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RBI Policy
Clear stand on forex derivatives, experts to RBI
Tata emerges as global brand
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Bharti gets addl spectrum with rider on pricing
Microsoft deadline to Yahoo passes
Nod to NYSE Euronext proposal for stake in MCX
Corporate Results
Tax Advice
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RBI Policy
Mumbai, April 27 “The RBI will maintain a hawkish stance and there is a possibility of a 0.25 per cent increase in both the repo and reverse repo rates,” private sector Yes Bank’s Chief Economist Shubhada Rao said here. The key short-term rates - repo and reverse repo - are used as instruments by the apex bank for liquidity management in the system. Presently, the repo rate stands at 7.75 per cent while the reverse repo rate, at 6 per cent. RBI would target excess liquidity in the system, the economists said. Though it had hiked the cash reserve ratio (CRR) limit only a few days ago by 0.5 per cent, the apex bank could still hike the reverse repo rate, felt Enam Securities’ Chief Economist Sachichidanand Shukla. “My view is that, the RBI might effect a 0.25 per cent hike in the reverse repo and leave the repo rate untouched. Shukla reasoned that a repo rate hike might not impact inflation in the short-term, and, besides, it would affect economic growth which was already showing signs of a slowdown. “If repo is hiked, then banks too might be forced to hike their interest rates,”
Shukla said. Inflation is and will continue to be a major challenge, Rao said, adding, with global commodities and fuel prices remaining high, combined with inflation remaining above the 7 per cent level, “I expect a hawkish stance from the policy.” Crisil’s Principal Economist and Director, D K Joshi, while agreeing, felt the RBI might not tinker with the repo and reverse repo rates. He pegged economic growth for this fiscal at 8.1 per cent. “Growth should moderate to around the 8 per cent level but if interest rates are raised from hereon, then growth could fall below 8 per cent,” warned Shukla. “Inflation should fall to the 6.5 per cent level by early to mid-June,” said Bank of Baroda’s Chief Economist, Dr Rupa Rege Nitsure. She too felt that the Reserve Bank might not touch the repo and reverse
repo rates. “The yearly average should be around 5.5 per cent,” both Joshi and Shukla said while Yes Bank’s Rao pegged it much higher at around 6.4 per cent.
— PTI |
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Clear stand on forex derivatives, experts to RBI
New Delhi, April 27 In addition to ICICI Bank and Axis Bank (formerly UTI Bank), several small and medium enterprises have filed cases in different High Courts against Yes Bank and Kotak Mahindra Bank that are trying to recover losses from the corporates. Companies in all these cases are resisting recovery of losses incurred by banks. Pointing out that only a small number of companies have filed court cases with regard to derivatives losses, senior partner of law firm Titus and Co, Diljeet Titus, said, “ The RBI should come out with clean and unambiguous clarification in this regard with retrospective effect in order to ensure than bank-client relationship is maintained.” “In certain cases courts have stayed the recovery proceedings as such agreements are prima facie void ab intio (right from beginning),” and their purpose turned out to be speculative and thus unlawful, senior advocate and corporate lawyer U K Chaudhary said. The absence of clarification by the RBI, Titus said, “would open floodgates of litigation”. Among the cases filed in this regard, is the ones by home furnishings company Sabare International against ICICI Bank and Coimbatore-based Rajshree Sugars and Chemicals against Axis Bank in Madras High Court. Derivatives are financial contracts that derive their value from an underlying asset like interest rate or foreign currency. They can be used to manage risk, reduce cost and enhance returns. Indian companies entered into these contracts to hedge risks on interest and currency rates.
— PTI |
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Tata emerges as global brand
London, April 27 Valued at $ 11.4 billion, Tata is ranked 57th among top 100 brands listed by Brand Finance, an independent company focused on the management and valuation of brands. Coca-Cola heads the list followed by fellow American companies Microsoft, Google, Wal-Mart, IBM and GE while UK’s HSBC is placed 7th. Expressing his happiness, R Gopalakrishnan, ED of Tata Sons, and member of the Group Corporate Centre said it was a first for an Indian brand to be listed among the world’s largest. “For the first time, an Indian brand has got into the list of the largest global brands, although it is number 57 and they have valued it at $ 11.4 billion,” he said. Citing actions initiated by Ratan Tata, Chairman of the Tata Group to measure and track the brand by international firms, Gopalakrishnan said Tata brand has increased its value over a period of time quite successfully. “If you see the three biggest acquisitions in value, the Anglo-Dutch steel company Corus is the biggest. When completed and approved, Ford’s Jaguar and Land Rover will be second and the third will be Tata chemicals’ purchase of General Chemicals.” He said the total amount of acquisitions done by Tata is probably around $ 25 billion in the last 4 to 5 years. He also said that the group has achieved “some significant progress” in South Africa in the last two to three years. Now it is making forays in the USA and UK. Each one of the Tata company has to sign a Brand Equity and Brand Promotion (BEBP) agreement, he said.
— PTI |
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B’desh to restart talks on investment: Report
Dhaka: Bangladesh government has decided to resume talks with the Indian conglomerate Tatas for its investment proposals totalling $ 3 billion, according to media reports here.
“The move is a response to a letter from Tata to the Finance Adviser in which Tata asked for resumption of talks that have been on the ice since August 2006,” leading Bangladeshi newspaper The Daily Star reported. In 2005, the Tata Group initially proposed setting up a 1,000 MW power plant, a steel mill with a capacity of 4,20,000 tonnes and 1 million tonne fertiliser unit in Bangladesh, The Daily Star reported. In July 2006 the Tata Group had announced suspending work on its mega investment project because of inordinate delays by the government in according approval to it. |
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Bharti gets addl spectrum with rider on pricing
New Delhi, April 27 Allocating additional spectrum of 2 MHz, the Department of Telecom
(DoT) said that the additional allotment of spectrum is subject to revised pricing as and when finalised and is also to subject pending court order. Reliance Communication has filed a petition in the telecom tribunal TDSAT saying that GSM operators have been given spectrum beyond the contracted quantity of 6.2 MHz and the extra radio frequency held by them should be returned so that the same could be distributed to new players. No decision has been taken by the TDSAT as yet. Communication and IT Minister A Raja has already asked the Telecom Commission to review annual spectrum charges being paid by service providers as license fee. According to sources, DoT is likely to raise the charges to a minimum of eight per cent beyond 6.2 MHz and a final decision in this regard is expected soon. The government has been allocating spectrum to the service providers based on subscriber-linked criteria as suggested by the telecom regulator TRAI and going by that most of the existing GSM players have more than 6.2 MHz in various circles. Sources said that the operators may be asked to pay higher spectrum charges beyond a particular level and in case the total quantity goes up to 10 MHz the DoT may levy charge of 10 per cent of firm’s revenues.
— PTI |
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Microsoft deadline to Yahoo passes
Silicon Valley, April 27 In an open letter to the Yahoo board of directors on April 5, Microsoft CEO Steve Ballmer gave the Internet giant three weeks to accept the $ 31 dollar per share bid - an offer which expired yesterday - or face a hostile takeover. He also warned that Microsoft could drop its bid price. The ultimatum followed Yahoo’s repeated rejection of Microsoft’s February 1 bid. Analysts are divided about what Microsoft’s next move would be, with some expecting Microsoft to go direct to Yahoo shareholders to oust its board, while others believe that Microsoft could simply walk away from the deal. In fact, Microsoft CFO Chris Liddell made clear this week that the company was prepared to drop the bid.
— PTI |
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Nod to NYSE Euronext proposal for stake in MCX
New Delhi, April 27 The proposal would now go to Finance Minister P Chidambaram for the final approval. The Foreign Investment Promotion Board
(FIPB) cleared the proposal at its recent meeting despite the fact that MCX is yet to abide by a regulation that no single entity can hold more than five per cent in a commodity exchange. Earlier this year, the government restricted FDI in commodity exchanges to 26 per cent and FII to 23 per cent with a cap of five per cent for an individual entity. Fidelity International has 9 per cent stake in
MCX, which it bought for Rs 216 crore in 2006, when this policy was not in effect.
— PTI |
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Corporate Results
New Delhi, April 27 IDBI Bank net up 15%
IDBI Bank has posted a net profit of Rs 245 crore for the fourth quarter ended March 31, up 15 per cent over the same period last year. The bank’s net profit for the FY’08 is Rs 729 crore, against Rs 630 crore during the previous fiscal, IDBI Bank CMD Yogesh Agarwal told reporters here. The net interest margin for the bank was at 0.80 per cent, compared to 0.67 per cent in the previous year. Sterlite Ind profit up
Sterlite Industries India Ltd, the flagship company of the Vedanta Group, said its net profit has increased to Rs 306.45 crore during the quarter ending March 2008, from Rs 209.18 crore over the same period last fiscal. Total income has increased to Rs 3,617.35 crore for fourth quarter ending March 2008 from Rs 3,073.10 crore during the corresponding quarter a year ago. The company, one of the country’s leading copper producer, has posted a net profit of Rs 951.63 crore for the year ended March 2008, where as the same was at Rs 784.03 crore for the year ended March 2007. Sterlite Industries said its Board of Directors at its meeting held has proposed a dividend of 200 per cent for the financial year 2007-2008 on its equity shares, subject to the approval of the shareholders.
— Agencies |
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Tax Advice
Q. I and my wife are senior citizens.
(a) We had purchased a plot jointly from our savings in 1978 for Rs 5,000. (b) Now we are selling the plot for Rs 5 lakh (Financial Year 2008-09). (c) Our married son (in service) lives in a rented house in another city. We wish he owns his own house there. (d) Can we gift the sale proceeds of the plot to him for the purchase of a plot/house. (e) Is there any legal hurdle/tax liability. Kindly also advise about the capital gain arising out of the sale proceeds. Is the capital gain to be retained by us or can it be gifted too. We are not filing any Income-tax return now as our income is less than the limit of taxable income. (f) Calculate the capital gain for us. Surinder Mohan Dhawan, Abohar A. Your queries are replied hereunder: (a) The plot was purchased by you in 1978. You have thus an option to adopt the fair market value of such plot as on 01.04.1981 for the purposes of computing the capital gain. This value will be indexed taking the financial year 1981-82 as the base year. On the basis of the cost of plot of Rs 5,000, the indexed value would work out at Rs 27,550 giving a net long term capital gain of Rs 4,72,450. The tax thereon would be payable @ 20% and would work out at Rs 49,490 (after considering the exemption of Rs 2,25,000 available to a senior citizen) plus education cess of 3% thereon. The total tax liability would thus work out at Rs 50,975 (49,490 + 1,485). As indicated above, you have an option to adopt the fair market value as on 01.04.1981 which will raise the base figure of Rs 5,000. The capital gain amount would get reduced thereby resulting in a lower tax thereon. (b) The total amount of sale proceeds less tax and expenditure in connection with such sales, if any, can be gifted by you to your son without any tax liability on such a gift. CG on agricultural land sale
Q. Kindly clarify the following points: 1. Whether the total proceeds or only the Capital Gain will have to be used for the purchase of agricultural land? 2. Will it be necessary to park the total proceeds/capital gain in the 'Capital Gains Deposit Account' in some bank till the purchase of agricultural land? 3. In case one decides not to purchase agricultural land, what is the time limit for the deposit of Capital Gains Tax after the sale of land? Ramneek Singh, Jalandhar A. 1 Your queries are replied hereunder: (i) The amount of capital gain arising on the sale of the agricultural land is required to be utilised for purchasing the new agricultural land. (ii) The amount of capital gain which is not utilised by the assessee for the purchase of the new agricultural land before the date of furnishing the return of income under Section 139 of the Income-tax Act 1961 (the Act) is required to be deposited under the capital gains scheme account, which can be opened with any nationalized bank. (iii) The capital gains tax has to be paid in the same manner in which the advance tax on other income is paid i.e. on 15th September, 15th December and 15th March of the year in which the capital gain has been earned. Transfer of
property
Q. I purchased Chandigarh Housing Board flat on P.O.A. on 22.06.2000 and shifted in it on January 1st, 2001 after completing the internal works. I got the flat transferred in my name in the Housing Board record on 25.09.2006. The following expenses were incurred for completion/transfer in addition to original price: - (a) The original price = 4,72,000 I wish to sell the flat this year by December 2008. Kindly advise:- (a) Whether all above expenses be included in the original price to reach the actual purchase price. (b) What would be the Indexed cost of acquisition? (c) Whether the gain would be LTCG or short term capital gain. (d) Whether it would be legal transfer the flat to my son by taking a nominal profit i.e. for Rs 20,00,000. (e) The present market value of the flat is Rs 40,00,000. (f) Whether it would be treated as a sale or transfer of property within the family, in case it is given to my son by taking nominal profit. Surinder Sharma, Chandigarh A. 4 Your queries are replied hereunder: (i) The expenditure incurred by you for completion of internal doors, bath room and transfer fee etc. will be included for the purposes of computing the total cost of the house property. (ii) The indexation for the original cost and the amount paid to the agent would be as under: ((4,72,000 + 8,500) X 551)/406 Since you have not mentioned the year in which the other expenditure i.e. on completion and transfer was incurred, it is not possible to compute the indexed cost. Further, the index used is that for Financial Year 2007-08 as the index for 2008-09 has not been notified. (iii) The capital gain arising on the sale would be a long term capital gain as possession of the house property had been taken by you in the year 2000-01 (iv) It would not be advisable to transfer the property for a lesser consideration. Instead it would be much better if the house is gifted to your son. The gift would involve payment of stamp duty and registration expenses. No gift tax would be chargeable on such a transaction. HUF property share
Q. I, the karta of H.U.F. own a house at Delhi. It is being assessed as H.U.F. property since seventies. In the sale deed and in the municipal records it stands in my name only. The H.U.F. consists of me, (karta), my wife and my four daughters, who are all married. I want to divide the H.U.F. property and funds amongst all members legally and honestly. We, all six, have agreed in writing on a stamp paper of Rs 10 to sell the house and out of the sale proceeds to buy a house elsewhere which may accommodate all members of the H.U.F., if need arises. It is also agreed that the Karta, after paying all taxes, keep accounts of the balance money and divide the same amongst the members according to Law. 1. Can I sell the house by my name only and soon thereafter transfer the sale proceeds in the bank account of the H.U.F. from my individual account and thereafter buy a new house as agreed by all members of the house, pay capital gains tax to the government from H.U.F. account and partition the new house with an undertaking that the new house shall not be sold for three years and divide the balance money amongst the members of the H.U.F. or I must wait for three years for total partition to get benefit of Section 54 of the Income Tax Act. 2. How many shares can be in the H.U.F. property; six or five i.e. (1) self and my wife take one share each and four shares go to my daughters or (2) myself and my wife take only one share and four shares should go to my daughters. 3. Can there be a total partition of H.U.F. property on an ordinary paper or it should be done on a stamp paper; if so of how much value. Is the partition deed required to be registered or not. M.L. Gupta, New Delhi A. Your queries are replied hereunder: (i) You can sell the house and take the action in the manner suggested by you with regard to the sale proceeds. (ii) The partition of an HUF property can be effected any time as such partition is not considered to be a transfer in accordance with the provisions of section 47(i) of the Act provided it is a total partition of the family. (iii) There will be six shares of the HUF property. However, it is not essential that the share of all
co-parceners should be equal. (iv) It will better to have a Memorandum of Partition. The recital of such Memorandum would state that the partition had been agreed orally on a particular date between the various parties and the same is being reduced in writing after the date of such partition. This may involve a lesser amount of stamp duty. It would be advisable to get such Memorandum registered with the Registrar. |
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