The Tribune, Chandigarh, India

New draft Bill for mining sector
Profitability of mining, steel cos likely to hit
Sanjeev Sharma
Tribune News Service

New Delhi, July 9
Profitability of mining and steel companies is likely to be hit with the new draft Bill for mining sector making it mandatory that companies should share profits with the people affected by the projects.

The Group of Ministers has approved a draft Bill for the mining sector making it mandatory for coal miners to share 26 per cent of their profit after tax with project-affected people.

The draft Bill also proposes that companies mining other resources (such as limestone, iron ore, copper and bauxite) should pay amount equivalent to 100 per cent of the royalty on their production to the local population of the project site. The bill will be taken up by the Cabinet in the monsoon session of Parliament.

The Bill also proposes to allocate mining blocks on an auction basis and rationalise royalty rates. The original draft of MMRDA had proposed sharing of 26 per cent of profits with the local community. However, the new draft makes a distinction between companies mining coal and companies mining other minerals.

With royalty rates on minerals other than coal at 7-10 per cent, the new draft would result in lower cash outflow for companies mining minerals other than coal compared to the original draft, according to estimates by Angel Broking.

It estimates that the EPS of mining companies (other than coal mining) is expected to be lower by 8-13 per cent, including companies like NMDC, Sesa Goa, Hindustan Zinc and Sterlite Industries while for Coal India the EPS could potentially decline by 17 per cent. However, the extent of higher burden could be lower (than the proposed 26 per cent of net profits) for Coal India as it currently spends a significant amount towards CSR activities.

Coal India, the report adds, has the cushion to pass on the additional burden to its customers as its sells coal at a price lower than global benchmarks. For miners and steel makers, the additional burden will have to be absorbed by them as they sell their products at prices determined by global benchmarks. For steel companies, the impact on EPS could be in the range of 2-8 per cent.

Investor Guidance
No rebate on capital gains from sale of plot
by AN Shanbhag

Q: I would be thankful if you could please clarify the following points:-

a) Please confirm that no capital gain tax is payable if a residential plot acquired 14 years back is sold and the entire sale proceeds thereof are invested towards purchase of a new residential plot in the same financial year in which the old plot was sold.

b) If no capital gain tax is payable, whether the amount involved in the sale of the old residential plot and purchase of the new residential plot will be required to be reported in the Income Tax Return of the seller for the relevant Assessment Year.

— R.K.Pahuja

A: It is not clear whether by ‘residential plot’ you mean land or house property. The confusion arises on account of the use the word ‘plot’. There is no exemption available where sale proceeds of land are reinvested in another plot of land. On the other hand, long-term capital gains earned on sale of residential house property may be reinvested in another residential house property for tax exemption. Where the asset sold is an asset other than a residential house property, the net sale proceeds (as against only the capital gain amount) is required to be reinvested. Also, such reinvestment need not be done within the same financial year. You have two years from date of sale for purchase of the fresh property (three years if the fresh property is being constructed). The other way of claiming exemption is by investing the capital gains in Bonds of REC or NHAI within 6 months. Note that there is a ceiling of Rs 50 lakh on investment in such bonds.

Ancestral property

Q: 1) In April 2010 I received a sum of Rs 40 lakh as my share from ancestral property. With this money, I purchased a flat in Chandigarh in May 2010.

2. Now I would like to sell the flat. I am getting a sum of Rs 50 lakh for it. I would than be buying a house for Rs 55 lakh. The remaining amount of Rs 5 lakh will accrue from my savings.

Kindly guide about the capital gain tax that I would have to pay.

— Sanders Ervine

A: We presume that your family has paid tax, if any, on the capital gains arising from the sale of ancestral property. Since the flat in Chandigarh will be sold before 3 years of holding are over, the gains of Rs 10 lakh will be treated as short-term gains. This amount would be added to your normal income and the total would be taxed as per the tax rates applicable. You having purchased another house for Rs 55 lakh is inconsequential. The purchase of another residential house saves tax u/s 54 or 54F for long-term capital gains only.

Aviation Notes
Aerocity: Security concerns ‘ignored’
by KR Wadhwaney

In a trouble-torn world, in which potential belly bomb is a lurking fear, the security and safety of men and material is the main consideration of agencies at the international airports, which enjoy the reputation of being 'sleepless jungles'.

Sadly and shockingly, the GMR’s Delhi International Airport Limited (DIAL) does not show any concern for passengers and property when it comes to financial gains of the consortium, which has a finger in every pie, including Indian Premier League (IPL).

Barely 250 metres from the main runway, the multi-purpose Aerocity in Mahipalpur is being raised without consulting security agencies working at the Indira Gandhi International Airport (IGIA). As the Aerocity, including prestigious hospitality unit, is located near the Air Force hangar and the VVIP movement technical area, there is an urgent need to secure requisite nod from the defence ministry.

The raising of huge commercial complex in such a sensitive area is highly dangerous because hundreds of people, including suspicious persons, will be congregating there. Imagine the operations from the Safdarjung airport have been withdrawn only because of the residences where VVIPs are staying. When the operations can be stopped from an airport, how can such a huge commercial complex come up without taking into consideration 'security concerns'?

According to a survey, the hospitality complex is being raised in an area spread over 45 acres. It will include hotels, commercial plazas, convention centres and restaurants etc. The project is mammoth. Apart from the GMR outfit, some other developers have also been party in raising the Aerocity.

According to Bureau of Civil Aviation Security, their concurrence has not been sought. Similarly, the Delhi police unit at the IGIA has been in dark about this project.

According to reports, the Delhi police has written to the DIAL's security chief as to how and why the security agencies have not been taken into confidence while undertaking such a huge project in one of the most sensitive areas. The letter, among other observations, said: "...A large number of commercial buildings are coming up in the hospitality area just across the road and boundary of the runway."

The fact is the DIAL is a land owning agency and it should have taken security concerns into consideration being going ahead with the project. In response to all these concerns, the DIAL is reported to have said: "The construction in the hospitality area is being undertaken with statutory approvals of appropriate authority/authorities". The letter does not mention which are these appropriate authorities and why security agencies at the IGIA were not consulted?

What is cause for concern is: "What is more important - safety of passengers, visitors, people and property or commercial benefits of a private undertaking?