Income disclosed in return filed within time limit couldn’t be treated as undisclosed in block asses

IT: Where assessee disclosed certain income in its regular return filed within prescribed time for assessment year 1999-2000, amount so disclosed could not be added to assessee's undisclosed income computed in pursuance of block assessment proceedings initiated for block period 1-4-1989 to 11-5-1999

HC condones delay caused by red tapism and orders payment of costs to assessee

ST: Delaying in filing appeal by Department due to administrative reasons and consumption of time at office of Government Pleader must be condoned where substantive question of law and high stakes are involved, subject to payment of costs to assessee

Gifts can’t be financed from loan otherwise it casts doubt on genuineness of gift, sec. 68 additions

IT : A gift through a loan is not a genuine gift

Matter remanded in TP case to verify the docs filed by assessee for first time before ITAT in suppor

IT/ILT : Where assessee filed relevant material, to prove that fee was paid to AE for rendering management services, for first time before Tribunal, matter was to be remitted for further verification

Ice Cotton Settles Lower On Stronger Dollar, Export Sales Data

ICE cotton dropped on Friday as a stronger dollar knocked many commodities lower and the market digested data that showed export sales continue to slow. The most-active December cotton contract on ICE Futures US closed down 0.71 cent, or 0.82 percent, at 85.03 cents a lb. The US dollar rose to a six-week peak against the euro as better-than-expected jobs data reinforced expectations that the Federal Reserve could begin scaling back its asset purchases as early as September.



That knocked the wider commodities market lower. The Thomson Reuters-Jefferies CRB index closed down 0.4 percent. A strong dollar makes commodities priced in US currency more expensive for holders of other currencies. Dealers also digested weekly export data that showed sales for the world's largest cotton exporter fell 40 percent in the week to June 27 to 34,500 bales.



That is almost half the total of just under 70,000 in the week to June 13. Technically though, the market is lacking direction. The December contract is right in the middle of a five-month trading range, with important short- and long-term moving averages converging just above 85 cents. "The market has no momentum whatsoever and it will take some force to jolt it out of this sideways trend," said Peter Egli, director of risk management at Plexus Cotton Ltd, a British-based medium-sized merchant.



Downside in prices should be limited by falling inventory as the current season to end-July nears completion, analysts say. Exchange stocks fell another 15,000 bales to 597,980 bales after falling for the first time in almost a month on Wednesday. While that is close to three-year highs, traders say much of it is tied up in committed sales, leaving little surplus US grown cotton in circulation ahead of the harvest in December.



"Given the low availability of cash cotton and the fact that the US crop is late this year, we feel that the odds are slightly in favour of higher prices as we head into late summer and fall," Egli said. "December seems to be a dangerous month to be short." In a further sign of a potential tightening of global supplies, the president of Brazil's growers' association said the country will need to import some 200,000 tonnes of cotton by the end of the year to meet the rising needs of the local textile industry.



The country imported just 3,500 tonnes of cotton last year after two consecutive seasons of large crops boosted local supply. The country is usually the world's No 3 exporter. While the market is facing a record surplus above 80 million 480-lb bales this season, more than half of that total is held in China's strategic reserve. The market is awaiting news from China, where textile mills have lobbied Beijing to allow them to import more cotton as they struggle to source high-grade fibre locally. The US Department of Agriculture will release its monthly crop report next Thursday.

Source:-www.brecorder.com

Rupee Depreciation Fails To Cheer Madurai Exporters

MADURAI: Depreciation of rupee that usually results in windfall gains for Indian exporters has not brought much cheers to the exporters from Madurai this time around.



While some of the exporters did see a rise in their profits, they pointed out that it was too meagre. Many others note that fall in rupee value means little to them as their importers in Europe and other countries have started demanding a discount. The exporters point out that the export market was also shrinking due to dollar appreciation and economic uncertainty in many countries.



N Jegatheesan, president of Tamil Nadu Chamber of Commerce and Industry, said that most exporters from Madurai have a one-to-one relationship with their overseas buyers. "In such a relationship if a buyer seeks a discount in view of dollar appreciation corresponding to a fall in rupee value, exporters are in a position to oblige. Buyers have also started demanding cash in rupee equivalent. We can argue with buyers and be shrewd. But that might affect long-term trade especially if we are dependent on them,'' he said.



As far as Madurai jasmine is concerned, it has a market in a few pockets of the globe, but the profit due to fall in rupee value is meagre. "We export about 150 to 300 kg daily from Madurai. Due to rupee depreciation, we get just Rs 15 additional per kg which is not big money,'' Jegatheesan said.



Players in the sea food, another major exporting sector, are also not very enthused over the situation. "The movement of sea food is generally slow as the season starts only by October last. Even otherwise, there is a general reluctance among buyers to place the orders due dollar appreciation," said V Ramakrishnan, group general manager of Diamond Sea Foods, Tuticorin.



However, the importers in the region are feeling the heat. M Marimuthu, proprietor of a plastic unit in Kappalur Industrial Estate, said that the material cost has increased over the last two months since rupee started falling. "One kg of plastic used to cost Rs 90 two months back. Now it costs Rs 107 per kg,'' Marimuthu said. Though Marimuthu sources his raw materials locally, the plastic industry is heavily dependent on imports.



"We are in a severe constraint due to rupee value depreciation. Feedback from traders is also not encouraging. They say sales is very poor. The capacity of our unit is 60 tonne per month, but we are now manufacturing only 8 tonnes of products,'' Marimuthu concluded.

Source:-timesofindia.indiatimes.com

Iron Ore Export At Paradip Rises Three-Fold

5-Jul-2013

Coinciding with the weaker rupee regime, iron ore exports from Paradip port surged nearly three times to one million tonne (mt) during the first quarter of the current fiscal against the same period a year ago.



During the three-month period, 1.03 million tonnes of iron ore fines (powdery ore) of 62 grade were exported, compared with just 371,000 tonnes shipped in the previous comparable period.



Average global iron ore rates have slipped by more than 15 per cent between April and June to trade at $114 per tonne at Chinese ports. The Indian rupee, meanwhile, softened 9.5 per cent against the US dollar in the same period, providing a relief for the exporters to make some quick deals amid sluggish demand.



"There is no major rush of importers to book Indian iron ore. The rise in exports was just because of the weak rupee as exporters wanted to clear some stocks at ports," said R K Sharma, director general of Federation of Indian Mineral Industries (Fimi).



After the mining ban in Karanataka and curb on exports in Goa, east Indian ports have assumed top positions in terms of iron ore exports. A major part of 18 million tonne annual exports is being shipped from east coast ports such as Paradip, Haldia and Vizag, with Odisha contributing about 4.5 million tonnes.



During April-June, imports of coking coal zoomed by 27 per cent to 1.5 milion tonne at Paradip, indicating rise in industrial activities despite a costlier dollar. The import of coking coal, a key fuel required to convert iron ore into hot metal, have been showing an upward trend since April, data from the port revealed.



In April, it was 499,461 tonnes, which went up to 511,764 tonnes in May and 554,138 tonnes in June. Even as coking coal rates have shed more than 5.7 per cent during the first quarter, a weaker rupee against the dollar neutralised the effect.



"We could not benefit from price fall in global coking coal rates as a costlier dollar penalised us. The rising imports were also part of previous long term contracts of some steel plants," said an official of Neelachal Ispat Nigam Ltd (NINL), which imports coking coal worth Rs 900 crore every year.

Source:-www.business-standard.com

Leather Exports Marginally Up In June: Cle

5-Jul-2013

The country’s leather exports grew marginally by 1 per cent year-on-year to USD 444 million in June this year due to weak demand in the western markets like the US and Europe.



In June last year, these exports stood at USD 439 million, according to the data provided by the Council for Leather Exports (CLE).



“The demand for leather exports has been sluggish in traditional markets including US and Europe,” CLE Executive Director R Ramesh Kumar said.



To reduce dependence on traditional markets and to create niche for the products in new ones, Mr. Kumar said, exporters are exploring emerging markets including Latin America, Russia and Japan.



The major markets for leather and its products are US, UK, Germany, Italy, France and Spain.



Among the items which witnessed growth in June 2013, leather garment saw maximum jump of 8.3 per cent, followed by saddlery and harness at 5.71 per cent, footwear components at 5.5 per cent and leather goods at 2 per cent.



During April-June this year, leather exports grew by 3.02 per cent to USD 1.20 billion as against the same period previous year.



The Council expects the country’s leather exports to touch the USD 14 billion level by 2017 and may double jobs in the sector to 5 million.



At present, the industry employs 2.5 million people, 70 per cent of whom are women, mainly in leather hubs like Agra, Kanpur, Kolkata, Chennai, Mumbai, Bangalore and Puducherry.



During the last fiscal, leather exports grew over 4 per cent year-on-year to USD 5 billion in 2012-13.

Source:-www.thehindu.com

Oil Meal Exports Up 12% In June

5-Jul-2013

Oilmeals exports increased by 12% in June to 3.48 lakh tonnes on account of increase in shipments of castor meal, according to trade data released today.



Oilmeals export stood at 3,11,089 tonnes in June 2012, Solvent Extractors' Association said in a statement.



However, exports declined by 21% during the first quarter of the current fiscal to 8,50,951 tonnes as compared to 10,74,034 tonnes in the same period of previous year.



According to the data, the exports of soyameal has fallen drastically to 4,09,507 tonnes during April-June quarter of 2013-14 fiscal from 6,37,407 tonnes in the year-ago period.



Similarly ricebran oil fell by 65% in the first quarter of current fiscal from year-ago period, while rapeseed meal declined marginally during the period.



However, export of castor seed meal rose by 40% to 1,89,785 tonnes in the period under review.



Major importers of oilmeals from India are South Korea, Iran, Thailand, Vietnam, Indonesia and Japan.



Oilmeals exports to Japan fell maximum by 87% to 10,987 tonnes during first quarter of the current fiscal compared to 85,050 tonnes in the corresponding period of previous year.



Shipments to Vietnam, Indonesia, Thailand and Iran also fell during the review period.



Vietnam imported 31,421 tonnes of oilmeals during April- June quarter of this fiscal from India as compared to 1,19,593 tonnes in the year-ago period.

Source:-www.business-standard.com

Demand To Reconsider Meat Export Policy

5-Jul-2013

NAGPUR: In view of large-scale slaughtering of cattle, the United Nations affiliated International Organisation for Animal Protection (OIPA) in India has demanded from the government to reconsider meat export policy.



In a petition on meat export policy of India, Naresh Kadyan of OIPA said beef exports have gone up 44% in four years. According to data compiled by the animal husbandry departments of all states, meat from registered slaughterhouses increased from 5.57 lakh tonnes in 2008 to 8.05 lakh tonnes in 2011. Export earnings from bovine (beef & cattle) meat is expected to touch Rs 18,000 crore in 2012-2013.



Quoting US department of agriculture, Kadyan said India became the largest beef exporter edging out Australia and New Zealand in May 2012. Uttar Pradesh is the top buffalo meat-producing state with 3 lakh tonnes in 2011. At least 70% of the buffalo meat is exported.



Further, the way animals are transported and slaughtered is cruel and far from international standards. "There is rampant abuse of animals in transport and slaughter for meat whether for domestic consumption or export," said Sukanya Kadyan, honorary animal welfare officer to Animal Welfare Board of India (AWBI).



Slaughtering the animal is against the soul of Article 51 A (g) of Indian Constitution, hence meat export for personnel gain and profit is illegal, she added.



Bovine meat from India is popular in South-East Asian and Gulf countries. The increase is attributed to the Centre's 'Pink Revolution' to promote meat production and export with modernized abattoirs and storage facilities.



The food processing ministry had announced Rs 15 crore subsidies to modernize abattoirs. There are 38 integrated abattoirs in the country which slaughter for export. Agricultural and Processed Food Exports Development Authority (Apeda) inspects them and renews licenses.



However, the government's stringent rules on quality of meat have failed to extend to prevention of cruelty to animals. "Animals are overloaded in vehicles and transported without food and water," said Kadyan.



"None of the meat exporters pay attention to the condition of animals," he said. Most police officers let vehicles through without fining them for overloading as per the Prevention of Cruelty to Animals Act.

Source:-timesofindia.indiatimes.com

Curbs Work, June Gold Imports Fall

India's near-obsessive demand for gold may finally have petered out under the onslaught of measures by the finance ministry and the Reserve Bank of India to curb imports of the yellow metal to tackle the current account deficit.



Gold imports in June are estimated to have dropped by over 80 per cent to a mere 28 tonnes against 162 tonnes in May, according to market estimates.



"Import of gold and silver is understood to have declined substantially to $2-2.5 billion in June, much below the $8.39 billion imported in May, and over $7 billion in April," a senior government official said. Official data on gold imports in June will, however, be released only later this month along with trade data.



Other data pouring in also suggest that gold imports which averaged about 150 tonnes each during the first two months of the fiscal may have begun to decline. Import figures of the Ahmedabad air cargo complex for June reveal that gold imports to Gujarat fell to just 3.73 tonnes against 37.61 tonnes in May.



"Market data suggests that gold imports have fallen sharply in June in reaction to steps taken to discourage gold imports. Also, typically June and July are slack months when demand for gold is subdued due to the lull in the marriage season," said Prithviraj Kothari, managing director, Ridhi Sidhi Bullion and former president of the Bombay Bullion Association.



This will prove to be a major reprieve for the CAD that touched a seven-month high of 4.8 per cent in March this year at $ 20.1 billion. Gold is the second highest contributor to the import bill after oil. The CAD touched 4.8 per cent in 2012-13 with gold imports touching 830 tonnes.



The finance ministry had raised the import duty on gold to 8 per cent with the RBI too putting in supportive measures to block imports by all nominated agencies or star trading houses. Finance Minister P Chidambaram has also asked banks to discourage customers from buying gold.

Analysts believe that gold prices in international markets are likely to soften and dampen demand after data on employment points to a revival in the US economy released Friday.

Source:-www.indianexpress.com

6% Dip In Export, Import Activities At Chpt

The Chennai Port Trust (ChPT) has reported a six per cent decline in its export and import activities for the first quarter of 2013-14 owing to economic slowdown and depreciation of Indian rupee against the U.S. dollar.



For the period under review (April to June), ChPT recorded total business of 12.83 million tonne cargo against 13.65 million tonne registered for the corresponding period last year. Import volume dropped by five per cent and export volume dropped by 7.65 per cent .



Out of the 13 items in the import list, eight have shown negative growth with containers leading the list followed by petroleum, oil, lubricant and scrap items.



Crude, dolomite and gypsum registered upward march.



On the export front, once again containers were in the forefront of negative growth followed by barytes and sugar, whereas wheat and cars posted positive growth.



The performance of ChPT has taken a beating in the last two years after the Madras High Court imposed a ban on handling dusty cargo.



After a gap of two years, the Food Corporation of India, Tamil Nadu region, exported wheat from Chennai and Karaikal ports to Malaysia, Bangladesh and other African countries.

Source:-www.thehindu.com

CBDT serious about HC’s mandamuses; directs robust system for receipt and disposal of sec. 154 appli

IT : Section 154 of The Income-Tax Act, 1961 -Rectification of Mistakes - Mistakes Apparent from Records - Procedure to be Followed in Receipt and Disposal of Rectification Applications Filed Under Section 154

CBDT instructs higher officials to comply with HC’s mandamuses on sec. 143(1) intimation

IT : Section 143 of the Income-Tax Act, 1961 - Assessment - General - Identification of Unserved Intimation under Section 143(1) for Cases Processed Prior to 31-3-2010

ICAI can't be deemed to be pursuing commercial activities by taking coaching classes or campus place

IT : Exemption under section 10(23C)(iv) can't be denied to ICAI on account of fees received for providing coaching classes and campus placement of its students

Reported ALP is acceptable if difference between figures of margin of assessee and TPO is within tol

IT/ILT: Where difference between net profit margin declared by assessee and arithmetical mean of ALP determined by TPO was less than 5 per cent, no addition in ALP worked out by assessee was called for

Liberalized formalities for resident entities in Indian Forex Market

FEMA/ILT : Risk Management and Inter-Bank Dealings- Liberalization of Documentation Requirements for The Resident Entities in The Indian Forex Market

Guidelines for calculation of foreign investment in Indian Cos, transfer of ownership and control of

FEMA/ILT : Foreign Investment in India - Guidelines for Calculation of Total Foreign Investment in Indian Companies, Transfer of Ownership and Control of Indian Companies and Downstream Investment by Indian Companies

Tribunal can’t transfer appeals to a competent forum if it isn’t maintainable before it

ST : Rebate-related orders passed by Commissioner (Appeals) are not appealable before Tribunal; Tribunal should reject appeals relating to them/return papers back to assessee for presentation before competent forum (Central Government), Tribunal has no power to direct transfer of such matters before Central Government

No reassessment to reduce sec. 80-IA relief if full disclosures were made by assessee during origina

IT : Where all material facts were disclosed and assessee's claim was accepted after proper examination, irregularities noticed in subsequent assessment year would not be sufficient for re-opening of assessment

Assessee must be heard before lifting of bar of limitation on reassessment provided under sec. 149

IT : To re-open an assessment beyond prescribed time-limit, section 153 requires that income which is excluded from total income of one person must be held to be income of another person and such other person should be given an opportunity of being heard

RBI lays down procedures for paying interest by NBFCs on freezed or seized public deposits

NBFC : Payment Of Interest On Overdue Public Deposits

RBI/2013-14/118 A.P. (DIR Series) Circular No. 02 dated 04-07-2013

RBI/2013-14/118

A.P. (DIR Series) Circular No. 02

July 04, 2013

To,

All Authorised Dealer Category – I Banks

Madam / Sir,

Risk Management and Inter-Bank Dealings- Liberalization of documentation requirements for the resident entities in the Indian Forex Market

Attention of Authorized Dealers Category – I (AD Category – I) banks is invited to A.P. (DIR Series) Circular No. 32 dated December 28, 2010 issued on Comprehensive Guidelines on Over the Counter (OTC) Foreign Exchange Derivatives and Overseas Hedging of Commodity Price and Freight Risks. In the annex to this circular, under paragraph (II) sub-paragraph (b) (ii) it has been stated that in the case of contracted exposure, AD Category I banks must obtain “Quarterly certificates from the statutory auditors of the users, that the contracts outstanding at any point of time with all AD Category I banks during the quarter did not exceed the value of the underlying exposures”

2. In view of the recommendations of the Technical Committee on Services / Facilities for the Exporters (Chairman: Shri G. Padmanabhan, Executive Director, Reserve Bank of India) regarding rationalization of the documentation process, it has now been decided that AD banks, while offering hedging products under the contracted exposure route to their customers may obtain an annual certificate from the statutory auditors to the effect that the contracts outstanding with all AD category I banks at any time during the year did not exceed the value of the underlying exposures at that time. It is reiterated, however, that that the AD bank, while entering into any derivative transaction with a client, shall have to obtain an undertaking from the client to the effect that the contracted exposure against which the derivative transaction is being booked has not been used for any derivative transaction with any other AD bank.


3. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers concerned.


4. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions /approvals, if any, required under any other law.

Yours faithfully,

(C D Srinivasan)

Chief General Manager

ITAT confirms disallowance for TDS default even when income was computed on estimation basis

IT : Disallowance can be made under section 40(a)(ia) independently, even if business income is estimated after rejecting book results

Stay can’t be granted merely by establishing a prima facie case

ST: Stay cannot be granted merely by establishing a prima facie case; stay can be granted only where it appears that demand imposed has no legs to stand or it would be undesirable to ask assessee to pay full or part of demand

Karnataka Government nods to implement policy on multi-brand retail trading

FDI/FEMA/ILT : Consolidated FDI Policy Circular 1 of 2013 - Review of The Policy on Foreign Direct Investment in The Multi Brand Retail Trading Sector- Amendment of Paragraph 6.2.16.5(2)

RBI/2013-14/117 A. P. (DIR Series) Circular No. 01 dated 04-07-2013

RBI/2013-14/117

A.P. (DIR Series) Circular No. 01

July 04, 2013

To

All Category – I Authorised Dealer banks

Madam/Sir,

Foreign Investment in India – Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified by the Reserve Bank vide Notification No. FEMA 20/2000-RB dated 3^rd May 2000 , as amended from time to time.

2. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India had, vide Press Notes 2 and 3 (2009 series) dated February 13, 2009, issued guidelines for calculation of total foreign investment, i.e., direct and indirect foreign investment in Indian companies and for establishment of Indian companies/ transfer of ownership or control of Indian companies from resident Indian citizens to non-resident entities, in sectors with caps. Further, DIPP, vide their Press Note 2 (2012 series) dated July 31, 2012, had made certain other changes. The Consolidated FDI Policy Circular 1 of 2013 dated April 5, 2013, available at www.dipp.gov.in comprehensively incorporates the contents of the Press Notes.

3. (i) The regulatory framework comprises:

(A) definitions;

(B) concept of direct and indirect foreign investment;

(C) method of calculation of total foreign investment;

(D) guidelines for establishment of Indian companies and transfer of ownership or control of Indian companies, from resident Indian citizens and Indian companies to non-resident entities, in sectors with caps;

(E) downstream investment by an Indian company which is not owned and/or controlled by resident entity/ies.

These guidelines, summarised in the Annex, shall come into force from the date(s) mentioned in the Notification No. FEMA. 278/2013-RB dated June 07, 2013 and notified vide G.S.R.393(E) dated June 21, 2013.

(ii) Any foreign investment already made in accordance with the guidelines in existence prior to February 13, 2009 would not require any modification to conform to these guidelines. All other investments, after the said date, would come under the ambit of these new guidelines.

(iii) As regards investments made between February 13, 2009 and the date of publication of the FEMA notification, Indian companies shall be required to intimate, within 90 days from the date of this circular, through an AD Category I bank to the concerned Regional Office of the Reserve Bank, in whose jurisdiction the Registered Office of the company is located, detailed position where the issue/transfer of shares or downstream investment is not in conformity with the regulatory framework now being prescribed. Reserve Bank shall consider treating such cases as compliant with these guidelines within a period of six months or such extended time as considered appropriate by RBI in consultation with Government of India.

4. AD Category - I banks may bring the contents of the circular to the notice of their customers/constituents concerned.

5. As stated above, Reserve Bank has since amended the Regulations and notified vide Notification No. FEMA.278/2013-RB dated June 07, 2013 and notified vide G.S.R.393(E) dated June 21, 2013.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Rudra Narayan Kar)

Chief General Manager-In-Charge

---

Annex

Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies

A. Definitions

1 (i) Ownership and Control

a) Company ‘Owned by resident Indian citizens’ shall be an Indian company if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens; Company shall be considered ‘Controlled' by resident Indian citizens if the residents Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company;

b) Company ‘Owned by non-residents’ means an Indian company where more than 50% of the capital in it is beneficially owned by non-residents; Company ‘Controlled by ‘non-residents ’ means an Indian company where non-residents have the power to appoint a majority of its directors in that company;

(ii) Direct foreign investment’ shall mean investment received by an Indian Company from non-resident entities regardless of whether the said investments have been made under Schedule 1, 2, 3, 6 and 8 of the Notification No. FEMA. 20/2000-RB dated May 3, 2000 , as amended from time to time;

(iii) ‘Downstream investment’ means indirect foreign investment, by one Indian company into another Indian company, by way of subscription or acquisition;

(iv) 'Holding Company’ would have the same meaning as defined in Companies Act 1956;

(v) ‘Indian Company' means a company incorporated in India under the Companies Act, 1956;

(vi) ‘Indirect foreign investment’ means entire investment in other Indian companies by an Indian company (IC), having foreign investment in it provided IC is not ‘owned and controlled’ by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens or where the IC is owned or controlled by non-residents. However, as an exception, the indirect foreign investment in the 100% owned subsidiaries of operating-cum-investing/investing companies will be limited to the foreign investment in the operating-cum-investing/ investing company.

(vii) ‘Investing Company’ means an Indian Company holding only investments in other Indian company/ies directly or indirectly, other than for trading of such holdings/securities;

(viii) ‘Non-Resident Entity’ means ‘person resident outside India’ (as defined at Section 2(w) of FEMA, 1999);

(ix) ‘Resident Entity’ means ‘person resident in India’ (as defined at Section 2(v) of FEMA, 1999), excluding an individual;

(x) ‘Resident Indian citizen’ shall be interpreted in line with the definition of person resident in India as per FEMA, 1999, read in conjunction with the Indian Citizenship Act, 1955.

(xi) ‘Total foreign investment’ in an Indian Company would be the sum total of direct and indirect foreign investment.

B. Direct and indirect foreign investment in Indian companies – meaning

2. Investment in Indian companies can be made by both non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise both resident and non-resident investments. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can also be a cascading investment, i.e. through multi-layered structure.

C. Guidelines for calculation of total foreign investment, i.e., direct and indirect foreign investment in an Indian company.

3.(i) Counting of Direct foreign investment: All investments made directly by non-resident entities into the Indian company would be counted towards 'Direct foreign investment'.

(ii) Counting of indirect foreign Investment: The entire indirect foreign investment by the investing company into the other Indian Company would be considered for the purpose of computation of indirect foreign investment. However, as an exception, the indirect foreign investment in the 100% owned subsidiaries of operating-cum-investing/investing companies will be limited to the foreign investment in the operating-cum-investing/ investing company. This exception has been made since the downstream investment of a 100% owned subsidiary of the holding company is akin to investment made by the holding company and the downstream investment should be a mirror image of the holding company. This exception, however, is strictly for those cases where the entire capital of the downstream subsidiary is owned by the holding company.

(iii) The methodology for calculation of total foreign investment would apply at every stage of investment in Indian companies and thus in each and every Indian company.

(iv) Additional requirements

(A) The full details about the foreign investment including ownership details etc. in Indian company /ies and information about the control of the company /ies would be furnished by the Company /ies to the Government of India at the time of seeking approval.

(B) In any sector/activity, where Government approval is required for foreign investment and in cases where there are any inter-se agreements between/amongst share-holders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider such inter-se agreements for determining ownership and control when considering the case for approval of foreign investment.

(C) In all sectors attracting sectoral caps, the balance equity i.e. beyond the sectoral foreign investment cap, would specifically be beneficially owned by/held with/in the hands of resident Indian citizens and Indian companies, owned and controlled by resident Indian citizens.

(D) In the I& B and Defence sectors where the sectoral cap is less than 49%, the company would need to be “owned and controlled” by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens.

(a) For this purpose, the equity held by the largest Indian shareholder would have to be at least 51% of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956. The term “largest Indian shareholder", used in this clause, will include any or a combination of the following:

(aa) In the case of an individual shareholder,

(aai) The individual shareholder,

(aaii) A relative of the shareholder within the meaning of Section 6 of the Companies Act, 1956.

(aaiii) A company/ group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest.

(ab) In the case of an Indian company,

(abi) The Indian company

(abii) A group of Indian companies under the same management and ownership control.

(b) For the purpose of this Clause, “Indian company” shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956/ HUF, either singly or in combination holding at least 51% of the shares.

(c) Provided that, in case of a combination of all or any of the entities mentioned in sub-clauses (aa) and (ab) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company.

(E) If a declaration is made by persons as per section 187C of the Indian Companies Act about a beneficial interest being held by a non resident entity, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment.

4. The above mentioned policy and methodology would be applicable for determining the total foreign investment in all sectors, except in sectors where it is specified in a statute or a rule there under. The above methodology of determining direct and indirect foreign investment therefore does not apply to the insurance sector which will continue to be governed by the relevant Regulation.

D. Guidelines for establishment of Indian companies/ transfer of ownership or control of Indian companies, from resident Indian citizens and Indian companies to non-resident entities, in sectors with caps.

5. In sectors/activities with caps, including, inter-alia, defence production, air transport services, ground handling services, asset reconstruction companies, private sector banking, broadcasting, commodity exchanges, credit information companies, insurance, print media, telecommunications and satellites, Government approval/FIPB approval would be required in all cases where:

(i) An Indian company is being established with foreign investment and is not owned by a resident entity or

(ii) An Indian company is being established with foreign investment and is not controlled by a resident entity or

(iii) The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition, etc. or

(iv) The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition, etc. or

(v) It is clarified that these guidelines will not apply to sectors/activities where there are no foreign investment caps, that is, where100% foreign investment is permitted under the automatic route.

(vi) For the purpose of computation of indirect foreign investment, foreign investment shall include all types of direct foreign investments in the Indian company making downstream investment. For this purpose portfolio investments either by FIIs, NRIs or QFIs holding as on March 31 of the previous year would be taken into account. e.g. for monitoring foreign investment for the financial year 2011-12, investment as on March 31, 2011 would be taken into account. Besides, investments in the form of Foreign Direct Investment, Foreign Venture Capital investment, investments in ADRs/GDRs, Foreign Currency Convertible Bonds (FCCB) will also be taken in account. Thus, regardless of the investments having been made under Schedule 1, 2, 3, 6 and 8 of the Notification No. FEMA. 20/2000-RB dated May 3, 2000 , as amended from time to time will be taken into account.

E. Downstream investment by an Indian company which is not owned and/or controlled by resident entity/ies.

6. (i) Downstream investment by an Indian company, which is not owned and/ or controlled by resident entity/ies, into another Indian company, would be in accordance/compliance with the relevant sectoral conditions on entry route, conditionalities and caps, with regard to the sectors in which the latter Indian company is operating.

Note: with effect from 31^st day of July 2012 Downstream investment/s made by a banking company, as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949, incorporated in India, which is owned and/or controlled by non-residents/ a non-resident entity/non-resident entities, under Corporate Debt Restructuring (CDR), or other loan restructuring mechanism, or in trading books, or for acquisition of shares due to defaults in loans, shall not count towards indirect foreign investment. However, their 'strategic downstream investment' shall count towards indirect foreign investment. For this purpose, 'strategic downstream investments' would mean investment by these banking companies in their subsidiaries, joint ventures and associates.

(ii) Downstream investments by Indian companies will be subject to the following conditions:

(a) Such a company has to notify Secretariat for Industrial Assistance, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.com within 30 days of such investment, even if capital instruments have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme);

(b) downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of its Board of Directors as also a Shareholders’ Agreement, if any;

(c) issue/transfer/pricing/valuation of shares shall continue to be in accordance with extant SEBI/RBI guidelines;

(d) For the purpose of downstream investment, the Indian companies making the downstream investments would have to bring in requisite funds from abroad and not use funds borrowed in the domestic market. This would, however, not preclude downstream operating companies, from raising debt in the domestic market. Downstream investments through internal accruals are permissible by an Indian company engaged only in activity of investing in the capital of another Indian company/ies, subject to the provisions above and as also elaborated below:

• Foreign investment into an Indian company, engaged only in the activity of investing in the capital of other Indian company /ies, will require prior Government/FIPB approval, regardless of the amount or extent of foreign investment. Foreign investment into Non-Banking Finance Companies (NBFCs), carrying on activities approved for FDI, will be subject to the conditions specified in Annex-B of Schedule 1 of FEMA Notification No. 20 dated May 3, 2000 as amended from time to time;


• Those companies, which are Core Investment Companies (CICs), will have to additionally follow RBI‟s Regulatory Framework for CICs.


• For infusion of foreign investment into an Indian company which does not have any operations and also does not have any downstream investments, Government/FIPB approval would be required, regardless of the amount or extent of foreign investment. Further, as and when such a company commences business(s) or makes downstream investment, it will have to comply with the relevant sectoral conditions on entry route, conditionalities and caps.

Note: Foreign investment into other Indian companies would be in accordance/ compliance with the relevant sectoral conditions on entry route, conditionalities and caps.

(e) The FDI recipient Indian company at the first level which is responsible for ensuring compliance with the FDI conditionalities like no indirect foreign investment in prohibited sector, entry route, sectoral cap/conditionalities, etc. for the downstream investment made by in the subsidiary companies at second level and so on and so forth would obtain a certificate to this effect from its statutory auditor on an annual basis as regards status of compliance with the instructions on downstream investment and compliance with FEMA provisions. The fact that statutory auditor has certified that the company is in compliance with the regulations as regards downstream investment and other FEMA prescriptions will be duly mentioned in the Director’s report in the Annual Report of the Indian company. In case statutory auditor has given a qualified report, the same shall be immediately brought to the notice of the Reserve Bank of India, Foreign Exchange Department (FED), Regional Office (RO) of the Reserve Bank in whose jurisdiction the Registered Office of the company is located and shall also obtain acknowledgement from the RO of having intimated it of the qualified auditor report. RO shall file the action taken report to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Central Office, Central Office Building, Shahid Bhagat Singh Road, Mumbai 400001.

RBI/2013-14/118 A.P. (DIR Series) Circular No. 02 dated 04-07-2013

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RBI/2013-14/119 A.P. (DIR Series) Circular No. 03 dated 04-07-2013

RBI/2013-14/119

A.P. (DIR Series) Circular No. 03

July 04, 2013

To

All Category - I Authorised Dealer Banks

Madam / Sir,

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No.112 dated June 20, 2013 , wherein the Rupee value of the special currency basket was indicated as Rs.75.705663 effective from June 05, 2013.

2. AD Category-I banks are advised that a further revision has taken place on June 10, 2013 and accordingly, the Rupee value of the special currency basket has been fixed at Rs.78.374512 with effect from June 13, 2013.


3. AD Category-I banks may bring the contents of this circular to the notice of their constituents concerned.


4. The Directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(C. D. Srinivasan)

Chief General Manager

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