XYZ Pvt Ltd, is a dealer in gem stones, and is exporting the goods to the overseas buyers and also to domestic buyers. It is making royalty payment to a Singapore Company in relation to use of brand name. Could you please let us know that whether the rate mentioned in DTAA i.e. 10 per cent should be further increased by surcharge or education cess or not?

The expression ‘tax’ is defined in Article 2(1) of the India-Singapore DTAA to include ‘income-tax’ and is stated to include ‘surcharge’ thereon, so far as India is concerned. The education cess is essentially of the same nature as surcharge, being an additional surcharge. Thus, the scope of Article 2 also extends to the education cess.

In view of the above, 10 per cent rate mentioned in India-Singapore DTAA in respect of royalty income should not be increased by surcharge and education cess.

Withhodling tax on shares

We are a partnership firm, engaged in the business of manufacturing and selling of polished diamonds and exporting the same. Recently, we have purchased shares of an unlisted Indian Company from a foreign company based in US. The foreign company was holding these shares for a period more than three years. What would be the withholding tax rate in this case?

Since the shares have been held for more than 12 months, the capital gain on sale of such shares shall be treated as long term capital gain for tax purpose. Further, as per amended section 112 of the Income Tax Act, 1961 (‘the ITAct’), the long term capital gain on sale of unlisted securities in case of Non-resident Investors shall be taxable at the rate of 10 per cent without giving benefit of indexation or of currenc. fluctuation.

Accordingly, tax should be withheld on the net capital gains at the rate of 10 per cent plus surcharge at the rate of two per cent if applicable and education cess of three per cent. However, if Permanent Account Number (‘PAN’) is not furnished by the US Company. then the tax should be withheld at the rate of 20 per cent as per Section 206AA of the IT Act.

Loan or deemed dividend

We, ABC Pvt Ltd, are engaged in the business of cutting and polishing of diamonds. Our managing director, who is also holding 55 per cent of share capital, wishes to take loan from company. Kindly elaborate as whether the said loan shall be considered as deemed dividend under Section 2(22) (e) of the IT Act?

Deemed dividend under section 2(22)(e) is attracted when a closely held company makes any payment by way of advance or loan to a shareholder, being the beneficial owner of shares holding not less than 10 per cent of the voting power. However, it is restricted to the extent of accumulated profit that such company posseses.

Based on the limited information, it appears that provisions of deemed dividend under section 2(22) (e) shall be applicable.

jewellery sale & cpital gains tax

Recently, I have sold gold jewellery worth Rs five lakhs after holding the same for almost two years. What is the capital gain index for financial year 2012-13? Is there any reinvestment option available to save the capital gains tax?

Since the gold jewellery has been held for less than 36 months, the gain on sale of such jewellery will be treated as short term capital gains. There is no tax saving reinvestment scheme available with respect to short term capital gains. However, you can claim deduction under section 80C (deduction in respect of life insurance premium, contribution to provident fund etc.) or under section 80D (deduction in respect of health insurance premium etc. from your gross total income.

House property & jewellery sales

I have brought forward loss under the head house property as per my income tax return. Currently, I am planning to sell some jewellery on which I will have some capital gain. Can I set off the brought forward loss of house property against such gain on jewellery?

Please note that the brought forward loss under the head ‘Income from house property’ can not be set off against any income except under the head income from house property. As such, you will not be able to set off the brought forward loss of house property against the capital gain on sale of jewellery.

jewellery gift in wealth tax

I had gifted certain amount to my wife on the occasion of our marriage anniversary. Out of the said sum, my wife bought some gold jewellery. Kindly let me know as whether the value of said jewellery will be included in the my net wealth or in the net wealth of my wife for wealth tax purposes for the assessment year 2012-13.

As per section 4(1)(a)(i) of the wealth Tax Act, 1957 the value of assets transferred directly or indirectly to spouse without adequate consideration (except where transfer is in connection with an agreement tc li ve apart) shall be clubbed in the net wealth of the husband.

Considering the above provision, the fair market value of the said gold jewellery as on 31 March 2012 shall be included in your net wealth.

Stronger Euro over dollar helped supporting Gold prices during the month Euro saw its biggest one day rally on 3rd august and moved up 1.7% in a day. This move showed Euro an upper trend hence and has weakened the US dollar. A stronger than expected US Job data improved the investors’ appetite for risk and helped investors to move to Euro, as QE3 for US was not looking nearby. However, US dollar is ,expected to be strong further as upcoming US elections would keep the sentiments for US dollars high.

China which was one of the biggest hopes for investors during this ominous market conditions across the globe also showed disappointment through its economic data which showed its trade balance to 25.1B vs 31.7B previously and PPI data at -2.9% vs -2.1% previously.

Although these economic conditions gave a boost to Go : prices increasing its appeal for safe haven and also on them hopes of further stimulus or policy change by Chinese govern ment.I nvestors are eyeing on China now as Premier Jiabao has stated to make some monetary policy changes to boost the economy. Further expected a rate cut in China can bolster the demand for gold in coming months as it will increase the inflation in world’s second largest economy and gold consuming nation.

India the biggest gold consuming nation has shown a downfall in demand for gold this year as weaker rupee has showed gold prices to its all time high. A weaker rupee versus the dollar meant that average local second-quarter bullion prices in India were 29 per cent higher than a year earlier which has weakened the demand for gold.

Adding fuel to the fire was increase in import duty for gold recently which made gold more costly for Indian investors. Gold demand in India has declined 7.1 per cent in the second quarter and import prices has increased to four per cent almost doubled, which has reduced the gold demand too.

India’s gold imports could pick up in the second half of 2012 if record prices ease but annual volumes will still fall about 30 percent. As festival season coming up in India we can see a demand forgold but it would he capped to a limit due to higher prices. Total Indian demand was 181.3 tons in the latest quarter but imports have declined and are further expected to decline by 38 per cent by the year end.

Recently the amount for bailout to Spain and Greece which was agreed by troika will be pumped in during September. The visit from these organizations to Greece in coming month would also determine if Greece needs further assistance or easing as new coalition government have been doing a good job to maintain the country’s deficit.On the other hand Germany has showed a better preliminary GDP of 0.3 per cent vs 0.2 per cent expected. There are signs of improving economy in Euro area conversely uncertainty is still struck as there is no clearer picture about Greece leaving Eurozone to investors.

Silver has become more of industrial metal rather than a precious metal. It has almost always followed a trend of gold and maintained a correlation of 0.90 over last 12 years but since January 2011 the correlation between these two commodities has decreased extremely to 0.20 due to acute fluctuation in gold prices. We are expecting Gold/Silver correlation to be around 0.75 in coming months.

Gold will be range-bound for the next two to three months as uncertainty in US and Eurozone nations and lack in demand from two biggest gold consuming nations can cap the gold price. With a seasonal li kelihood of stronger demand in India and then in China, the second half can be stronger than the first half for the gold market. Any announcement of stimulus by US or China can also push gold higher.

Gold Spot – Weekly

Gold prices breached trend line support in Gold spot weekly chart below $1640. Prices are holding above $1525 and consolidating. In short term prices can give bounce to $1685 around and again selling can be seen there. Prices have crucial support at $1525 and breakdown below this level, prices can test $1380.

Silver Spot – Weekly

Silver prices are consolidating bet $26 to $28.5 from last nine weeks. Prices have crucial support at $26. Breakdown below $26, prices can test $20.8. On higher side prices may test $31.2 on breakout above $28.5.

MCX, NCDEX and Comex future prices are the base for gold. Jewellers are partially right in blaming these commodity exchanges for their woes.

The advent of the US dollar had changed the outlook on gold. Let’s go back in history as to how the US dollar came into being, before I give my opinion on gold prices.

In 1862, the U.S. government began issuing its nowfamous greenback dollars: U.S. Notes unbacked by gold or silver. These served as legal tender (compulsory) currency. The wartime issues were limited to $450 million. They began to be redeemed by the government in 1866, but the recession of 1867 halted this. A total of $356 million were allowed to remain in circulation. They are still in circulation. They are not common. Federal Reserve Notes are the common currency.

Prior to 1862, currencies were private, and private currencies varied in value. There was no agency to guarantee their value. There were no legal tender laws. Nobody was compelled to accept any bank’s currency notes. When gold coins circulated, they were familiar to most Americans. They were perceived as money. So, they were money. They functioned as money in exchange. From 1934 until 1971, the official price of g: did not rise. The dollar’s purchasing power fell.

Bretton Woods Agreement
During the second world war, international trade suffere-: with runaway inflation and devaluation of currencies. 2. need was felt to bring out a new monetary system :- – would be stable and conducive to international trade. – – process was started in 1943 by Britain and the US a- : finally in July 1944 the American proposal was accep:e: at the Bretton Woods conference.

The new system aimed to bring about convertibility of all currencies, eliminate exchange controls and establish an international monetary system with stable exchange rates. The International Monetary Fund (IMF) was se: up in 1946 under the Bretton Woods agreement and the new exchange rate system also came to be known as the Bretton Woods system.

Reasons for subdued gold prices till 2001

■ The U.S. was on a government-defined gold standard, the government bought and sold gold in a narrow trading range. Gold was not a free market commodity. It was a rigged commodity. That is what a government-enforced gold standard is: a rigged market.

■ Gold became a bubble commodity, from 1976 until January, 1980. The bubble burst as a result of the Federal Reserve System’s tight-money policy, launched in October, 1979. Gold fell so far that it did not recover when the FED reversed policy in August, 1982. when the Dow Jones Industrial Average fell below 800. The Mexican government threatened a default on all international loans to its banks. The FED inflated, bailing out the Mexican banks.

■ Gold went down after January, 1980, as did most commodities. Anyone holding commodities for two decades lost his money.

■ Prior to 1933, American banks were allowed to go bankrupt, taking depositors’ balances with them. No longer. The FDIC officially insures deposits up to $100,000.

■ The United States government was legally obligated to pay a fixed amount of paper money in exchange for an ounce of 0.999 fine gold. This was a legal price floor for gold.

■ Gold coins circulated as money. The public was familiar with gold.
Today, paper currency circulates and every central bank has been printing currency notes faster like never before in history. People have realized that the paper currencies which they hold will depreciate far more quickly than gold. This the key reason for the huge spike in every form of gold investment demand in the past decade. Death of paper currency and the rise in value of gold as an alternate currency of the future is the main reason for gold price hike.

Global financial systems vs MCX/NCDEX

Global money supply is at a historical high. Excess money has not created any safe investing avenues. Investors are forced to invest in gold futures and gold exchange traded funds for safety of their investments.

Central banks & gold price hike

Central banks of the developed nations are responsible for the current gold price rise as they believe that supplying the world with free money can cure fundamental ills of their economies instantaneously. If the current zero interest rate policy remains in place for longer duration, then in the next five years there will be a sustained recession and gold prices can spike between Rs 45,000-Rs 50,000 (per ten grams) by the end of 2018.

Jewellers need to adjust to high prices and ensure that their sales as well as profit margins increase. The UPA government has increased custom duties on gold imports twice in the past one year. The government wants to ensure that there is reduced investment in gold.

However, the government is unable to differentiate between gold for jewellery purposes and gold for investment purpose which has increased jewellery prices. It’s our business and we need to protect it and be competitive. If you cannot do it on our own, take the help of an expert. If there is more than one jewellery shop in your city which is on the verge of closing down, merge them. For example. say there are four different jewellery shops in a city which are on the verge of closure. This information can be known through the bullion association of your city and/or the bullion association of every city should take steps to pass information as to which jewellery shops are on the verge of closure. The owners of these shops can meet together and create a partnership firm or any other entity, place manufacturing as well as purchase of materials under one roof to reduce cost.

The attachment a mother holds with her daughter is reflected in the ancestral jewellery she passes on to her; similarly for a daughter it’s not just a mere jewellery piece but also embraces a great emotional value. The contemporary bride shouldn’t stow away these elegant pieces of jewellery but flaunt it and be the powerful modern women walking in sync with today’s trend.

But the statement arises: CAN THESE JEWELLERY PIECES BE ENHANCED IN A MORE BEAUTIFUL MANNER WHILE KEEPING THE ORIGINAL ESSENCE?

My forte is customized jewellery where I personally meet my clients and design the jewellery based on their budgets and choices. On her wedding day the bride sparkles as bright as a diamond in her jewellery. She feels beautiful in her own way and feels more gorgeous on every compliment she receives. For a bride her wedding jewellery is symbolic of the commencement of her new life. But most of the women have the mentality of keeping the jewellery in the safe lockers and years later, pass it on to their daughter and daughters in law. Through years of youth, women enjoy buying new trendy pieces and don’t want to be seen wearing pieces of past years. I strongly believe in staying in tune with contemporary styles, but also enjoy re-incarnating the bride’s trousseau jewellery. It’s like alchemy, only better because you make gold more p recious and designs further beautiful than before.

Here are the seven ways of recreating heirloom jewellery:-

1. Converting the original piece into several jewellery pieces:
This has been the traditional way of modifyingjewellery, and is perhaps the easiest. A long earring with two or more motifs, can be cut into two different earrings and worn more often. Multi-string necklaces can be detached and worn as individual strings. This way the traditional essence and the look is not modified but just worn in another manner.

2. Re-setting of stones:
Stones from your jewellery can be re-set in modern styles, like the illusion setting, where small diamonds are set artistically to make them appear larger. Resetting also ensures that the gems are steadily fastened on the jewellery. While changing the setting, one need not break down the entire piece, but simply alter a portion that requires it.

3. Stringing with gemstones:
Motifs can be detached from necklaces and strung with rare fancy gemstones – a perfect blend of tradition and fun. A choker, which was held back with a chord, can be attached to pearl strings with a pearl bracelet to follow suit.

4. Use of Rhodium:
Rhodium, a metal used for plating can enhance the colour of your jewellery. While white is the most common form of rhodium, it can be done in pink, blue, green, purple and black. Definitely a chic way of being classy and fun.

5. Changing polish :
A change in finish is always an exciting modification. with polish options ranging from burnished copper antique to an exciting bright yellow; one can always re-polish traditional pieces to add the contemporary touch.

6. Wearing it on a different body part:
A cocktail ring shouldn’t be restricted to your fingers; it can be worn as a pendant, strung through a chain. If you’re more of a delicate ring person, then you can interconnect two or three rings and slip it through a chain. Also a pendant can be incorporated in a baju badh or mang tikka as a centre motif.

7. Adding changeable charms & stones:
A regular link chain could become funky by adding charms to the links. No need to pinch yours pockets forthese charms, you could always add a lobster hook to your pendant and make it a charm! These bracelets look great when hung on bag handles too.

In July, Munish Khurana, a shareholder in Khurana Jewellers, had lodged a complaint with the Civil Lines police that an unidentified person was allegedly writing blogs and sending frivolous e-mails from bogus IDs to their customers with an intention to defaming them and ruiningtheir business. The c-mails used to mention that the jewellery house is defrauding its customers by selling fake diamonds. (The Art of Jewellery also received a copy of the mail). A case under Section 66-A of the Information Technology Act and Sections 500 and 501 of the I PC was registered.

Soon the local police, along with investigation authorities of cyber crime cell uncovered the racket and it was found that Suhail Kedia, son of the owner of Malliram Jewellers, was involved in sending the emails. Kedia was arrested on July 18 and has been bailed out. Kedia confessed that he had done this out of jealousy and to stigmatise the reputation of Khurana Jewellers.

To quote from an email received by us from Charanjit Arora, Munish Khurana and Pankaj Arora, partners in Khurana Jewellers, “We have been in this trade from last 62 years and are amongst one of north India’s leading retailers o fine jewellery. Malicious attempt of ruining one’s goodwill out of trade jealousy- Is that one calls a fair trade practice? Can a respectable business house run its business in peace, with honesty and without fear when such deceitful people stoop low to such unethical ways to stay in trade? Due to this episode, our customers got affected and our sales dipped. It won’t be surprising if eventually the sale of diamonds in north India gets affected too.”

“This is an unprecedented case. Such actions damages reputations built over years and GJF strongly condemn the unethical elements who have perpetrated these acts of emailing potentially damaging staternents.This could result in drastic loss of consumer confidence. GAF is of the strong opinion that unethical rivalry results unhealthy competition causing damage to everyone in the business,” commented a spokesperson of All India Gem and Jewellery Trade Federation.

“The ministry of industry & commerce is facilitating jewellery industry development through initiatives such as funding the Die and Mould Centre of the Moratuwa University, and its prototyping and incubator facilities,” said minister Rishad Bathiudeen. “Jewellery exports also bring the highest value addition in diamonds, gems and jewellery exports.”

“If we can successfully link Sri Lanka’s jewellery supply chain to such multinationals as Pure Gold, we stand to enhance the much needed international recognition for our jewellery industry,” Bathiudeen added.

Located in Wufeng district, the Three Gorges International Jewellery Complex aims to engage in the complete production pipeline mainly focusing on high-end jewellery, from research and development, product design, manufacturing, marketing and retail.

As Sr Vice President, JCK Brands for Reed Exhibitions, Bonaparte is not only in charge of the brand in the US and abroad, he has also become a major advocate in connection with issues and events affecting the jewellery industry. He was also appointed the global leader for the jewellery portfolio at Reed Exhibitions worldwide.

The unit, located on the ground floor of a building within the international airport compound, has capacity for 1000 tonne, said Joshua Rotbart, general manager for the Hong Kong based company’s Malca-Amit Precious Metals unit.

Two of the vaults may hold assets, including gold, for banks and financial institutions, and others will be used for diamonds, jewellery, fine art and precious metals.

The latest example of this is Swiss luxury watch brand, Hublot, which opened its second boutique in Shanghai. Located on Nanjing West Road, an area known for its concentration of top luxury brands, the boutique features the black that defines the Hublot brand along with leather furnishings, glass and metal fixtures, and high-tech details that create a contemporary space.