RBI/2013-14/137 A.P. (DIR Series) Circular No. 12 dated 15-07-2013

Reserve bank of India

A.P. (DIR Series) Circular No. 12

July 15, 2013

To

All Category - I Authorised Dealer Banks

Madam / Sir,

External Commercial Borrowings (ECB) Policy Repayment of Rupee loans and/or fresh Rupee capital expenditure – USD 10 billion Scheme

Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to A.P. (DIR Series) Circular No. 134 dated June 25, 2012 , A.P. (DIR Series) Circular No. 26 dated September 11, 2012 and A.P.(DIR) Circular No.78 dated January 21, 2013 on the captioned scheme.

2. As per the extant guidelines, Indian companies in the manufacturing, infrastructure sector (as defined under the extant ECB policy) and hotel sector, which are consistent foreign exchange earners, are allowed to avail of ECB for repayment of outstanding Rupee loan(s) availed of from the domestic banking system and / or for fresh Rupee capital expenditure under the Approval Route.


3. On a review, it has been decided to extend the benefit of USD 10 billion scheme to Indian companies in the aforesaid sectors which have established Joint Venture (JV) / Wholly Owned Subsidiary (WOS) / have acquired assets overseas in compliance with extant regulations under FEMA, 1999 subject to the conditions as under:
   
   
   
   1. ECB can be availed of for repayment of all term loans having average residual maturity of 5 years and above / credit facilities availed of by Indian companies from domestic banks for overseas investment in JV/WOS, in addition to ‘Capital Expenditure’;
   
   
   2. ECB can be availed of within the scheme based on the higher of 75 per cent of the average foreign exchange earnings realized during the past three financial years and / or 75 per cent of the assessment made about the average of foreign exchange earnings potential for the next three financial years of the Indian companies from the JV / WOS / assets abroad as certified by Statutory Auditors / Chartered Accountant / Certified Public Accountant / Category I Merchant Banker registered with SEBI / an Investment Banker outside India registered with the appropriate regulatory authority in the host country;
   
   
   3. ECB availed of under the scheme will have to be repaid out of forex earnings from the overseas JV / WOS / assets.
   
   
   
   


4. The past earnings in the form of dividend/repatriated profit/ other forex inflows like royalty, technical know-how, fee, etc from overseas JV/WOS/assets will be reckoned as foreign exchange earnings for the purpose of US$ 10 billion scheme.


5. All other aspects of the scheme shall remain unchanged. The amended ECB policy will come into force with immediate effect and is subject to review based on the experience gained in this regard.


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


7. 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

RBI/2013-14/137

Concealment penalty confirmed as assessee disclosed income after search and sec. 153A notice

IT: Where there was a search upon assessee and she subsequent to search, in pursuance of notice issued under section 153A, filed returns for relevant assessment years and amount shown in returns filed as 'other income' was not a part of her regular accounts, such amount would squarely come within purview of concealed income liable to penalty under section 271(1)(c)

No unexplained investment if fact finding authority didn’t spot any discrepancy in slump purchase sh

IT : Where in case of business transfer, assets shown in books had been accepted by appellate authorities, addition could not be made on account of unexplained investment

Find out if you have to pay wealth tax

Very few taxpayers have heard of it and fewer pay it. However, this is no reason for you to ignore wealth tax. This tax is payable if the market value of certain assets exceeds Rs 30 lakh. The tax is 1% of the combined value of such assets.

Wealth tax targets unproductive, non-essential and idle assets. In the crosshairs are two of the biggest obsessions of Indian investors: property and gold. If you have bought a second house and not given it on rent, the value of the property will be included while computing your wealth tax liability. Of course, the outstanding loan taken to buy the property will be deducted from this. Gold and silver, whether bought, gifted or inherited, will also be included in the calculation. Even the cash you keep in your locker at home is liable to wealth tax.

However, productive and financial assets, such as commercial property, bonds, fixed deposits, stocks, Ulips, gold funds, mutual funds, your savings account bank balance and gold exchange traded funds (ETFs) are exempt from wealth tax.

This tax is not taken very seriously by taxpayers because the Central Board of Direct Taxes is busy with other, more important, ones, such as corporate tax, income tax, service tax and excise.

Wealth tax accounts for less than 0.25% of total direct taxes and is minuscule in the total revenue collection. Last year, it contributed Rs 866 crore to the total revenue collection of Rs 1,038,036 crore.

The taxman's disinterest is surprising because, although small, this is a regular stream of tax collection. Unlike income tax, which is levied on earnings just once, wealth tax is payable every year for the same assets. One would have thought that wealth tax collections would see an exponential rise as India's rich became richer. Instead, these collections have witnessed a slow growth, rising 10% from Rs 787 crore in 2011-12 to Rs 866 crore in 2012-13.

This doesn't mean the taxman will not go after you for not paying it. Direct tax collections have been below the target set in the budget and the CBDT is under pressure to improve compliance. There is a stiff penalty for evading wealth tax. Incorrect declaration of wealth can invite a fine of up to 500% of the evaded tax. One can also be jailed for up to seven years if the tax due is over Rs 1 lakh. Remember, wealth tax evasion is easy to detect because the assets are tangible and undervaluation is not difficult to prove.

Are you liable to pay wealth tax? Fill the table provided here to know if you are rich enough to fall in its ambit. If the total figure exceeds Rs 30 lakh, you have to pay 1% wealth tax on that amount. This can be paid online or deposited at any designated bank branch. The wealth tax return is to be filed using form BA and the last date for doing so is 31 July. If the assessee is liable to audit, the last date is 30 September.

Wealth tax fact file

Wealth tax is 1% of the value of assets exceeding Rs 30 lakh.

Valuation date for a financial year is 31 March.

If you haven't paid yet, add 1% interest on the tax for every month of delay.

Penalty for evasion can be up to 500% of the tax sought to be evaded.

Assessee can be jailed for up to 7 years if the tax evaded exceeds Rs 1 lakh.

Penalty for delay in filing wealth tax return can be Rs 100-200 per day.

Invocation of extended period of limitation is a mixed question of law and fact; out of writ jurisdi

ST: Issue whether show-cause notice was beyond limitation is a point on which writ Court cannot, generally, render a finding since it involves a mixed question of law and fact, which must be determined in adjudicating proceedings

Winding up petition to be dismissed if dispute among parties on restructuring was not yet settled

CL: Where parties had entered into restructuring, winding up order could not be passed in favour of petitioner unless dispute with regard to restructuring was adjudicated and settled

POCM isn’t mandatory; real estate developers can follow either POCM or Completed Contract Method

IT : It is not mandatory for all real estate developers to workout their profits by following percentage of completion method as prescribed by Institute of Chartered Accountants of India under AS-7

India Mulls New Measures To Curb Gold Imports

15-Jul-2013

KOLKATA (miningweekly.com) - The Indian government is mulling a number of new measures to consolidate the falling trend in gold imports over the past month, including stiffer licensing conditions for importers.

According to senior government officials, the Finance Ministry has initiated a consultation process with various government departments and the Reserve Bank of India (RBI) to look into the possibility of laying down fresh, stiffer conditions for the granting of licences to importers.

One of the options currently favoured by the Finance Ministry is to restrict the granting of gold import licences to gold that is for actual use, such as for jewellery making, and not for investment or trading purposes, the official said.

Many of the RBI's senior staff were also against the granting of gold import licences to some commercial banks, as imported gold was used by commercial banks for retail sales to investors. The RBI officials have recommended that only government-owned trading companies should be eligible for imports and not actual refiners, which would choke demand for gold for retail investment purposes.

“New measures to curb the import of gold were felt necessary in order to consolidate the success achieved with earlier measures,” a senior bank official involved in the consultations said.

“Rising oil and gold imports were two main constituents of the country’s worsening current account deficit (CAD). Since oil imports cannot be checked in view of energy needs, the government feels it necessary to be most aggressive in curbing gold demand,” the official added.

Gold imports during June 2013 fell to 28 tonnes, down from 162 tonnes in May 2013, in response to the central bank restrictions last month. The RBI imposed that all gold imports intended for domestic consumption and made through either nominated agencies or directly, would have to be through 100% cash margins.

The central bank prohibited all forms of credit from any suppliers or bullion banks, for domestic use of gold which would impact gold imports on a nonconsignment basis, such as gold on lease or loans.

However, government circles were not sure whether the fall in imports in June could be entirely attributed to the measures taken, as the June to September period usually witnessed muted demand, owing to widespread monsoon rains and the agricultural sowing season in the rural regions.

A demand upsurge could not be ruled out during the September to December period, driven by the festival and marriage seasons and higher liquidity in rural areas during the harvesting season. As a result, the new measures to check imports would have to be sustained, the official said.

In March this year, India’s CAD hit a seven-month high of 4.8% at $20.1-billion, with gold imports of 830 tonnes during 2012/13 being the second-highest contributor after the oil import bill.

New measures to check gold imports assumed further urgency, with the RBI, last week, once again, raising concern over the large CAD and new pressures emerging on it from the weakening exchange rate of the rupee. Since May 2013, the Indian rupee hasdlost 15% against the greenback, resulting in the further ballooning of the gold import bill unless imports are checked.

Source:-www.miningweekly.com

Payment to NR for downloading the licensed software is payment of ‘royalty’ subject to withholding t

IT/ILT: Payment made by assessee to non-residents for downloading their licenced software amounted to payment of royalty and, thus, assessee was liable to deduct tax at source while making said payment

CBDT fixes deadline for adjustment of refunds against past arrears where Sec. 245 procedure wasn't f

IT : Section 245 of The Income-Tax Act, 1961 - Refunds - Set off of Refunds Against Tax Remaining Payable - Past Adjustment of Refunds Against Arrears where Procedure under Section 245 was not Followed

For promotional activities, RBI asks banks to engage only those telemarketers who are registered wit

BANKING : Unsolicited Commercial Communications - National Customer Preference Register (NCPR)

IRDA permits participation of insurers in Securities Lending and Borrowing Scheme

INSURANCE : Lending Securities through Securities Lending and Borrowing (SLB) Framework

Comparables with higher turnover, functional diversity and RPT’s to be excluded for TP analysis

IT/ILT : Where in course of transfer pricing proceedings, TPO made certain adjustment to ALP determined by assessee, in view of fact that some of comparables selected by TPO were inappropriate on account of high turnover, functional difference and excessive related party transactions, impugned adjustment was to be set aside and matter was to be remanded back for disposal afresh

Matter to be remanded back in case of dispute on facts

ST : In case there is a dispute as to factual background, matter must be remanded back to adjudicating authority in order to get an order on merits of issue

Additions on matters which are outside the scope of material found during search to be deleted

IT: Where addition was made de hors material found as a result of search, it should be deleted being not falling within parameters of Chapter XIVB

Sec. 40A(2) disallowances to be invoked only for an amount which exceeds its fair market value

IT: Disallowance of payment to related parties under section 40A(2) can be made only for amount proved to be in excess of fair market value

AO rejected books as complete records weren’t furnished; return can be revised even after sec. 143(1

IT: Processing of return does not amount to an assessment and revised return within statutory time is valid

Coupon discounts are deductible in computing taxable value of services

ST/ECJ : Discounts and rebates are not to be included in taxable amount, as they constitute a reduction of price at which services are offered to customer

No addition for unexplained credit if assets were created against liability which was fulfilled late

IT : No addition can be made under section 68 or 69 for creditors for expenses when assets have been created against said liability which was acknowledged of having been fulfilled at a later date

Transfer of possession of an immovable property is ‘transfer’ as contemplated under section 2(47)

IT : Transfer of possession of property amounts to transfer of asset under section 2(47)

Assessee gets immunity from penalty if conditions of Explanation 5 to sec. 271 are fulfilled

IT: Immunity from penalty be granted where all relevant requirements of Explanation 5 to section 271 are satisfied

Interest can’t be demanded twice over the same demand

ST : If interest for same delayed payment had already been confirmed by adjudicating authority and deposited by assessee, second time confirmation of same interest is liable to be set aside subject to confirmation by Department

Ex parte order by CLB is valid if conduct of appellant isn’t fair and it didn’t co-operate in procee

CL: Where appellant's conduct before CLB was not fair and they did not co-operate in conduct of proceedings, ex parte order passed by CLB in petition under sections 397 and 398 was justified

Subsidiary co. isn’t a ‘related person’ for sec. 40A(2); payment made by holding co. isn’t subject t

IT : Subsidiary of assessee-company is not a related person within meaning of sub-clause (ii) of clause (b) of section 40A(2) and, thus, payment made by assessee to its subsidiary cannot be disallowed by invoking provisions of said section