for the year or the statutory last date for filing the returns, whichever is earlier, is required to be parked in ‘Capital Gains Account Scheme’ with a Bank in
India
The authors may be contacted at wonderlandconsultants@yahoo.com |
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