Taxman adds to UTI�s woes
Split option for Haldia Petro recedes
Lever unit tense on job cut possibility
Trust investments on JPC radar
Ketan�s Swiss bank account frozen
CSE closes pay-in with Rs 1cr gap
Breakup penalty for abuse of dominance
Accord hits the road, Sonata & Mondeo rev up
BK Modi not aware of EGM
Foreign Exchange, Bullion, Stock Indices

Mumbai, July 5: 
Compounding the troubles for Unit Trust of India, the income tax department has recently issued a notice asking the mutual fund major to pay wealth tax on assets for a period of seven years, from assessment year 1992-93 to 1999-2000.

According to a top I-T official, UTI is yet to respond to the department�s notice. The notice, under Section 17 of the Wealth Tax Act, was first issued on May 28 this year. Thereafter, a reminder was sent recently, the official said.

UTI officials confirmed receiving the notice, but declined to comment further.

While the mutual fund major�s liability is yet to be quantified, the official said the amount to be paid would be considerable gauging the massive size of UTI�s operations and its assets.

The department has argued that UTI is a corporation under the UTI Act 1963, and is an Indian company within the meaning of Section 2 (26) of the I-T Act, 1961.

Earlier, the I-T department had issued eight notices to UTI in December 2000, under the Interest Tax Act 1974, for assessment years 1992-93 to 1999-2000. UTI responded by filing returns of interest for these assessment years, disclosing nil chargeable interest. The mutual fund major had argued that under the UTI Act (Section 32), interest earned by it is nothing but income earned, and hence, exempt from taxation.

�On going through the balance sheet filed by UTI for assessment year 1993-94 to 1999-00, it came to the notice of the assessing officer that its assets come under the purview of the Wealth Tax Act 1957. �However, records show that no wealth tax returns were filed by UTI under the Act for all these years,� I-T sources said.

Things took a new turn with the Central Board of Direct Taxes (CBDT) later issuing a circular stating that its 1991 circular, exempting UTI from taxation, stood withdrawn. This implied that the mutual fund major had to pay tax on interest earned by it.

The mutual fund major then went to court, which had relieved it of the burden of paying interest tax of over Rs 1,100 crore in the case filed by the I-T department. A division bench of the Bombay high court had quashed the tax demand on the interest income of UTI, levied for the assessment years 1992-93 to 1999-2000. The court had, however, upheld the department�s right to levy tax prospectively.

While stating that UTI was liable to pay interest tax, the court had then observed that since the government has stopped levying interest tax from April 1, 2000, UTI does not have any interest tax liability. However, the court had then clarified that UTI will be liable to pay the tax if the government re-introduces interest tax in future.

UTI then said the order vindicated their stand and ensured that there was no liability past or present either on the Unit Trust of India, its schemes or its unit holders. Since the Interest Tax Act now stands repealed, the question of any payments to be made under this head, too, does not arise, the court had ruled.

The fresh notice comes at a time when the mutual fund major is already facing a crisis on another front.

I-T sources said the department will move the apex court challenging the order of the high court, but a decision is yet to be taken in this regard.


Calcutta, July 5: 
A possibility that Haldia Petrochemicals (HPL) will not be carved up to accommodate Indian Oil Corporation (IOC) emerged today at a meeting which discussed the petroleum major�s direct entry as the fourth equity partner.

�We discussed IOC�s inclusion in the project as the fourth partner. The matter will come up again before a committee set up to look into the company�s participation in HPL. We have not discussed the plan to split HPL and hive off the naphtha cracker unit into a separate entity,� sources added.

There was a proposal earlier to hive off the naphtha cracker unit into a separate entity and get IOC to invest in it. The entire chunk of loans would be transferred to the new company, leaving HPL debt free.

IOC will send its own proposal on participation within a fortnight to the HPL board. Today, it held a meeting with the promoters of the project on KPMG Peat Marwick�s due diligence report on HPL.

The meeting was attended by Purnendu Chatterjee of The Chatterjee Group, Richard Saldanah, managing director of HPL, Jawhar Sircar, the state commerce and industry secretary, Phiroz Vandrevala, deputy managing director (new and allied business) of Tisco as the representative of the Tatas, the entire accounting team of HPL, members of KPMG group and three directors of IOC.

IOC chairman M. A. Pathan was not present at the two-hour meeting held at the company�s office, but M S Ramachandran, director (business development), attended it.

The state-owned petroleum major discussed how restructuring HPL�s debt would make it easy for it to enter the project. �KPMG talked about how HPL�s debt can be restructured to facilitate the entry of IOC,� sources present at the meeting said.

HPL too presented its own accounting formula to lower the debt burden and make the company debt free. In fact, the HPL management was busy over the last two weeks to work out a possible formula for retiring the high-cost borrowings.

Sources accustomed with the development said that if Indian Oil comes into Haldia Petrochem with an initial equity of Rs 200 crore then it will help HPL to negotiate with the financial institutions for restructuring the debt. IOC being a �Navratna� company does not require Cabinet clearance for investment up to Rs 200 crore.


Calcutta, July 5: 
Tension is brewing at Hindustan Lever Ltd�s Garden Reach factory over the company�s alleged move to cut 400 jobs as a precondition to holding the next round of wage negotiations.

According to the Hindustan Lever Sramik Karmachari Congress (HLSKC), the HLL management has proposed to reduce manpower in the city unit from 1200 to 780 and shut down a few divisions, including processing and packaging, to pave the way for outsourcing. The company has already started outsourcing several products and services from eight units in and around the city, including the one owned by former state chief minister Jyoti Basu�s son, Chandan Basu.

The HLSKC has already served a strike notice on the management for July 13. The union, which is affiliated to the Sramik Sangram Committee, has also threatened to go for an indefinite strike if the HLL management does not initiate negotiations sans �anti-labour� preconditions. HLSKC has demanded the company start negotiations regarding manpower base as on January 1, from when the new wage agreement is due. The union is also demanding that the company abide by all statutory norms when closing down any of its divisions and maintain parity in the executive-employee salary ratio.

�The highest paid executive in this factory gets over 21 times of the lowest paid-employee, while the Fifth Pay Commission has clearly laid down that the difference should not be more than 10:1. We have demanded this disparity should be removed,� a union spokesperson said.

The union has alleged that merely 66 managers and officers account for 48.16 per cent of the total wage bill, while the remaining is accounted for by the 1,200 employees.

The HLL management, however, said the �union has refused to include the management�s proposal for improving productivity norms, within the discussions.�

�The management believes that to sustain the viability of the Garden Reach unit�s current operations, its productivity must improve and match that of the best factories within the company. For this, the management is appropriately modernising the factory,� the HLL spokesman said.


Calcutta, July 5: 
The Joint Parliamentary Committee (JPC) probing the recent stock market scam has smelt a rat in the investment decisions of Unit Trust of India (UTI) and will examine them to determine whether there was any collusion between the country�s largest mutual fund and the brokers who manipulated markets.

The Securities and Exchange Board of India (Sebi) has already presented to the JPC details of trades undertaken by UTI in four stocks � HFCL, Zee Telefilms, DSQ Software and Global Telesystems � between July 1999 and March 2001.

A Sebi executive director said information on UTI�s deals in other stocks is being collected for being furnished to the JPC. �But our role in the matter ends there as we are not officially empowered to regulate UTI,� the official added.

�We have examined the details of trades furnished by Sebi so far. On the face of it, UTI�s investment decisions look suspect. We will have to probe whether these were aimed at protecting the position of any broker,� a senior JPC member said.

He made it clear that the probe will not only focus on US-64 but on other schemes as well. �There has been substantial capital erosion even in schemes which have invested more in debt than equity,� the member added.

Commenting on the details furnished by the market regulator, UTI executive director Brij Gopal Daga said: �We have a large number of schemes, each with independent investment officers and objectives. Investments of each scheme should be examined separately, not as a whole, because that is likely to present a distorted picture.� Sebi has presented to the JPC consolidated trading data for all UTI schemes.

Daga said UTI, which maintains records of all investment decisions as mandated by Sebi for other asset management companies, will be able to justify its trading calls.

The JPC member said the role of UTI in the recent scam has been discussed by the panel. The issue will come up again at its next meeting, in the wake of the US-64 crisis.

He also indicated that one of the contentious issues being discussed is the fact that UTI is not governed by the market regulator despite specific recommendations by the JPC which had probed the 1992 scam.

�Two years ago, UTI said it would voluntarily comply with the standard Sebi guidelines for all its schemes, except five. US-64 was one of them,� the member added.

Some finance ministry officials have already hinted that the terms of reference of the 30-member JPC probing the recent scam could be altered so that it can investigate the crisis in US-64 per se. However, the member said no intimation from the finance ministry has reached the committee so far.


Mumbai, July 5: 
The CBI today said the Swiss bank account of big bull Ketan Parekh, one of the main accused in the multi-crore pay order scam, had been frozen following a request from the agency. The account, having millions of Swiss francs (crores of rupees) deposited in it, has been frozen by the Swiss authorities after the CBI made a request to Interpol for an international probe into the siphoning off of money from India, CBI spokesman S M Khan told reporters here.

However, when contacted Parekh said, �I don�t know anything about these accounts.� He added jokingly that he is still searching for these accounts. Nobody from CBI has contacted him as yet, he said.

Khan said the agency suspected Parekh had siphoned off the money, allegedly acquired from the multi-crore scams of over Rs 1,000 crore of Madhavpura Mercantile Co-operative Bank, to the Swiss bank.

The Interpol wing of CBI had an information that huge amount of money had been siphoned off from India by Ketan Parekh and his associates which was allegedly the proceed of a number of financial crime and bank frauds committed by him, added Khan.

He said the money laundering reporting officer of Switzerland was given the information last week and as a follow up, the Swiss authorities informed the CBI yesterday that an account of Ketan Parekh had been frozen.

Parekh, who had opened the account in collaboration with a Bahamas-based Corporation, was the sole beneficiary of it.


Calcutta, July 5: 
Pay-in worth Rs 32 crore for the settlement in which badla positions were liquidated on the Calcutta Stock Exchange (CSE) was wrapped up today, but not without a Rs 1-crore shortfall.

According to senior exchange officials, four to five brokers failed to meet their payment obligations fully, but their dues have been covered with capital and margin deposits. �Despite the default, the exchange will not have to dip into its own resources for the pay out,� a CSE official said. The last badla session took place on June 21, and today�s pay-in pertains to transactions for the extended settlement from June 22 to June 29.

Officials said there was one major case of default, where the outstanding to CSE at today�s close of business was Rs 95 lakh. �We could have squared off his positions forcefully, but decided against it, because the risk to the exchange was fully covered by his deposits,� a CSE official said.


New Delhi, July 5: 
The Competition Commission, to be set up under the competition law which is expected to be enacted in the monsoon session of Parliament, will have the power to order the �division of dominant undertakings� and demerger of companies.

However, there will be a rider: the division of the dominant undertaking will be ordered only if there is an abuse of dominance by the company concerned which will have to be established beyond reasonable doubt.

�Enjoying a dominant position will not be a crime, but its abuse will be,� says a four-page note prepared by the ministry of law, justice and company affairs.

Besides, the new law will �regulate� combinations (acquisitions, mergers and amalgamations of certain size) and prohibit anti-competitive agreements.

Although it is still not known what objective criteria the Bill will lay down to define dominance, some peg marks are already available. The note says that the law will seek to pre-empt �elimination/reduction of competitors in the market through acquisitions, amalgamations or mergers. To do so, it has prescribed certain limits for the size of the entity created out of mergers and acquisition based on two criteria�assets and turnover.

In the case of acquisition by enterprises, the entity should not have assets in excess of Rs 1,000 crore in India and over $ 500 million abroad. Moreover, it should not have a turnover of over Rs 3,000 crore in India and $ 1500 million abroad.

In the case of mergers and amalgamations, the asset limits have been set at Rs 4,000 crore in India and $ 2 billion worldwide, and turnover limits at Rs 12,000 crore in India and $ 6 billion overseas.

There have been two famed instances in the US where large companies straddling their respective industries were forced to break up: the first was in 1911, when John D. Rockefeller�s Standard Oil was broken up into several smaller oil companies. The second instance was in the late seventies when the anti-trust law was again used to carve up the AT and T telephone monopoly.

Microsoft, the $ 3-trillion software giant, came within ace of being split up in two over its abuse of its monopoly. Last week, Judge Penfield Jackson�s ruling was overruled on appeal.

It is not yet clear how the law will be ultimately framed, but the �draftsmen� of the Bill say the Competition Commission of India (CCI), a quasi-judicial body, will also have the powers:

to issue �cease and desist� orders

to grant interim relief as would be necessary in each case

to award compensation

to impose fines on the guilty

power to order costs of frivolous complaints.

�In addition to the adjudication function, the CCI will have the roles of advocacy, investigation, prosecution and merger control.�


New Delhi, July 5: 
Honda Siel Cars India Ltd today launched the sixth generation Accord, the first in the D-segment passenger cars, ahead of Ford�s Mondeo and Hyundai�s Sonata.

Other manufacturers, whose �D� segment cars are lined up for launch include Toyota (Camry), Skoda (Octavia), General Motors (Vectra) and Mitsubishi Motors (Galant). Mercedes Benz is also gearing up to launch its C-180 petrol and C-220 diesel models in both Classic and Elegance trims.

The Accord will be available in both automatic and manual gear systems and has been priced at Rs 14.95 lakh and Rs 15.75 lakh respectively (ex-showroom Delhi).

Initially, the car will have 30 per cent local component, which will be increased at a later stage.

Launching the car here today, Satoshi Toshida, managing director, Honda Motor Company, Japan, said Honda will continue to study the Indian market and will roll out other models from its stable depending upon volumes.

HSCIL president and chief executive officer, T. Fujisaki, said the company had plans to introduce the Accord in collaboration with Telco in the early 1980s, but the government�s regulatory conditions designed to protect the domestic industry, did not allow Honda to go ahead with the plans.

The company has set a target of selling 2,500 units of Accord and 11,000 units of the Honda City in the current financial year. The total market size for the �D� segment cars is estimated to be about 6,000 units annually.

Honda has invested about Rs 10 crore in the Accord project alone, in addition to the Rs 460 crore already invested in India. �Slump or no slump in the car market, we are confident of selling 2,500 units of Accord. According to our estimates, the market will soon grow at a fast pace,� Fujisaki said.

�The Indian car market is now in a stage of evolution where customers have been driving �C� segment cars for over half a decade and are now ready to upgrade. The Accord in India will fulfil a definite need that exists amongst this segment of Indian customers,� he added. HSCIL also plans to export the Accord to Sri Lanka and Bangladesh. HSCI today signed a memorandum of understanding with Honda UK for export of components of Honda Accord.

Hajime Yamada, director marketing HSCI said, �Today we signed an MoU with Honda UK to export Accord components. We will be able to meet our export obligations when exports to Sri Lanka and Bangladesh commence. In the past, we have had some problems in meeting these obligations, but we are confident that this will be corrected.�

HSCI is optimistic of breaking even during the current fiscal. �We are set to break even during 2001-02. The sale of 11,000 units is the break-even point for us,� said Fujisaki.

Honda Accord is a 2254 cc car and with a four-stroke single point overhead camshaft with variable timing and lift electronic control 16-valve engine. According to a Honda executive, the VTEC system helps in achieving maximum output not only in the high rotations per minute (RPM) range but also in the low RPM range by using a four-valve per cylinder mechanism.


New Delhi, July 5: 
The B. K. Modi faction of Modi Rubber Ltd (MRL) has said it has not received any notice for an extraordinary general meeting, called at the instance of the financial institutions, to get the shareholders approval of the board-level coup which removed B. K. Modi as managing director and his cohorts from key positions in the company.

Meanwhile, the board has written to all financial institutions holding a stake in the company saying, �Any decision by B K Modi, including threatened suspension of company secretary S N Ghosh, is null and void�.

Company sources said that the letter has gone to UTI, GIC, IFCI, IDBI and LIC.



Foreign Exchange

US $1	Rs. 47.13	HK $1	Rs. 5.95*
UK �1	Rs. 66.27	SW Fr 1	Rs. 25.85*
Euro	Rs. 39.68	Sing $1	Rs. 25.50*
Yen 100	Rs. 37.59	Aus $1	Rs. 24.05*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4450	Gold Std(10 gm)	Rs.3480
Gold 22 carat	Rs. 4200	Gold 22 carat	N.A.
Silver bar (Kg)	Rs. 7175	Silver (Kg)	Rs.7300
Silver portion	Rs. 7275	Silver portion	N.A.

Stock Indices

Sensex		3317.63		+  5.75
BSE-100		1563.96		+  5.87
S&P CNX Nifty	1069.75		+  1.80
Calcutta	 121.45		-  0.21
Skindia GDR	 581.63		+  1.25

Maintained by Web Development Company