-- Vipul M Rupani, Borivili (W), Mumbai

These are two different animals. ICICI Bond is a co-bond, same as the bonds of IDBI, IFCI, L&T, HUDCO, TISCO, Konkan Railway, IRFC and MTNL. The UTI Bond Fund is only a name, but it not a bond. It is a scheme of a mutual fund, the same as any of the schemes of Prudential ICICI, Birla, Tata, Reliance, JM, JF, ITC Thread Needle, etc, including all the other schemes of UTI. There is no relation whatsoever between the two.

As a matter of fact, the bonds are close cousins of co-FDs and bank deposits. There is a contractual obligation between the institution and the investor,unrelated with the profits or losses flowing from these bonds. If the institution makes a loss, bad luck to the institution. It has to pay the promised returns. If it makes a hefty profit, it keeps all of it to itself for its shareholders.

On the other hand, unit holders are like shareholders, partners of the MF, as far as the particular scheme is concerned. If the MF incurs a loss, the unit holders bear the loss. On the other hand, it the MF earns heavy profits on a specific scheme, the unit holders share the profits mutually. In this sense, a unit is a close cousin of an equity share. Each scheme of an MF is like a subsidiary, independent of all the other subsidiaries. The profit or loss earned by one cannot be shared with the other.

When any fund manager assures returns, the scheme loses its basic colour and character and gets inducted into the family of bonds, co-FDs, etc. It is my considered opinion that in such a situation, the units lose the right, not only of indexation, but also of the benefit ofcapital gains at its redemption. Many MFs -- and UTI is the leader in this -- woo the investors to their own schemes by offering ``assured returns''. They take mean advantage from the fact that these two words work like catalysts in attracting investors who are not savvy enough to discriminate between expressed and implied promises.

Taking advantage of the ignorance of the investors, in my opinion, is a scam, worse than what was perpetrated ever before, even in 1992. The MFs have nothing to lose. The investors will be denied the benefit of long-term capital gains, forget the indexation.

I am pained to find that SEBI not only tolerates this nonsense, but supports it. I am more pained to find that some time ago, it was SEBI itself who had put an embargo on MFs assuring minimum returns. What has suddenly made them change their stance? It is SEBI, more than the investors, who should realise that MF schemes are not co-FDs or bonds and have no basic right to assure any returns. It is my considered opinion thatthe stand of ``if the asset managers desire to assure, let them go ahead'', is an irregular one for a regulatory body to take.

Until this realisation dawns on SEBI, the community of investors will be a confused lot. Thanks to this stand, we have reached a situation where the MFs find it impossible to assure returns on equity-based instruments and the investor does not desire to look at any MF, unless there are assured returns. Until then, anyone who desires to earn an income through long-term capital gains will do well by opting for those in whom they have confidence of earning as much, if not more, with or without ``assured returns''.

I have sold 100 shares of XYZ Co., at Rs 10 on June 10, 1997, and have received payment of Rs 1,000 after 15 days. These were purchased three years ago at Rs 10,000 (100 shares x Rs 100 cost). The transaction has resulted in a loss of Rs 9,000. I have adjusted this loss against long-term capital gains after cost indexation. After one month, on July 10, 1997, I haverepurchased the same shares. This transaction has given me two benefits. One, I have saved some tax on the long-term gains that I had incurred and two, I have brought down the cost of acquisition, which will benefit me whenever I sell these shares in the future. Have I cheated the exchequer by playing this trick? I have been an honest tax payer and do not want to face any litigation.

-- Adi F Bhadar, Jogeshwari

As long as your transaction is bona fide and you have sufficient documentary proof for this, you have no cause to worry. I repeat, you have no cause to worry even if you have ended up holding the same original shares that you sold and repurchased. I myself have recommended this trick several times in the past, especially in the case of junk scrips. All that is necessary in these cases is to sell these to a close friend of yours (including your wife, who is a close friend, I hope) just to pocket the loss. If the friend is not cooperative, you may repurchase the shares at the same priceafter some time. The department cannot raise any objection as long as you have the proof of the money being transferred from the account of the buyer to yours and vice versa.