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Taming Inflation
Deal with MTN
‘Not bound by RIL’s alleged RoFR in RCom’
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Speculators behind oil spike: FM
IA cuts fares on UAE-Delhi, Mumbai routes
HDFC mobile ATM facility
Aviation Notes
Investor Guidance
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Taming Inflation
New Delhi, July 19 "In a situation like this, encouraging inflow would help ease inflation. Easing of ECB should happen logically. Sooner or later there will be a high-level co-ordination committee on ECB," finance ministry sources told PTI. The sources said the upcoming HLC would have discussion on relaxing the norms further. The HLC on external commercial borrowing comprises finance ministry officials and representatives of SEBI and RBI. When asked about the amount of ECB that could be allowed for Indian companies, the sources said the finance ministry suggests policy and RBI considers it and decides the quantum. "It is the RBI which decides the number," they added. India typically has never handled inflation through exchange rates, the sources said. Increase in capital inflow would appreciate the rupee, which generally counters inflation, assuming other factors remain the same. Inflation is inching towards 12 per cent mark and the government might think of various options to control it, besides raising interest rates and squeezing liquidity. The government had tightened ECB norms to moderate capital flows, when they were leading to appreciation of the rupee, hurting exports. In August, 2007, it had limited the companies to bring back money raised abroad up to only $20 million for rupee expenditure. However, that cap was enhanced in May to $100 million for infrastructure companies and $50 million for others. Besides borrowers in the service sector viz hotels, hospitals and software companies were allowed to avail ECB up to $100 million for import of capital goods under the approval route.
— PTI |
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Deal with MTN
New Delhi, July 19 While Anil Ambani-owned RCom became the second Indian telco in as many months to fail in pulling off a merger with MTN, officials of Bharti Airtel said they had nothing to say on the speculations in the market that it would renegotiate the deal with MTN. “Officially or unofficially, we have nothing to say on the latest development as regards the breakdown of MTN talks with R-Com and whether Bharti Airtel would be going back to the negotiating table,” an official unwilling to be quoted said. As and when there would be some development it would come out in the open, he added. However, experts were of the opinion that the two telecos may end up again on the negotiation table as more than Bharti Airtel it would be MTN which would be keen to start afresh. This, they said, was because the main stakeholders in MTN were out sell and would want to get back to where it left with Bharti Airtel. Sources close to the development said Bharti Airtel would be ‘open to take the discussions with MTN forward’. However, it is possible that other global telcos may also enter the fray for MTN. Bharti Airtel and MTN were close to a merger in May but the Indian telco called off the talks after the two companies failed to agree on the corporate structure of the combined entity. Bharti Airtel was looking to buying the controlling stake in the MTN, which operates with 68.2 million mobile subscribers in South Africa and 20 other countries spread over the African continent and middle-eastern region. Bharti had 64 million subscribers at the end of the first quarter, a 12 percent increase from the previous quarter, and a 65 percent leap from a year earlier. Together, the merged entity would have emerged as the fourth largest telecom operator in the world giving Bharti Airtel a footprint globally. MTN, incidentally, is learnt to have already sent feelers to Bharti Airtel for reviving talks as it felt that the spanner thrown in the wheels by Anil Ambani’s elder brother and chairman of Reliance Industries was a serious attempt to dislodge the talks. RCom and MTN yesterday announced that merger talks between the two telcos have ended. |
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‘Not bound by RIL’s alleged RoFR in RCom’
New Delhi, July 19 AAA Communications, a private company of Anil Ambani that holds 63.38 per cent equity in RCom, today wrote to RIL claiming it was "free to and shall deal with RCom shares as it deems fit." It claimed that it was not a party to any "alleged non-compete agreement dated January 12, 2006" and hence was not covered by any alleged rights of first refusal (RoFR) to RIL. An RCom spokesperson, however, declined to comment when asked about the non-compete agreement, citing which RIL had initiated the arbitration process against RCom by nominating a former Supreme Court judge Justice B P Jeevan Reddy as an arbitrator on July 17. A spokesperson of RIL, which had thrown the spanner in negotiations between RCom and MTN, which could have possibly created a $70-billion telecom entity, by asserting its right of first refusal on majority stake in RCom, declined to comment immediately on the letter from Anil Ambani firm. The Anil Ambani firm termed RIL's action as "uncalled for, offensive and clearly motivated" and said RIL's "mala fide interference caused significant harm to AAA Com as a substantial RCom shareholder". "AAA Com reserves right to claim direct and consequential damages from RIL," the spokesperson said.
— PTI |
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Speculators behind oil spike: FM
New Delhi, July 19 Chidambaram, who had last month asked the oil cartel to regulate crude prices within a specified band, said there was conclusive evidence that futures trading and speculators were driving the prices. "We are completely convinced that any price above $60 a barrel is speculative element," he said here. Finance minister had mooted the idea of price band at a meeting called by oil kingpin Saudi Arabia of oil producers and consumers in Jeddah last month. "There is evidence for that (speculative trading contributing to oil price spike). There is enormous literature and I had gone through it myself before I went to Jeddah," he told PTI in an interview.
— PTI |
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IA cuts fares on UAE-Delhi, Mumbai routes
Dubai, July 19 IA has cut fares on the UAE to Delhi and Mumbai routes by 20 per cent. The one-way fare has been cut from Dh500 (about Rs 5,500) to Dh 400 (Rs 4,400), while the fuel surcharge remains same. The new fares came into effect from July 14. Indian Airlines regional manager Abhay Pathak said the airline had introduced special fares to Delhi and Mumbai last Monday.
— PTI |
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HDFC mobile ATM facility
Bhubaneswar, July 19 HDFC Bank would be the first in country to launch mobile ATM facility and they were planning to extend the facility to other states in a phased
manner. — PTI |
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Aviation Notes
The modern aircraft, Airbus and Boeing, are sturdy to the extent that manufacturers scream that people are safer in flying cabins than in their houses.
Statistics reveal that more than 90 per cent accidents and near-miss happenings occur because of human fallibilities of commanders, co-pilots and air-traffic controllers. Aware of all-important human fallibility factor, the International Civil Aviation Organisation (ICAO) has formulated stringent rules pertaining to drunken flying, pilots' sleep regime and duty and time limits stipulations. Despite these rules, there are repeated violations in Indian skies. Owing to paucity of commanders and pilots, the cockpit crew have been engaged more in flying than rules permit. The commanders made fervent appeals to the directorate-general of civil aviation (DGCA) that ‘rest hour’ stipulation should be strictly adhered to without compromising safety norms. But the authorities stayed unconcerned and unbothered and commanders were compelled to seek redress in the court. "The flight safety cannot be compromised". This was the ruling of the Bombay High Court on July 1, 2008, while disposing of petitions filed by three pilots unions. When National Aviation Company’s lawyer made a plea for continuation of the new guidelines, the court curtly said: "If the DGCA could put the 2007 guidelines in abeyance overnight then it is equally possible for it to change the scheduled operations immediately". According to court's findings, the DGCA just acted in a haste on the behest of the minister Praful Patel. The DGCA's status is the same as that of the Federal Aviation Authority (FAA) of the United States. It should have acted on its own showing its technical expertise instead of paying heed to opinion of politicians and bureaucrats. The court further said: By putting the 2007 rules in abeyance, the 1992 rules do not automatically get revised. In fact, once the 2007 rules came into existence, the 15-year-old rules ceased to exist in law". In essentiality, the acute paucity of pilots in the country is a DGCA-made problem. Most of the flying clubs are not functioning and production-line has dipped. It is a pity that the Safdurjung airport strip is lying unutilised. The costly and sophisticated machinery is rotting because of disuse. |
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Investor Guidance
Q: I own a flat in Mumbai for which I am paying housing loan EMI every month.
I am staying in rented house in Mumbai as this is near to my work place and I am entitled to HRA from my employer. My query is can I avail deduction in income tax for both of these i.e. on housing loan EMI and HRA for which I will be producing rent receipts. Is it possible to claim tax deduction for housing loan EMI and HRA simultaneously? — Jigar Shah A:
HRA and home loan provisions are two different issues as far as the Income Tax Act (ITA) is concerned and one does not influence the other. So, you may own a flat or any number of flats, either in the same city that you work in or anywhere else in the whole of India or for that matter abroad — this will, in no way influence the HRA deduction that you are entitled to. Conversely, notwithstanding the amount of HRA that you receive, your home loan deductions on the EMIs for the house that you have bought or intend to buy will not be affected. Rebate u/s 80D
Q: In the last Budget, finance minister announced exemptions for mediclaim charges paid for senior citizens. However, I am not sure if it has yet been notified and effective. I need to take medical insurance for both my parents, who are senior citizens. I would appreciate if you can let me know. — Girish Bonde A:
Earlier Sec. 80D deduction in respect of medical insurance premium is Rs 15,000 for an individual and Rs 20,000 for a senior citizen. However, from this year, if someone were to buy medical insurance for his parent/s, additional deduction of Rs 15,000 (over and above Rs 15,000) will be available. If such parent/s were senior citizen, the additional deduction would be Rs 20,000. So a person insuring himself, his spouse, children and parents could potentially get a deduction of Rs 35,000. This provision is effective from 1.4.08. HRA deduction
Q: I would like to know that if somebody is getting HRA from employer and staying with parents, can he/she pay rent to the parents and get the HRA deduction. What documents are needed? I mean a simple rent receipt will be allowed or agreement is required? — Sarika Khot A: There is a deduction available from the House Rent Allowance amount (HRA) if the taxpayer pays rent for the premises he or she resides in. If you pay rent to your parents for living in a house owned by them then indeed you would be able to claim HRA deduction. If no rent is paid, then there is no deduction available. However, this transaction should not be entered into to evade tax. In other words, it should be a genuine arms length agreement between you and your parents. Also, note that your parents would have to include the rent you pay in his taxable income. II
Q: My question is with respect to exact figures of my HRA deduction. The following are the particulars — House Property purchased is not rented out but staying at a different place for employment purpose. Interest on loan for the purchase of said house, say, Rs 1,50,000. HRA calculated as per the provisions of the Act, say Rs 90,000. Salary, Say Rs 10,00,000. Whether Rs 2,40,000 is deductible from salary for the purpose of computation of TDS. Or interest on housing loan is not allowable since house is not selfoccupied — Rajesh Pillai A: The HRA deduction does not depend upon whether you own a house or not…rather it depends upon whether you pay rent for the premises that you stay in or not. So in your case, assuming the figures provided are accurate, the total deduction you will be entitled to would be Rs 2.40 lakh. III
Q: I came to know, for the first time, that I can claim for HRA even if I am living in my own house which I am paying home loan installments for. However, I couldn’t understand from where I will get the rent receipts to show against the HRA. Is there any alternative process to claim HRA when I own a house? — Sunny Tambi A: The basic principle behind claiming the HRA deduction is that you ought to be paying rent. In other words, without paying rent, you cannot get deduction on HRA. In your case, since you live in a house owned by you, there is no question of paying any rent or producing any rent receipts. Therefore, the full amount of HRA being paid to you will be taxable. The authors may be contacted at
wonderlandconsultants@yahoo.com Repatriating capital gains
Q: Sometime back I had sold some real estate and made profit. Though the capital amount is being readily credited to the NRE account, the bank is not allowing the credit of the profit amount to the NRE account. Instead they insisted that I repatriate the money and then if needed credit it back to the NRE account. I found this absurd and wrote to you. You mentioned that the definition of the word repatriation includes crediting to the NRE account. I spoke to the bankers but they now want to take on record the exact law as it exists. May I request you to quote the section or the clause which deals with this? — Khule A: When property that was originally purchased using funds from the NRE account is sold, the original capital amount used can be immediately repatriated. The capital gains can be repatriated after appropriate tax is paid thereon. For this purpose, an undertaking by the remitter and certificate by a Chartered Accountant in the format prescribed by CBDT vide their Circular 10/2002 dt 9.10.02 has to be submitted. In the meanwhile, the bank credits the capital gains portion either to a suspense account or to the NRO account of the NRI. It seems that the Bank is not allowing a credit to the NRE account from the suspense or the NRO account in this case. Normally, money cannot be transferred from an NRO account to the NRE account. However, in this case, RBI expressly allows repatriation. And the definition of “repatriation” includes a credit to the NRE account of the investor. Therefore, if the Bank is allowing the funds to be repatriated, they should allow the credit to the NRE account. This subject is dealt with in Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000. In Section 2 clause (d) thereof, “repatriation outside India” includes crediting the amount to an account in Indian currency maintained with an authorized dealer from which it can be converted into foreign currency”. In other words, the amount may be credited to the NRE account. |
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