The Tribune, Chandigarh, India

SMEs up in arms against rate hike
Ruchika M. Khanna/TNS

Chandigarh, September 17
The micro and small enterprises, which constitute almost 90 per cent of the total industry in this region, are up in arms against the hike in repo rate by the RBI. The industry fears that this will increase their cost of borrowings from financial institutions; cut into their profit margins; and also force them to withhold their unit automation, thus affecting economic growth.

The hike of 25 bps in repo rate announced by the apex bank yesterday is the 12th hike announced in the past 18 months. Entrepreneurs in the region said in the past two years, rate of interest on term loans and working capital loans has gone up by almost five per cent. They say that as compared to 10-10.5 per cent rate of interest on loans for industry in 2009, they will now have to shell out 14.5-15 per cent as interest.

Talking to The Tribune, A L Aggarwal, general secretary of Haryana Chamber of Commerce and Industry, said the high interest rates are detrimental for enhancing industrial production. “The micro, small and medium enterprises (SMEs) are already reeling under financial constraints, and this will lead to negative growth in industry. Since most of these units work on small capital, they will become economically unviable and forced to shut shop,” he said.

It may be noted that a recent business outlook survey conducted by the Confederation of Indian Industry (CII) in North India, had presented a bleak picture of the overall economy, mainly because of rising interest rates and high raw material cost. With the repo rate being revised again yesterday, many industrial units in the region say that they will be forced to close shop as they will not be able to borrow money at these high rates to run their units.

PD Sharma, president of Apex Chamber of Commerce and Industry, said while the smaller units would be adversely hit by the rising interest rates, the bigger units will remain largely unaffected as they can resort to external commercial borrowings. “The big units can take the ECB route to get finance from foreign banks at 3- 3.5 per cent rate of interest. It is the smaller units that will see cash crunch and will also have to defer decision for unit automation- which is the only way to increase production,” he said.

The hike of 25 bps in repo rate by the RBI yesterday is the 12th hike announced in the past 18 months

Small and micro enterprises constitute 90 per cent of the total industry in the region

Gold gains Rs 420, silver up Rs 1,100

New Delhi, September 17
Snapping two days of losses, both gold and silver gained on the bullion market today on emergence of buying by stockists and investors at existing lower levels driven by a rebound in global markets.

While gold surged by Rs 420 to Rs 28,160 per 10 grams, silver went up by Rs 1,100 to Rs 64,400 per kg.

Trading sentiment turned better after gold rose the most in a week in global markets on renewed concerns that Europe's debt crisis will threaten economies, boosting demand for alternative investment options.

Gold in global markets, which normally sets the price trend on the domestic front, rose by $22.70 to $1,812.50 an ounce, the biggest gain since September 8.

Silver also traded 1.88 per cent higher at $40.66 an ounce. On the domestic front, gold of 99.9 and 99.5 per cent purity surged by Rs 420 each to Rs 28,160 and Rs 28,010 per 10 grams, respectively. The metal had lost Rs 725 in the last two trading sessions. Sovereign followed suit and recovered by Rs 100 to Rs 22,700 per piece of eight grams.

In a similar fashion, silver ready spurted by Rs 1,100 to Rs 64,400 per kg and weekly-based delivery by Rs 1,150 to Rs 64,450 per kg, respectively. Silver coins also jumped by Rs 3,000 to Rs 72,000 for buying and Rs 73,000 for selling of 100 pieces. — PTI

IndiGo to increase flights to Singapore

Singapore, September 17
India's low-fare airline IndiGo has said it will increase flights to Singapore as the current overall limit, permitted by the air services agreement between the two countries, remains underutilised.

As of now, the Indian side does not even utilise 50 per cent of the flights allowed under the agreement, which leaves scope for increasing flights, IndiGo president Aditya Ghosh told PTI.

"But, we hope, this will now change and as we increase flights," said Ghosh, who launched IndiGo's first low fare service on September 15 to Singapore.

IndiGo, though low cost airline, flies under the scheduled air flight agreement between India and Singapore, he pointed out. — PTI

Aviation Notes
Air fares to go up soon
by KR Wadhwaney

Heads I win, tails you lose. This has been the practice of the Delhi International Airport Private Limited (DIAL) as the private consortium, through the subtle support of politicians, succeeded in ousting the Airports Authority of India (AAI) from the Indira Gandhi International Airport (IGIA).

Despite written agreement in 2006, the DIAL has not paid the AAI 45.99 per cent gross revenue earned from the IGIA. In the latest report, tabled in Parliament recently, the Comptroller and Auditor-General (CAG) has pointed that the DIAL has been playing tricks. In the report, the CAG says that the DIAL has 'cleverly' formed 11 joint ventures (JVs) to run non-aeronautical operations with a view to substantially reduce payment of the gross revenue to the AAI.

According to the CAG, the formation of these JVs violates the operation, management and development agreement. But the government has not taken any action and, if this state of affairs continues, the AAI will continue to lose its share of revenue.

Similarly, "the AAI has lost heavily on cargo and car parking as DIAL has allowed JVs to take charge of these operations", according to the audit report.

Statistics show that revenue through cargo and car parking has increased substantially, but the share of revenue to the AAI has dwindled considerably owing to these 'clever' operations of the DIAL.

Despite adverse comments and observation by majority of passengers in Europe and the US against full-body scanners, the DIAL has installed, at a cost of Rs 1 to Rs 1.5 crore, device on a 'trial basis' from September 1. The scanner has been placed at gate number 1 of the 1-D where certain sections of passengers are undergoing checks.

The saving grace, however, has been that the equipment has been installed 'free' during the trial run by the Belarus-based company.

The arrangement is that the Central Industrial Security Force (CISF) is closely monitoring the advantages and disadvantage of the system. Its officials will submit the detailed report to the Bureau of Civil Aviation and Security (BCAS) before any decision is taken.

Aviation analysts, however, feel that this is an exercise in futility as many women passengers worldwide have expressed unwillingness to go through the scanner. In addition, the scientists have gone on record saying that it is not a fool-proof system as the scanner failed to detect 100 grams of the RDX hidden in socks.

As fuel prices continue to jump upwards, the airlines are gearing up to raise their fares to reduce losses. Most of the airlines, including majority of no-frill carriers, are sustaining losses as they are unable to control over-head expenses. "We are unable to cut even at this time and we will be in dire constraints if the fuel prices are raised", said three main operators of the scheduled airlines. As there have been complaints against Air India subsidiary for charging below cost fares, the national carrier is contemplating increasing 10-15 per cent in basic fares. This move will hit the travelling passengers a great deal.

Investor Guidance
Registered will can also be contested
by A.N. Shanbhag

Q: This has reference to your advice to PC Bajaj in The Tribune of September 4, where you mentioned that if the property is self-acquired the owner can bequeath his assets to anyone as per his wish. You have further advised him to get the will registered for adequate precaution lest it gets contested later on.

My query is whether a registered will cannot be contested and even if contested the spirit of the will shall prevail?

— H S Ahluwalia

A: The fact of the matter is that if anyone who desires to contest a will, per se, can do so. It is his birth right. To protect oneself against those who use this privilege indiscriminately the law has provided a protection by way of registration. Registration of the will signifies that it is authentic and official. If someone contests your claim, in spite of registration, you have better chances of winning.

IT return

Q: I am a regular reader of your column in The Tribune which appears every Sunday. There is one query which is not clear to me for a long time. Does anyone having credit card have to file the returns even if one's income is below threshold of tax limits or does not need to pay any tax due to low annual income? Please guide.

— Anurag Khanna

A: If your total income is below the tax threshold, you need not file tax returns irrespective of whether you have a credit card and are actually using it. Even the AIR schedule that required disclosure of certain items of spending beyond specified limits, including the use of a credit card, has been dropped this year. In any case, AIR or not, if your income before deductions is below the tax threshold, return may not be filed.

Tax on gift

Q : I have two queries. My wife who is not a taxpayer has been gifted Rs 9.80 lakh by old parents. Would any of the parties be required to pay any tax? If not, under which section? If yes, then how much & who will pay?

Secondly, I sold shares [more than 3 years old] worth Rs 11 lakh. Under which section of the Income Tax Act I can claim exemption ?

— Vipin Bakshi

A: 1. There is no income tax on the amount of donation since your parents (the donors) are relatives of your wife. This is as per Sec. 56 of the Income Tax Act (ITA). However, clubbing provisions will apply on the income earned by your wife from the donated amount and the same will be taxed in the hands of the donors (your parents). Note that the taxed amount is not the amount of donation per se but the income generated by your wife from the donated amount. This is as per Sec. 64 of the ITA.

2. In the case of capital gains arising out of securities (including shares) and equity-based units of MFs sold on a Recognised Stock Exchange in India or equity-based units repurchased from MFs:

a) LTCG is exempt u/s 10(38)

b) STCG is taxed @15% flat, u/s 111A and 115AD

Farm income

Q: A charitable trust is having agricultural income (agricultural income otherwise is not taxable). Now the question is whether this income is to be added with other income or donation for calculating 85% amount which is to be spent for charitable purposes.

The other point is that the Charitable Trust purchases land and other assets such as light inverter, furniture etc. Now the question is whether these assets are to be taken as expenditure for the objects of the trust while calculating 85% expenditure for charitable purposes. Please guide.

— Surinder Singh Kanwar

A: 1. Agricultural income, tax-free u/s 10, will not form part of total income for the purpose of computing the accumulation of income in excess of 15% of the total income as laid down u/s 11 [CIT v Nabhinandan Digamber Jain (2002) 257ITR91 (MP)].

2. When expenditure is incurred out of the income earned on the objects of the trust, even if such expenditure is for capital purposes, the income would be exempt [CIT v Kannika Parameshwari Devasthanam & Charities 133ITR779 (Mad) 1982)