Deductibility of political donations

Contributions that are more than what is permissible under the Companies Act cannot be deducted under Section 80GGB of the I-T Act.

In the article ‘Bringing political donations to book’ (Business Line, June 28), the author has expressed the view that “the bottom line therefore is while a company would fall foul of the company law if it breaches the 5 per cent norm, it can get away under the income-tax law and the claim of entire contribution would be allowed in computing its taxable income.” There could be another view on this.Section 293A
Section 293 of the Companies Act, operative from May 24, 1985, permits donations to political parties with certain riders. The important ones are: TO READ MORE CLICK........

Reverse Mortgages

Reverse Mortgages:
According to the Budget 2007, the National Housing Bank
(NHB) will introduce a novel product for senior
citizens : a “Reverse Mortgage” under which a senior
citizen who is the owner of a house can avail a monthly
stream of income against the mortgage of his/her house
while remaining the owner and occupying the house
throughout his/her lifetime, without repaying pr servicing
the loan.
What is a reverse mortgage ?
A reverse mortgage enables older home owners (senior
citizens) to convert part of the equity in their homes into
tax-free income without having to sell the home, give up
title, or take on a new monthly mortgage payment.
The reverse mortgage is aptly named because the
payment stream is “reversed.” Instead of making
monthly payments to a lender, as with a regular
mortgage, a lender makes payments to you.
In India the actual process of reverse mortgage has not
yet started . But based on general practices followed
in other countries, some common questions asked by
consumers about reverse mortgages are being given
below :
What are common payment plan options?
You can choose to receive the money from a reverse
mortgage
• all at once as a lump sum,
• fixed monthly payments either for a set term or for
as long as you live in the home,
• as a line of credit,
• or a combination of these.
The most popular option is the line of credit, which allows
you to draw on the loan proceeds at any time.
Does unused balance in the Line of Credit Option
has a growth feature? Does that mean I'm earning
interest?
No, you're not earning interest like you do with a savings
account. The growth factor takes into consideration that
your home has appreciated in value over the past 12
months and that you are one year older.
How much money will I get?
No matter which reverse mortgage product you choose,
the amount of funds you are eligible to receive depends
on your age (or the age of the youngest spouse in the
case of couples), appraised home value, current interest
rates, and the lending limit in your area. In general, the
older you are and the more valuable your home (and the
less you owe on your home), the more money you can
get.
Does my home qualify?
Eligible property types include single-family homes, 2-4
unit properties; own constructed homes and flats in
housing societies.
How can I use the proceeds from a Reverse
Mortgage?
The proceeds from a reverse mortgage can be used for
anything, whether its to supplement retirement income
to cover daily living expenses, repair or modify your
home, pay for health care, pay off existing debts, buy a
new car or take a "dream" vacation, cover property taxes
etc.
Are there any special requirements to get a reverse
mortgage?
As long as you own a home, and Senior Citizen, and have
enough equity in your home, you can get a reverse
mortgage. There are no special incomes or medical
requirements.
What if I have an existing mortgage?
You may qualify for a reverse mortgage even if you still
owe money on an existing mortgage. However, the
reverse mortgage must be in a first lien position, so any
existing indebtedness must be paid off. You can pay off
the existing mortgage with a reverse mortgage, money
from your savings, or assistance from a family member or
friend.
For example, let's say you owe Rs.10,00,000/- on an
existing mortgage. Based on your age, home value, and
interest rates, you qualify for Rs.15,00,000/- under the
reverse mortgage program. Under this scenario, you will
be able to pay off ALL the existing mortgage and still have
Rs.5,00,000/- left over to use as you wish.
If, however, you only qualify for Rs.8,00,000/- then you
would need to come up with Rs.2,00,000 from your own
savings to get the reverse mortgage. Even then, all the
money from the reverse mortgage will have been used to
pay off the existing mortgage. On the other hand, you
won't have a monthly mortgage payment anymore.
If you find yourself in a deficit situation where you don't
have enough money to pay off the existing mortgage, you
may use funds from a grant or gift from a family member
or friend to cover the gap, but you cannot incur a new
debt obligation (i.e., loan).
When do I pay back my loan?
No monthly payments are due on a reverse mortgage
while it is outstanding. The loan is repaid when you cease
to occupy your home as a principal residence, whether
you (the last remaining spouse, in cases of couples) pass
away, sell the home, or permanently move out. The
amount owed can never exceed the value of your home.
Furthermore, if the home is sold and the sales proceeds
exceed the amount owed on the reverse mortgage, the
excess money goes to you or your legal heir.
Under what circumstances should I not consider a
Reverse Mortgage?
Because of the upfront costs associated with a reverse
mortgage, if you intend to leave your home within 2-3
years, there may be other less expensive options to
consider, such as home equity loans. Also, if you want to
leave your home to your children, then you should
consider other options, because in many cases, the home
is sold to pay back a reverse mortgage.

ITAT DECISION

Issue: Taxability of Interest Income u/s 56
DCIT, circle, Bulandshahr v. Allied construction {105 ITD
1 (Delhi-SB)}
The firm received interest on FDR placed with the bank.
The FDR was placed out of surplus business fund of the
firm. Further, the FDR was pledged with the bank for
availing loan for the business purpose. Hence, the firm
offered interest income as business income. Dept did not
accept the contention of the assessee and taxed it as
income from other sources. The tribunal also endorsed
the view of Department in as much as the source of
interest income was FDR with bank which is different
from business receipt. It was further decided that taking
FDR and pledging them for business loan are two
different transactions. Hence, Interest income on FDR
was considered as income from other sources.
Issue: Re-opening Proceedings
S.K. Jain v. Deputy commissioner of gift Tax Spl. Range,
Bhilai{105ITD205(Nag)}
In this case, the department collected some information
at the back of the assessee and used it for reopening of
gift tax assessment proceedings. The Tribunal decided
that department has right to re-open the case even if the
information is collected through illegal means by them. It
was decided that truth of affair and not manner of getting
material is to be taken note of in case of reopening the
cases.
Issue: Capital receipt.
JCIT, Spl Range-1 v. Kwality Café & Restaurant (P) Ltd
{105 ITD 169 (Chd)}
In this case, the company sold its right to use trade mark
and manufacturing facilities. The company offered capital
gain on surrender of trade mark as long term capital gain
and certain portion of consideration as capital receipt not
liable for taxation . It took the view that it lost income
earning apparatus. The Department taxed it as a revenue
receipts. However, the Tribunal accepted assessee's
contention and held that loosing a source of income in the
case of a person, who is not in a business of buying and
selling of business, would amount to transfer of a capital
assets and compensation received therefore clearly falls
within the ambit of a capital receipt.
Issue: Deduction u/s80HHC
Brook Crompton Greaves Ltd., v. ITO Ward 1,
Ahmednagar {105 ITD 146(Pune)}
The Tribunal decided that unabsorbed depreciation / loss
of earlier years need to be reduced from the income of
current year to determine the business income for
computation of deduction u/s 80HHC.
It was also decided that CIT (A) has power to enhance the
income on the issue which was not the subject matter of
appeal before him if the A.O. has overlooked any aspect
relating to the assessment. Therefore, one needs to be
careful before filing appeal to CIT (A) since it will open
entire case even the issue is not agitated before CIT (A).
Issue: Deduction u/s 35D
LIC Housing Finance Ltd., v.DCIT Spl. Range 36, Mumbai
{105 ITD 86(Mum)}
It was decided that if company wants to claim deduction
for preliminary expenses after it commence business; it
can be claimed only by industrial undertaking and that
too, after fulfilling condition of extension of undertaking
or setting up of new undertaking. Therefore, one has to
be careful while claiming deduction u/s35D i.e. public
issue expenses, expenses for increase of authorized
capital.
Issue: Allowability of Expenses u/s37 (1) & MAT
u/s 115JA
IBM Ltd., v. CIT (Appeals)-I {105 ITD 1(Bang)}
In this case it was decided that liability to pay warrant is
not contingent liability. It arises no sooner sales are
effected and therefore, it is to be allowed in the year of
sale of products.
As regards purchase of application software, it was
decided that purchase of application software in the
course of business, which merely enabled to carry on
business operation efficiently and smoothly even though
it gives enduring benefit, would be considered as revenue
expenditure.
The tribunal held that in case provision for doubtful debts
are made in the books, the deduction thereto would be
available in the computation of book profit for the
provision of MAT in view of the fact that such provisions
are not made for meeting and liability, it simply reduce
the assets. Hence, such provisions are deductible for
computation of book profits under the provisions of MAT.
Issue: Un-explained cash credit u/s 68.
Davinder Singh v. ACIT Circle-III, Ferozepur {104 ITD
325 (ASR)}
In this case, it was decided that if any credit found unexplained
by the assessee, the same would be hit by the
provisions of section 68 of the Act. It is not necessary that
only cash receipt on credit side ought to be considered. It
was held that it covers all credits loan, trade credits and
also other receipts be that of cash or kind. Therefore, one
need to be careful while showing creditors which are not
verifiable, the same may be subjected to tax u/s 68 of the
Act.
Issue: Statement recorded u/s 132(4).
Ms. Aishwarya K. Rai v. DCIT, Central circle2, Mumbai
{104 ITD 166(MUM) (TM) }
In this case, if any person makes any disclosure on the
day of search u/s132 (4) of the Act and thereafter during
the post search operation, he makes statement u/s131
denying the confession made earlier , the disclose will not
have any evidentiary value in the assessment . The A.O.
must have conclusive evidence , other than the mere
disclosure , that assessee has undisclosed income. This
judgment will come to rescue in those case where
department merely extract disclosure and makes
addition solely on the basis thereof.

TDS CERTIFICATE

TDS CERTIFICATE FORMS
The CBDT has issued Notification No 83/2007, Dated
26-3-2007 prescribing the new forms of TDS
certificates. These forms are:
• Form 16 TDS certificate for Salaries
• Form 16A TDS certificate for other than salaries
• Form 27D Certificate for tax collection at source
The new forms have come into effect with immediate
effect. This article will elaborate on the changes as
compared to old formats and other practical issues.
Time limit of issuance of TDS certificate
Periodicity and Due Date
Monthly Certificate
Form No 16A is to be issued for all the TDS deductions
made during a month. Such monthly certificates are to
be issued on or before the end of next month. For
deductions in February 2007, TDS certificate must be
issued on or before 31st March 2007.
Yearly Certificate
Form No 16
TDS certificate for salaries is always issued once a year
and the due date is 30th April of the assessment year.
Form No 16A
• The yearly certificate can be issued only if the
deductee so requests.
• Such yearly certificate which can be issued on or
before 30th April of the current assessment year.
• If there are provisional entries at the end of the year,
the certificate for the same can be issued on or before
7th of June, since, the last date of payment of
provisional entry is 31st May.
Based on above, it is clear that the following must be
issued in the new TDS forms
• Form 16 for FY 2006-2007
• Form 16A / 27D for February and March 2007
• Form 16A / 27D consolidated for FY 2006-2007
Changes in the forms
Form 16
1. 'PAN No. of the Deductor' instead of PAN/GIR No.
earlier
2. 'TAN No. of the Deductor' instead of TAN earlier

3. 'PAN No. of the Employee' instead of PAN/GIR No.
earlier
4. “TDS Circle where annual return u/s 206 is to be filed”
is removed completely.
5. New column - Acknowledgement Nos. of all quarterly
statements of TDS under sub-section (3) of section
200 as provided by TIN Facilitation Centre or NSDL
web-site
6. New line added after “Details of Tax Deducted and
Deposited”
(The Employer is to provide transaction-wise details
of tax deducted and deposited)
Form 16A
1. Heading 'For interest on securities --------- is
changed
2. 'PAN No. of the Deductor' instead of PAN/GIR No. of
the deductor earlier
3. 'PAN No. of the Payee' instead of PAN/GIR No. of the
payee earlier
4. TDS Circle where annual return u/s 206 is to be
delivered is removed completely.
5. New column - Acknowledgement Nos. of all quarterly
statements of TDS under sub-section (3) of section
200 as provided by TIN Facilitation Centre or NSDL
web-site
6. New line added after the “Details of Payment, Tax
deduction and deposited”
(The Deductor is to provide transaction-wise details
of tax deducted and deposited)
Form 27D
1. Heading 'For Collection of tax --------- is changed.
2. 'Name and address of the buyer or licensee or lessee
or a person who is awarded the contract' instead of
Name & address of the buyer earlier
3. 'Tax deduction and tax collection account no. of the
collector instead of Tax collection account no. of the
collector earlier
4. 'PAN No. of the Collector' instead of PAN/GIR No. of
the Collector earlier
5. PAN No. of the Buyer or Licensee or Lessee or a person
who is awarded the contract' instead of PAN/GIR No.
of the Buyer earlier.
6. Nature of goods referred to in the table in section
206C (1) or nature of contract or licence or lease
referred to in the Table in section 206C (1C)' instead
of Nature of goods referred to in the table in section
206C (1) earlier.
7. Circle where return u/s 206C (5A) is to be delivered is
removed completely.
8. New Heading - Acknowledgement Number of all
quarterly statements of TCS under sub-section (3) of
section 206C as provided by TIN Facilitation Centre or
NSDL web-site
9. New line added after the "Details of Payment, Tax
collected and deposited".
(The Collector is to provide transaction-wise details of
tax collected and deposited)

Analysis
Minor Changes
As is evident , the column TDS circle where Annual
Return is filed as TDS circle is removed , as this
identifiable on the basis of TAN.
Redundant expressions like GIR number of the deductor
or collector have also been dropped.

Major Changes
Quarter Wise Acknowledgement No.
The most significant change in the forms is about giving
details of Quarter Wise Acknowledgement numbers. The
format of the same is as follows:
Quarter Acknowledgement No.
1
2
3
4
Quarter Acknowledgement No.
• The details are to be given for all quarterly
statements.
• The details are as provided by TIN Facilitation Centre
or NSDL web-site. If the returns are filed at TIN
Facilitation Centre, a printed Acknowledgement is
provided. However, when the electronic returns are
filed online using digital signature, the number is
available at the filing web site.
• The most important question is about giving details
for all quarterly statements. For this we need to check
the due dates of filing quarterly statements. Please
refer to the table given below.
• Co-relating the due date of filing eTDS statements and
due of Monthly / Yearly TDS certificates, it is clear
that:
o For Monthly certificates for April and May, no
details of eTDS Acknowledgement Number can be
provided. Similarly for July and Aug, details of Q1
Acknowledgement Number can be provided.
o For Yearly certificates only details of Q1, Q2 and
Q3 eTDS Acknowledgement Number can be
provided.
• So unless the due dates of certificates and eTDS
statements is synchronized, details of all quarterly
Acknowledgement Number cannot be provided.
Payment-wise transaction-wise details
• The new forms specifically requires the deductor,
collector and employer to furnish payment-wise,
transaction-wise details of the tax deducted or
collected and paid to the credit of the Central
Government.
• Earlier, many deductors used to give one
consolidated figure of TDS deducted, mentioning
only the name of bank branch where amount was
deposited. Similarly , the TDS certificates issued by
institutions on interest on bonds etc. generally does
not give the details transaction wise. Such
certificates are printed on the back of interest
warrant. This change will make all such TDS
certificates invalid.
• The idea behind this is to facilitate matching of the
entries in the electronic returns with those in the TDS
certificates.
• Similarly employers will now have to provide details
regarding deposit of taxes each month, after deducting
from the salaries of employees.
• The changes in the tax forms are expected to provide
complete details to taxmen about the gross income of
employees and improve flow of income taxes on schedule
to the State Exchequer.

Due Dates of Quarterly e-TDS / e-TCS Statements

Qtr No :- Q1
Quarter:- April to June
Due Dates for Form NO.24Q/26Q :- 15th July
Due Dates for Form No.27Q :- 14th July
Due Dates for Form No. 27EQ :- 15th July

Qtr No :- Q2
Quarter:- July to September
Due Dates for Form NO.24Q/26Q : 15th Oct
Due Dates for Form No.27Q:-14th Oct
Due Dates for Form No. 27EQ:-15th Oct

Qtr No:- Q3
Quarter: Oct to Dec
Due Dates for Form NO.24Q/26Q: 15th Jan
Due Dates for Form No.27Q:-14th Jan
Due Dates for Form No. 27EQ:-15th Jan

Qtr No:-Q4
Quarter :-Jan to March
Due Dates for Form NO.24Q/26Q: -15th June
Due Dates for Form No.27Q: -14th April/14th June *
Due Dates for Form No. 27EQ:- 30th Apr

*If there are TDS deduction provisional entries as on the last date of the accounting year, then due date of return is 14th June. If there are no such entries, then it is 14th April

KING BHOJA

KING BHOJA

King Bhoja was taking a leisurely evening stroll by a river. He was enjoying looking at the trees and the flowers. He spotted a man carrying a huge bundle of sticks on his head. The woodcutter was apparently carrying more than he could easily manage and was perspiring profusely. But he looked happy. The King felt an urge to talk to him. The king stopped the man and said, ?Hey, who are you?? The man replied cheerfully, ?I?m King Bhoja?. The King was taken aback. He asked, ?Who?? The man repeated, ?King Bhoja!? The King was now quite intrigued. He said, ?Well, if you are King Bhoja, would you tell me your income?? The woodcutter replied, ?Why not? I earn six paise per day!?The King thought about the huge sum of money that was there in his coffers. How could a man who earned six paise a day think himself to be a king? How could he look so happy? The King thought of the numerous worries and problems that besieged him. He wanted to know more. So he asked the old man, ?If you earn just six paise per day, what are your expenses? Are you really King Bhoja??The old man said, ?Well, if you really want to know, let me explain. I earn six paise every day. I give one paisa each to my capitalist, my minister and my borrower. I deposit one paisa in my savings account and use one paisa to serve my guests. The remaining one paisa, I keep for myself.? By now the King was totally hooked. What planning! What vision! By a man of such humble means! But how was he doing this? It was like a puzzle and the King wanted to solve it. He said, ?Please explain, I don?t understand.?The wood cutter said, ?Alright. My parents are my capitalists, because they invested in my upbringing. They expect me to look after them in their old age. They invested and lent with a plan to earn interest and get the principal back too. Isn?t that what all parents expect from their children??The King was quick to ask, ?What about your borrower?? The old man smiled, ?My children of course! They are young. It is my obligation to support them. But when they are older and are able to earn, they shall repay me, just as I am repaying my parents. They too shall discharge their Pitri-rin!?The King was quite at a loss for words, ?Who is your minister?? asked the King. ?My wife of course,? replied the man. ?She runs my house; she is in charge of everything on the home front. I depend on her for physical as well as emotional support. She is my best friend and advisor.??Where is your savings account?? he asked sheepishly. The old man said, ?A person who does not save for his future is a fool. Life is full of unforeseen contingencies. Each day I set aside one paisa into my treasure.?The king said, ?Go on, please.? The wood cutter said, ?I set aside the fifth paisa to serve my guests. As a householder, it is my duty to keep an open house for guests. Who knows when a guest may drop by? I have to keep aside something for that eventuality.?The man continued smiling, ?The sixth paisa my friend I keep for myself; to look after my daily needs.?The King was immensely impressed as the wise old man put all the pieces of the jigsaw puzzle into place.Surely, happiness and contentment do not stem from wealth, position or worldly comforts. Attitude and disposition towards your current situation are important. If one can learn to live within his means and organize one self accordingly, a lot is achieved. This is the power of positive thinking and right attitude. The old wood cutter was a king because his attitude was such!

BY SANJAY TANDON

INFLATION

Continued from yestarday..............

Capital requirements.......
All banks are required to hold a certain percentage of their assets as capital, a rate which may be established by the central bank or the banking supervisor. For international banks, including the 55 member central banks of the Bank for International Settlements, the threshold is 8% (see the Basel Capital Accords) of risk-adjusted assets, whereby certain assets (such as government bonds) are considered to have lower risk and are either partially or fully excluded from total assets for the purposes of calculating capital adequacy. Partly due to concerns about asset inflation and repurchase agreements, capital requirements may be considered more effective than deposit/reserve requirements in preventing indefinite lending: when at the threshold, a bank cannot extend another loan without acquiring further capital on its balance sheet.
Reserve requirements
Another significant power that central banks hold is the ability to establish reserve requirements for other banks. By requiring that a percentage of liabilities be held as cash or deposited with the central bank (or other agency), limits are set on the money supply.
In practice, many banks are required to hold a percentage of their deposits as reserves. Such legal reserve requirements were introduced in the nineteenth century to reduce the risk of banks overextending themselves and suffering from bank runs, as this could lead to knock-on effects on other banks. See also money multiplier, Ponzi scheme. As the early 20th century gold standard and late 20th century dollar hegemony evolved, and as banks proliferated and engaged in more complex transactions and were able to profit from dealings globally on a moment's notice, these practices became mandatory, if only to ensure that there was some limit on the ballooning of money supply. Such limits have become harder to enforce. The People's Bank of China retains (and uses) more powers over reserves because the yuan that it manages is a non-convertible currency.
Even if reserves were not a legal requirement, prudence would ensure that banks would hold a certain percentage of their assets in the form of cash reserves. It is common to think of commercial banks as passive receivers of deposits from their customers and, for many purposes, this is still an accurate view.
This passive view of bank activity is misleading when it comes to considering what determines the nation's money supply and credit. Loan activity by banks plays a fundamental role in determining the money supply. The money deposited by commercial banks at the central bank is the real money in the banking system; other versions of what is commonly thought of as money are merely promises to pay real money. These promises to pay are circulatory multiples of real money. For general purposes, people perceive money as the amount shown in financial transactions or amount shown in their bank accounts. But bank accounts record both credit and debits that cancel each other. Only the remaining central-bank money after aggregate settlement - final money - can take only one of two forms:
physical cash, which is rarely used in wholesale financial markets,
central-bank money.
The currency component of the money supply is far smaller than the deposit component. Currency and bank reserves together make up the monetary base, called M1 and M2.
Exchange requirements
To influence the money supply, some central banks may require that some or all foreign exchange receipts (generally from exports) be exchanged for the local currency. The rate that is used to purchase local currency may be market-based or arbitrarily set by the bank. This tool is generally used in countries with non-convertible currencies or partially-convertible currencies. The recipient of the local currency may be allowed to freely dispose of the funds, required to hold the funds with the central bank for some period of time, or allowed to use the funds subject to certain restrictions. In other cases, the ability to hold or use the foreign exchange may be otherwise limited.
In this method, money supply is increased by the central bank when the central bank purchases the foreign currency by issuing (selling) the local currency. The central bank may subsequently reduce the money supply by various means, including selling bonds or foreign exchange interventions.
Margin requirements and other tools
In some countries, central banks may have other tools that work indirectly to limit lending practices and otherwise restrict or regulate capital markets. For example, a central bank may regulate margin lending, whereby individuals or companies may borrow against pledged securities. The margin requirement establishes a minimum ratio of the value of the securities to the amount borrowed.
Central banks often have requirements for the quality of assets that may be held by financial institutions; these requirements may act as a limit on the amount of risk and leverage created by the financial system. These requirements may be direct, such as requiring certain assets to bear certain minimum credit ratings, or indirect, by the central bank lending to counterparties only when security of a certain quality is pledged as collateral.
Examples of use
The People's Bank of China has been forced into particularly aggressive and differentiating tactics by the extreme complexity and rapid expansion of the economy it manages. It imposed some absolute restrictions on lending to specific industries in 2003, and continues to require 1% more (7%) reserves from urban banks (typically focusing on export) than rural ones. This is not by any means an unusual situation. The US historically had very wide ranges of reserve requirements between its dozen branches. Domestic development is thought to be optimized mostly by reserve requirements rather than by capital adequacy methods, since they can be more finely tuned and regionally varied

TO BE CONTINUED TOMORROW.................

Golden Quotes

“Accepting every victory with a humble heart and every defeat with a gracious mind is the best way to live in this world”

JAB WE MET CA GROUP

some members of JAB WE MET CA GROUP celebrating
completion of their GMCS JUNE 2008 batch at chandigarh.
ALL THE MEMBERS OF THE GROUP(JAB WE MET CA) ARE WORKING VERY HARD TO PROVIDE UPTO DATE INFORMATON TO ALL OF US FREE OF COST.
I SALUTE THEM !!!!

4 investing gems from Warren Buffett

4 investing gems from Warren Buffett
Warren Buffett, probably the greatest investor of his generation, rarely communicates his investment ideas in writing to the general public. And why should he? If someone has that extra edge when it comes to making money from the stock markets, he would rather use it for himself rather than go around sharing it. But once a year, he makes an exception to the rule and does give out his way of thinking through the annual letter he writes to the shareholders of Berkshire Hathaway. Other than this he has given many speeches over the years, which have given the general public some idea of the way he thinks. Here are a few of these gems which he has shared with his shareholders over the years through his letters and speeches.

1. Buy the business and not the stock The speech titled, 'The Superinvestors of Graham and Doddsville,' delivered to the students of Columbia Business School in 1984, remains the most famous speech that Buffett ever made. This speech was delivered at a seminar held to celebrate the 50 years of the publication of Benjamin Graham and David Dodd's book Security Analysis. Benjamin Graham was Warren Buffett's Guru at Columbia School and all the years that Graham taught there Buffett was his only student to have got an A+ grade. And Buffett, as we all know, has surely lived up to that grade. This speech elucidated his firm belief in the principle of value investing. Value investors, he said, "search for discrepancies between the value of a business and the price of small pieces of that business in the market." Hence, the only thing they are bothered about is "how much is the business worth?" As Buffet said in the speech, "He's not looking at quarterly earnings projections, he's not looking at next year's earnings, he's not thinking about what day of the week it is, he doesn't care what investment research from any place says, he's not interested in price momentum, volume or anything. He's simply asking: What is the business worth?" And hence, as Buffett points out in the speech about value investors. "While they differ greatly in style, these investors are, mentally, always buying the business, not buying the stock." As we all know, the question 'how much is a business worth?' is not easy to answer and depends on how closely the investor follows the business of the company he is investing in and the understanding he has of that particular line of business. Buffett himself follows this and does not invest in businesses he does not understand. Information technology is one sector he has consciously stayed away from even at the height of the technology boom.

2. Buy when the stock prices are low One of the peculiar things about stock markets is the fact that investors like to buy when the markets are doing well and the stock prices are on their way up. This is not the best way to invest given the fact that in everyday life we like to buy more of something only when the prices are low. Buffett explains this point in his letter to the shareholders for the year 1997. "A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices?" "These questions," he goes on, "of course, answer themselves. But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the 'hamburgers' they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."

3. For investors as a whole, returns decrease as motion increases Getting into stock because everyone around you is and hoping to make money from it money successfully is not everyone's cup of tea. As more and more investors get into the same stock, and price rises, the chances of making money from the stock go down. In his 2005 letter Buffett wrote, "Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: he lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: 'For investors as a whole, returns decrease as motion increases.'"

4. There is a thin line separating investment and speculation Buffett explains this beautifully in his letter to the shareholders in the year 2000. "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money." "After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands."

RTI ACT AND INCOME TAX REFUNDS

RIGHT TO INFORMATION AND INCOME TAX REFUNDS
If in the income-tax administration there is one area
which has remained perennially incurable, it is Incometax
Refunds.
In a Press Release dated 19th April, 2007, Central Board of
Direct Taxes stated: “It has been reported in some
sections of the media that a large number of taxpayers
are awaiting refunds from the income-tax department for
up to three years. These reports are factually incorrect
and based on incomplete appraisal of facts”.
As per the statement made by Minister of State for
Finance there have been instructions to issue refunds
within four months from the date of receipt of return and
dispatched within 30 days from the date of signing the
refund order.
I am sure most readers of this article would doubt the
correctness of above Press Release and the Statement.
Many readers may not have received income-tax refunds
for one or more earlier years inspite of many reminders,
personal visits, and grievance-cell applications. There
was no hope. It was a helpless and hopeless situation.
Right to information Act
• The Right to Information Act came into effective
being from 12.10.2005. Now nearly two years are
getting over.
• The Act is being used by many citizens to obtain
information, which earlier was not available, from
various Government Departments and other
organisations like PSUs, Indian Railways, Reserve
bank of India and so on.
• Information can be accessed by making an
application under the RTI Act. It is very simple, leasttime
consuming, most inexpensive.
• Few organisations (22 in all) like CBI, RAW are
basically exempted.
• Further, certain informations are exempted for all
organisations covered under the RTI Act referred to
as “Public Authority”. Such exempt items include
information on commercial confidence, trade secrets
or intellectual properly, information which would
impede the process of investigation or apprehension
or prosecution of offenders, information which
relates to personal information the disclosure of
which has no relationship to any public activity or
interest or which would cause unwarranted invasion
of the privacy of the individual etc.
Example of application under RTI for refund
Suppose your income-tax refunds for A.Y. 2002-03 of Rs.
1,057 and for A.Y. 2004-05 of Rs.7,230 are not received
inspite of many reminders. You make the application in
Annexure A OF RTI ACT . You take it to one of the designated post
offices, handling RTI applications. There are
designated post offices, list available on
www.bcasonline.org. For ALL cities, visit
http://www.indiapost.gov.in/rtimanual16a.html to get
details of designated post offices.
Submitting application under RTI
• Filing fee for RTI application to the Central
Government authority is Rs. 10. Same can be
paid at post-office in the form of Postal Order for
Rs.10.
• To make the system operate easier, the decision was
taken by the Prime Minister of India that the
Department of Posts should provide its services to all
the Central Government Departments as a collection
point for information under the RTI Act by
designating its Central Assistant Public Information
Officers (CAPIOs) as CAPIOs for the entire Central
Government.
• The postal department now not only receives cash of
Rs. 10 on behalf of Public Authorities of all Central
Government Departments or / and issues postal
order for it, but also takes the responsibility of
delivering the RTI application free of charge to the
concerned CPIO anywhere in India. We need to
appreciate the service of postal department.
• Post office normally dispatches the RTI application to
the concerned Central Government Department on
the same day.
• The service of Post offices for delivery is at the option
of the applicant. If you desire to deliver application
to the concerned department yourself personally or
yourself posting it by registered post A.D. to get the
acknowledgement yourself you may do so.
Public information Officer
• RTI application is to be addressed to Public
Information Officer (PIO).
• Each establishment (i.e. Public Authority) covered
under the RTI Act has to appoint one or more PIO, in
fact one for each of the department's different offices.
• Until 09.08.2007, all Commissioners of Income-tax
were PIOs. Ministry of Finance, Department of
Revenue, Directorate of Income-tax vide
communication dated 09.08.2007 have modified RTI
mechanism in respect of PIOs / Appellate Authorities
and other related RTI issues. Now your assessing
officer himself is the PIO for you.