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Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

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Panel slams govt for slashing funds for crucial projects to fund ‘Make in India’ scheme : 04-05-2016


A Parliamentary panel has pulled up the government for curtailing the expenses for crucial projects while funding initiatives like ‘Make in India’.

“The committee is constrained to observe that allocations to many crucial projects were slashed in the year 2015-16 in view of funding ambitious projects like Make in India initiative,” Parliamentary Standing Committee on Commerce said in its report.

However, the Department of Industrial Policy and Promotion (DIPP) could only utilise 40 per cent of the budget estimate for the initiative till December 2015.

The committee “strongly feels that the department should have been pro-active over timely utilisation of the funds available in the most effective manner”, it said.

It also said that an expenditure to the tune of 40 per cent under the scheme for investment promotion for Make in India till December 2015 reflects lack of imagination and preparation of blueprint to promote India as an investment destination.

Further, the report said that Make in India campaign has devoted Rs 284 crore for expenditure under the minor head advertisement and publicity.

However, the work being done under this allocation is primarily business promotion through investor outreach programmes, it said.

The committee, it said, is of the view that these investor outreach programmes being conducted with the help of Indian Embassies/Missions or with the help of the professional agencies to target investor is separate from advertising and publicity.

“The committee feels that an allocation of Rs 200 crore and more under the head ‘Business Promotion/Investor Outreach Programme’ makes more sense than maintaining it under the head ‘Advertisement and Publicity’,” it added.

On ease of doing business, the report said against a target to integrate 6 central government services, only 3 new central government services could be integrated in 2015-16.

Similarly, against a target to roll-out state government services in the remaining pilot states of Delhi, Haryana, Maharashtra, Tamil Nadu, Odisha, Punjab, Rajasthan, Uttar Pradesh and West Bengal some headway could be made only in state services of Andhra Pradesh (14 services), Delhi (2 services) and Odisha (14 services).

It expressed concern over the slow progress in pilot project level where 50 services have been targeted for implementation.

“With this pace of implementation, the committee wonders about the time that may go in making the project fully functional with integration of more than 200 services on the e-Biz portal,” it added.

The committee strongly recommends that the pace of the project should be quickened to improve the business and regulatory environment of the country.

On intellectual property rights, the committee notes that though nearly a year has passed since the IPR think tank submitted its final report on the draft National IPR Policy, the department is still non-committal about the timeline for its notification.

“With the government is emphasising on innovation and start-ups, the committee strongly feels the policy should not hang fire,” it said.

An early notification of a national IPR Policy would send right signal to the investors at large about the existence of a stable IPR regime and thus encourage investments within the country as well as from abroad, it added.

It also expressed deep concerns over the huge pendency of patent and trademark registration applications.

As on March 9, as many as 2,37,029 number of patent and 5,44,171 trademark registration applications are pending with the government.

It recommended the department that intensive training and sensitisation programme may be firmed up to improve the quality of examination of applications.

“The unclogging of the pendency and quality examination will add to the robustness of our IPR system,” it added.

Further, the committee expressed disappointment over the pace of implementation of the national manufacturing policy (NMP).

“Proposals for eight of the NIMZs notified have not been sent by the state governments…However, half the decade has passed by and the deliverables under the Policy seem nowhere in sight,” it said.

The committee feels the execution of the scheme at “snail’s pace” for implementing of NMP reflects “serious lack of effort” on the part of the department towards operationalisation of the policy.

The committee further feels that “much is still to be done” to effectively realise the measures like Make in India and Start Up India on ground.

“The committee strongly feels the department should speed up the necessary reforms to bring in improvement in the business environment of the country,” it added.

Source : The Hindu

India’s private sector activity growth slows in April : 04-05-2016


Private sector activity in the country eased in April amid slower expansion in new business inflows in services sector while order books at manufacturers also broadly stagnated, adding to the clamour for further interest rate cuts by Reserve Bank.

The Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors, dropped from 54.3 in March (37-month high) to 52.8 in April, pointing to a softer expansion in private sector activity across the country.

“Having accelerated to the fastest in over three years during March, activity growth across India’s private sector took a step back in April,” said Pollyanna De Lima, economist at Markit, which compiles the survey.

Lima added that manufacturers appear to be still struggling to generate strong upward momentum in a subdued demand environment while solid increase in activity and new work were sustained among service providers.

Meanwhile, the Nikkei Services Business Activity index was down from 54.3 in March to 53.7 in April.

The survey noted that April data highlighted a general lack of pressure on the capacity of Indian service providers as unfinished business declined.

On the employment front, services employment was unchanged in April. Broadly stagnant employment trends have now been registered through the past nine months. Meanwhile, manufacturing payroll numbers were also unchanged.

The higher prices paid for fuel, average input costs faced by Indian services companies increased in April and the rate of cost inflation reached a 13-month high.

Part of additional cost burdens was passed on to clients, as both manufacturers and service providers raised their selling prices again in April, Nikkei said.

Meanwhile, services firms’ sentiment weakened slightly in April, with the degree of optimism being modest by historical standards.

“Nevertheless, a softer expansion in activity, combined with unchanged employment and a dip in business expectations among the latter suggest that companies are not fully convinced about the recovery and that March’s stronger numbers might have been a one-off,” Lima added.

In the first bi-monthly monetary policy review for 2016-17 announced on April 5,RBI governor Raghuram Rajan reduced the key interest rate by 0.25 per cent and introduced a host of measures to smoothen liquidity supply.

While this was the first rate cut after a gap of six months, RBI has lowered its rate by 1.5 per cent cumulatively since January last year. However, the industry still wants further rate cuts from the central bank.

Source : The Financial Express

Submit proof of travel for claiming tax deduction on LTA: CBDT : 04-05-2016


The Income Tax Department has brought out a new form making it mandatory for salaried taxpayers to furnish proof of travel for claiming tax deduction on LTA or LTC.

The Central Board of Direct Taxes (CBDT) has brought in a Form 12BB form requiring employees to furnish to their employers with evidence in relation to house rent allowance (HRA) if it exceeds Rs 1 lakh in an assessment year.

The details to be furnished include name, address and PAN of landlord where the aggregate rent paid exceeds Rs 1 lakh, according to a CBDT order.

For claiming deduction of interest on home loan, the name, address and PAN of lender will have to be furnished.

Similarly, for claiming tax deduction on leave travel allowance/concession (LTA/LTC), the new rule makes it mandatory for employee to furnish to his employer evidence for travel expenditure.

Also evidence of investment or expenditure will have to be provided for claiming tax deduction under Chapter VI-A.

Chapter VI-A pertains to allowable deductions under Section 80C, Section 80CCC, Section 80CCD as well as other sections like 80E, 80G and 80TTA.

These are part of new Rule 26C and Form 12BB that require employees to furnish to the employer, evidence/particulars in relation to house rent allowance (HRA), leave travel concession (LTA), deduction of interest under the head ‘income from house property’ and deduction under Chapter VI-A.

CBDT, in the same order, also extended the time limit for depositing tax deducted at source (TDS) on transfer of immovable property from 7 days to 30 days.

Also, the due date for filing quarterly TDS returns in Form 24Q, 26Q and 27Q was extended by 15 days.

The amended rules will be applicable from June 1, 2016, CBDT said.

Under section 80C, a deduction of Rs 1.5 lakh can be claimed from total taxable income if invested/spent in PPF, employee’s share of PF contribution, life insurance premium payment, children’s tuition fee, principal repayment of home loan, Sukanya Samridhi Account among others.

Section 80CC provides for deduction on amount deposited in annuity plan of LIC or any other insurer for pension while Section 80CCD is for the same purpose on contribution to Pension (Section 80CCD).

Deduction under Section 80GG is available on House Rent paid where HRA is not received and the taxpayer or his spouse or minor child does not own residential accommodation at the place of employment.

Deduction available on the count is the minimum of rent paid minus 10 per cent of total income or Rs 5000 per month or 25 per cent of total income.

Section 80E provides for deduction of interest on loan taken for pursuing higher education.

An additional deductions on home loan interest of Rs 50,000, over and above Rs 2 lakh allowed under Section 24, is allowed for first time home owners under Section 80EE is available if the value of the property purchased is less than Rs 50 lakhs and home loan is less than Rs 35 lakhs.

Section 80D provides for deduction for premium paid of up to Rs 25,000 for medical insurance.

Source : PTI

Government mulls allowing sick, loss-making PSUs run PF trusts : 03-05-2016


The government is considering a proposal to relax the Employees’ Provident Fund Scheme to enable loss-making and sick PSUs to continue with their own PF Trusts, Parliament was informed today.

“Yes… The proposal is being examined in consultation with the Central Board of Trustees, Employees’ Provident Fund,” Labour Minister Bandaru Dattatreya replied to a question in Parliament on whether the government is looking to relax/amend the Employees’ Provident Fund Scheme to enable loss-making and sick PSUs to continue to run own PF Trusts.

The minister, however, said the government has not identified any such sick or loss-making PSUs.

On any similar relaxation for private firms, he said, “No… Provident Fund Trusts of exempted establishments are custodian of the hard-earned money of the workers which needs to be protected.”

Dattatreya further said, “Private companies do not have the sovereign guarantee behind them as enjoyed by the public sector undertakings of both the central government and the state governments. Therefore, the proposed amendment is not intended to extend this advantage to private companies, so as to protect the interest of the workers.”

Source : The Financial Express

NSE to conduct mock trading session on May 7 : 03-05-2016


Leading bourse the National Stock Exchange (NSE) will conduct a mock trading session on May 7, ahead of coming out with new versions of software for live trading.

The move is a part of the exchange’s efforts to provide the members with a robust and efficient system for trading.

The exchange would be conducting a mock-trading session to test the system performance in the capital market, currency derivatives and Futures & Options (F&O) segments on May 7, 2016, NSE said  n separate circulars.

Besides, mock trading session will also be conducted in the SLBM and debt segment on the same day.

In currency derivatives segment, the mock trading would be between 1000 hrs and 1530 hrs.

In the case of capital market and futures and options segment, mock trading would start at 1015 hrs and would continue till 1530 hrs.

The exchange will also be releasing a new versions of its software through which members can login to live trading system from May 9 onwards.

Source : PTI

Salary disclosure requirement non-negotiable – Sebi to MFs : 03-05-2016


Refusing to budge on its directive for mandatory disclosure of top-management salary by mutual funds, Sebi today told them it is a ‘non-negotiable’ requirement and investors must be provided date without any ‘extra filters’.

Some fund houses, including HDFC, Reliance and ICICI Prudential Mutual Funds, today began publishing the salary details for unit holders on their respective websites as per the directive, but many others did not do so and wanted the regulator to relax the rules or at least extend the deadline.

They made a representation through industry body AMFI (Association of Mutual Funds in India) this evening before the Securities and Exchange Board of India (Sebi) Chairman U K Sinha, but were told in clear terms that “the requirement is non-negotiable” and must be complied with immediate effect.

Regulatory sources said, Sebi is of the view that fund houses good profitability records have been forthcoming with the disclosure requirements, but others have been resisting the move.

Sebi had earlier this year asked fund houses to disclose salary details within one month of a financial year, starting with 2015-16. Accordingly, all fund houses needed to publish the details by today, after taking into account the weekend holidays for the last two days.

Sources said the  fund houses have also been told to disclose the salary details without any ‘extra filters’.

While all fund houses ask for investor details like folio number and registered mobile number and email IDs for giving access to these details, a few of them have put in additional requirements such as name of the executive whose salary the investor wants to know.

In case of DSP Blackrock MF, the investors were being told that the details would be shared a few days after receipt  of the request.

“Your request for information has been registered our Human Resource team will reply to you shortly,” as per DSP Blackrock MF website.

In today’s meeting, Sebi told the fund houses that investors in any scheme are entitled for the information and “unhelpful and unnecessary filters in providing the information should not be applied”.

Asking AMFI to ensure uniform compliance by all fund houses, Sebi has told them that ESOPs or incentives pertaining

to other years may be indicated separately as an explanation.

After the meeting with Sebi Chairman, AMFI also told all its members that the fund houses that no “impediments” should be created in providing the information and the remuneration for the purpose of disclosure would include all forms of income as defined under the IT Act.

It asked all fund houses to take suitable action for disclosure by tonight itself.

As per the disclosure, top fund house HDFC MF’s chief Milind Barve got a total annual remuneration of Rs 26.21 crore for the latest fiscal 2015-16. This included previously granted ESOPs that were exercised during the last fiscal.

HDFC MF said that remuneration include “exceptional amounts computed on exercise of options granted under ESOP plans over the period 2008-2013″.

The other executives of HDFC MF took home salaries ranging from Rs 13 crore to Rs 1 crore. As many as 38  persons received remuneration in excess of Rs 1 crore.

Sundeep Sikka, the top honcho of Reliance MF, received a pay package of Rs 13.74 crore — which included Rs 3.5 crore as salary and over Rs 10 crore as a one-time payout.

ICICI MF paid Rs 5.4 crore to its Managing Director Nimesh Shah. A total of 15 executives received remuneration of more than Rs 1 crore.

Source : The Economic Times

Notification No. 14 (R)/2016-RB 2-5-2016


RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
CENTRAL OFFICE
MUMBAI

FEMA NOTIFICATION NO

14(R)/2016-RB, Dated: May 2, 2016

Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016

G.S.R.No.480(E): In exercise of the powers conferred by Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in supersession of Notification No.FEMA.14/ 2000-RB dated May 3, 2000, as amended from time to time, dealing with Manner of Receipt and Payment, Notification No. FEMA.16/2000-RB dated May 3, 2000, as amended from time to time, dealing with Receipt from and Payment to a person Resident outside India and Notification No. FEMA.17/2000-RB dated May 3, 2000, as amended from time to time, dealing with Transactions in Indian Rupees with Residents of Nepal and Bhutan, the Reserve Bank of India makes the following Regulations in respect of Manner of Receipt and Payment, namely

1. Short title and commencement:

(i) These Regulations may be called the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016.

(ii) They shall come into effect from the date of their publication in the Official Gazette.

2. Definitions :

In these Regulations, unless the context requires otherwise, -

(i) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);

(ii) ‘Authorised Dealer’ means a person authorized as an authorized dealer under subsection (1) of Section 10 of the Act

(iii) ‘Authorised Bank’ means a bank, other than an authorized dealer, authorized by the Reserve Bank to accept deposits from persons resident outside India;

(iv) ‘FCNR/NRE account’ means an FCNR or NRE account opened and maintained in accordance with the Foreign Exchange Management (Deposits) Regulations, 2016;

The words and expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act.

3. Manner of Receipt in Foreign Exchange : -

(1) Every receipt in foreign exchange by an authorized dealer, whether by way of remittance from a foreign country or by way of reimbursement from his branch or correspondent outside India against payment for export from India, or against any other payment, shall be as mentioned below:

(A) Members of the Asian Clearing Union

(i) Bangladesh, Myanmar, Pakistan, Sri Lanka & Republic of Maldives -

a) Receipt for export of eligible goods and services by debit to the Asian Clearing Union Dollar account and/or Asian Clearing Union Euro account in India of a bank of the member country in which the other party to the transaction is resident or by credit to the Asian Clearing Union Dollar account and/or Asian Clearing Union Euro Account of the authorized dealer maintained with the correspondent bank in that member country;

b) Receipt may also be made in any freely convertible currency in all other cases.

c) In respect of exports from India to Myanmar, payment may be received in any freely convertible currency or through ACU mechanism from Myanmar.

(ii) Nepal and Bhutan -

(a) Receipt may be in Rupees

(b) Receipts for export of goods to Nepal may be made in free foreign exchange, provided the importer resident in Nepal has been permitted by the Nepal Rashtra Bank to make payment in free foreign exchange. However such receipts shall not be routed through the ACU mechanism.

(iii) Islamic Republic of Iran

(a) Receipt for export of eligible goods and services, in any freely convertible currency and/or in accordance with the directions issued by the Reserve Bank to the authorized dealers from time to time.

(b) Receipt in any freely convertible currency and/or in accordance with the directions issued by the Reserve Bank to the authorized dealers from time to time in all other cases.

(B) All countries other than those mentioned in A above

(i) Receipt in rupees from the account of a bank situated in any country other than a member country of the Asian Clearing Union.

(ii) Receipt in any freely convertible currency.

(2) (a) In respect of an export from India, receipt shall be made in a currency appropriate to the place of final destination as mentioned in the declaration form irrespective of the country of residence of the buyer.

(b) Any other mode of receipt of export proceeds for an export from India in accordance with the directions issued by the Reserve Bank of India to authorized dealers from time to time.

(3) Authorised dealers have been permitted to allow receipts for export of goods/ software to be received from a Third party (a party other than the buyer) as per the guidelines issued by the Reserve Bank.

4. Manner of Receipts in certain cases : -

(1) Notwithstanding anything contained in Regulation 3, receipt for export may also be made by the exporter as under, namely:

(i) in the form of a bank draft, cheque, pay order, foreign currency notes/travelers cheque from a buyer during his visit to India, provided the foreign currency so received is surrendered within the specified period to the authorized dealer of which the exporter is a customer ;

(ii) by debit to FCNR/NRE account maintained by the buyer with an Authorised Dealer or an Authorised Bank in India;

(iii) in rupees from the credit card servicing bank in India against the charge slip signed by the buyer where such payment is made by the buyer through a credit card;

(iv) from a rupee account held in the name of an Exchange House with an authorized dealer if the amount does not exceed fifteen lakh rupees per export transaction or an amount prescribed by RBI, in consultation with Government of India in this regard;

(v) In accordance with the directions issued by the Reserve Bank to Authorised Dealers, where the export is covered by the arrangement between the Central Government and the Government of a foreign country or by the credit arrangement entered into by the Exim Bank with a financial institution in a foreign state;

(vi) in the form of precious metals i.e. gold/silver/platinum equivalent to value of jewellery exported by Gem & Jewellery units in Special Economic Zones and Export Oriented Units on the condition that the sale contract provides for the same and the value is declared in the relevant EDF.

(2) In addition to 4 (1) (i) & (iii) above, any person resident in India may also receive any payment for other than exports by means of postal order issued by a post office outside India or by a postal money order issued by such post office.

5. Manner of payment in foreign exchange : -

(1) A payment in foreign exchange by an Authorised Dealer, whether by way of remittance from India or by way of reimbursement to his branch or correspondent outside India against payment for import into India, or against any other payment, shall be as mentioned below :

(A) Members of the Asian Clearing Union

(i) Bangladesh, Myanmar, Pakistan, Sri Lanka & Republic of Maldives -

(a) Payment for import of eligible goods and services by credit to Asian Clearing Dollar account and/or Asian Clearing Union Euro account in India of a bank of the member country in which the other party to the transaction is resident or by debit to the Asian Clearing Union Dollar account and/or Asian Clearing Union Euro account of the authorized dealer maintained with the correspondent bank in that member country;

(b) Payment may also be made in any freely convertible currency in all other cases.

(c) In respect of imports to India from Myanmar, payment may be made in any freely convertible currency or through ACU mechanism from Myanmar.

(ii) Nepal and Bhutan -

Payment may be in Rupees

(iii) Islamic Republic of Iran

(a) Payment for import of eligible goods and services, in any freely convertible currency and/or in accordance with the directions issued by the Reserve Bank to the authorized dealers from time to time.

(b) Payment in any freely convertible currency and/or in accordance with the directions issued by the Reserve Bank to the authorized dealers from time to time in all other cases.

(B) All countries other than those mentioned in A above.

(i) Payment in rupees from the account of a bank situated in any country other than a member country of the Asian Clearing Union

(ii) Payment in any freely convertible currency.

(2) In respect of import into India -

(a) Where the goods are shipped from a member country of the Asian Clearing Union (other than Nepal and Bhutan) but the supplier is resident of a country other than a member country of the Asian Clearing Union, payment may be made in a manner specified for countries in Group B of Regulation 5;

(b) In all other cases, payment shall be made in a currency appropriate to the country of shipment of goods;

(c) Any other mode of payment in accordance with the directions issued by the Reserve Bank of India to authorized dealers from time to time.

(3) Authorised Dealers have been permitted to allow payments for import of goods/software to be made to a Third Party (a party other than the supplier) as per the guidelines issued by the Reserve Bank.

6. Manner of Payment in certain cases :-

(1) Notwithstanding anything contained in Regulation 5, a person resident in India may make payment for import of goods.

In foreign exchange through an international card held by him/in rupees from international credit card/debit card through the credit/debit card servicing bank in India against the charge slip signed by the importer/as prescribed by Reserve Bank from time to time.

Provided that -

(a) the transaction for which the payment is so made is in conformity with the provisions of the Act, rules and regulations made thereunder; and

(b) the import is also in conformity with the provision of the Foreign Trade Policy in force.

(2) Any person resident in India may also make payment as under :

(i) in rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India;

(ii) by means of a crossed cheque or a draft as consideration for purchase of gold or silver in any form imported by such person in accordance with the terms and conditions imposed under any order issued by the Central Government under the Foreign Trade (Development and Regulations) Act, 1992 or under any other law, rules or regulations for the time being in force;

(iii) a company or resident in India may make payment in rupees to its non whole time director who is resident outside India and is on a visit to India for the company’s work and is entitled to payment of sitting fees or commission or remuneration, and travel expenses to and from and within India, in accordance with the provisions contained in the company’s Memorandum of Association or Articles of Association or in any agreement entered into by it or in any resolution passed by the company in general meeting or by its Board of Directors, provided the requirement of any law, rules, regulations, directions applicable for making such payments are duly complied with.

(A K Pandey)
Chief General Manager

50 – 11-2-2016


Compilation of R-Returns: Reporting under FETERS – Circular – Dated 11-2-2016 – FEMA

RBI/2015-16/317
A.P. (DIR Series) Circular No. 50

February 11, 2016

To,

All Authorised Dealers in Foreign Exchange

Madam / Sir,

Compilation of R-Returns: Reporting under FETERS

Attention of Authorised Dealer (Category I) banks is invited to A.P.(DIR Series) Circular No.84 dated February 29, 2012 giving guidelines for compilation of R-Returns for reporting under the Foreign Exchange Transactions Electronic Reporting System (FETERS), A.P.(DIR Series) Circular No.101 dated February 4, 2014 on Export of Goods and Services: Export Data Processing and Monitoring System (EDPMS) for facilitating banks to submit export-related information through EDPMS platform and A.P.(DIR Series) Circular No.15 dated July 28, 2014 which discontinued separate reporting of information in ENC (Export Bills Negotiated / sent for collection) for acknowledgement of receipt of export documents and Sch.3 to 6 (realization of export proceeds) under FETERS.

Web based data submission by AD banks

2. In order to enhance the security-level in data submission and further improve data quality, the following modifications shall be effected in the guidelines for submission of data under the FETERS from 1st fortnight of April 2016 (i.e., reporting of those transactions which take place from April 1, 2016):

  1. The present email-based submission will be replaced by web-portal based data submission. However, there are no changes in periodicity, file-layout, delimiter, consistency checks, and inter-relationship among BOP6.TXT and QE.TXT files as well as their naming convention.
  2. Nodal offices of banks have to access the web-portal https://bop.rbi.org.in with the RBI-provided login-name and password, to submit data (Contact and other details are given in the above-mentioned Circular dated February 29, 2012).
  3. Banks may download RBI-provided validator template from this portal on their computer and perform off-line check of their FETERS data-file for error, if any, before its submission on the portal. Both Java-based and Excel-based validators are provided: Use of Java-based validator is advised for larger files. This portal also gives relevant master files (e.g., country, currency, AD code, purpose code masters).
  4. On uploading validated files, banks will get acknowledgment. They can view the data-files submitted by them during the previous two fortnights, with download facility. They can also revise the purpose codes for transaction submitted earlier, if required, which will be authenticated by RBI in the system.
  5. Banks may report (a) addition of AD code for their bank and (b) update AD category, which will be incorporated in the AD-master database by RBI after due authentication.
  6. With the discontinuation of ENC.TXT and SCH 3 to 6.TXT files in FETERS, the purpose codes P0105 [Export bills (in respect of goods) sent on collection – other than Nepal and Bhutan] and P0107 [Realisation of NPD export bills (full value of bill to be reported) – other than Nepal and Bhutan] have become defunct and are, therefore, discontinued.

Revision in Form A2

3. Further, in-order to streamline the reporting of the transactions relating to the Liberalised Remittance Scheme (LRS) in FETERS and On-line Return Filing System (ORFS), it has been decided that transactions relating to LRS may be reported under respective FETERS purpose codes (e.g. travel, medical treatment, purchase of immovable property, studies abroad, maintenance of close relatives; etc.) instead of reporting collectively under the purpose code S0023. This would help AD banks in classification of transactions for similar activity under single purpose code. Therefore, the purpose code S0023 would be revised as follows to enable reporting of ‘Opening of foreign currency account abroad with a bank’:

Purpose Code

Description as per the A.P.(DIR Series) Circular No.84 dated February 29, 2012and in Form A2

Revised Description

S0023 Remittances made under Liberalised Remittance Scheme (LRS) for Individuals Opening of foreign currency account abroad with a bank

i. For facilitating the existing monthly reporting of LRS transactions under ORFS, AD banks may use the following purpose codes only:

Sr. No.

Items under LRS

Corresponding FETERS purpose codes, if transaction is identified under LRS

1

Opening of foreign currency account abroad with a bank under LRS S0023

2

Purchase of immovable property S0005

3

Investment in equity, debt, JV, WoS, ESOPs, IDRs S0001, S0002, S0003, S0004, S0021, S0022

4

Gift S1302

5

Donations S1303

6

Travel (business, pilgrimage, medical treatment, education, employment, personal) S0301, S0303, S0304, S0305 & S0306

7

Maintenance of close relatives S1301

8

Medical Treatment S1108

9

Studies abroad S1107

10

Emigration S1307

11

‘Others’ such as loan to NRI close relatives and health insurance S0011, S0603

ii. AD banks should also ensure that the data pertaining to LRS transactions reported by them in FETERS tallies with that reported by them in ORFS.

iii. The Form A2 is also being revised (as per Annex) by introducing a check-box for LRS transactions in the relevant block as follows:

Sr. No.

Whether under LRS (Yes/No)

Purpose Code

Description

       
   

As per the Annex

iv. Further, the ‘Application cum Declaration for purchase of foreign exchange under the Liberalised Remittance Scheme of USD 250,000’ has been clubbed with Form A2 in order to reduce multiplicity of forms to be filled in by the customers.

Online submission of Form A2 by the remitter

4. With a view to facilitating miscellaneous remittances and reducing paperwork associated with payment transactions, it has been decided that Authorised Dealer banks, offering internet banking facilities to their customers may allow online submission of Form A2. Besides, they may also enable uploading/submission of documents, if and as may be necessary, to establish the permissibility of the remittances under the extant rules or regulations framed under the Foreign Exchange Management Act, 1999 (FEMA). Remittances that do not require any documentation (e.g. certain transactions under the LRS) may be put through on the basis of the Form A2 alone. To start with, remittances on the basis of online submission alone will be available for transactions with an upper limit of USD 25,000 (or its equivalent) for individuals and USD 100,000 (or its equivalent) for corporates. It may be noted that the remittance will be subject to satisfaction of the Authorised Dealer banks as laid down in Section 10 (5) of FEMA. Accordingly, Authorised Dealer banks are advised to frame appropriate guidelines for customer interface personnel to ensure ease of transactions for the customers within the ambit of the statutory/regulatory provisions. It may be further noted that reporting of transactions in FETERS shall continue, as hitherto, by the Authorised Dealer banks.

5. Appropriate changes in technology and/or operating procedure may be carried out by Authorised dealer banks immediately and compliance in this regard furnished to RBI.

6. The changes introduced through this circular may be implemented with immediate effect and in any case not later than April 1, 2016.

7. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents.

8. 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,

(B.P.Kanungo)
Principal Chief General Manager

49 – 4-2-2016


Post Office (Postal Orders/Money Orders), 2015 – Circular – Dated 4-2-2016 – FEMA

RBI/2015-16/314
A.P. (DIR Series) Circular No.49/2015-16 [(1)/18(R)]

February 04, 2016

To

All Category – I Authorised Dealers and Authorised Banks

Madam/ Sir

Post Office (Postal Orders/Money Orders), 2015

Attention of Authorised Dealers (ADs) is invited to Notification No. FEMA. 18(R)/2015-RB dated December 29, 2015 notified vide G.S.R. No.1009 (E) dated December 29, 2015, which supersedes the Notification No. FEMA.18/2000-RB.

2. Synopsis of the new regulations is given as under:

General permission has been given to any person to buy foreign exchange from any post office in India in the form of postal order or money order.

3. The new regulations have been notified vide Notification No. FEMA. 18(R)/2015-RB dated December 29, 2015, c.f. G.S.R. No.1009 (E) dated December 29, 2015 and shall come into force with effect from December 29, 2015.

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

5. 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,

B P Kanungo)
Principal Chief General Manager

 

No. LETTER F.NO.225/12/2016/ITA.II Dated: 2-5-2016


Reduce litigation and maintain consistency assessments of income arising from transfer of unlisted shares no formal market exists for trading. – Circular – Dated 2-5-2016 – Income Tax

LETTER F.NO.225/12/2016/ITA.II

DATED 2-5-2016

Regarding characterisation of income from transactions in listed shares and securities, Central Board of Direct Taxes (‘CBDT’) had issued a clarificatory Circular no. 6/2016 dated 29th February, 2016, wherein with a view to reduce litigation and maintain consistency in approach in assessments, it was instructed that income arising from transfer of listed shares and securities, which are held for more than twelve months would be taxed under the head ‘Capital Gain’ unless the taxpayer itself treats these as its stock- in-trade and transfer thereof as its business income. It was further stated that in other situations, the issue was to be decided on the basis of existing Circulars issued by the CBDT on this subject.

2. Similarly, for determining the tax-treatment of income arising from transfer of unlisted shares for which no formal market exists for trading, a need has been felt to have a consistent view in assessments pertaining to such income. It has, accordingly, been decided that the income arising from transfer of unlisted shares would be considered under the head ‘Capital Gain’, irrespective of period of holding, with a view to avoid disputes/litigation and to maintain uniform approach.

3. It is, however, clarified that the above would not be necessarily applied in the situations where:

i.    the genuineness of transactions in unlisted shares itself is questionable; or

ii.   the transfer of unlisted shares is related to an issue pertaining to lifting of corporate veil; or

iii.  the transfer of unlisted shares is made along with the control and management of underlying business and the Assessing Officer would take appropriate view in such situations.

4. The above may be brought to the notice of all for necessary compliance.

Notification No. : S.O. 1647(E) Dated: 2-5-2016


SECTION 125 OF THE COMPANIES ACT, 2013 – CERTAIN CHARGES TO BE VOID AGAINST LIQUIDATOR OR CREDITORS UNLESS REGISTERED – CONSTITUTION OF INVESTOR EDUCATION AND PROTECTION FUND

NOTIFICATION NO. SO 1647(E) [F.NO.5/27/2013-IEPF (PART-1)]DATED 2-5-2016

In exercise of the powers conferred by sub-sections (5) and (6) of section 125 of the Companies Act, 2013 read with rules 5 and 7 of the Investor Education and Protection Fund Authority (Appointment of Chairperson and Members, holding meetings and provision for offices and officers) Rules, 2016 (herein after referred to as the said rules), the Central Government hereby constitutes the Investor Education and Protection Fund Authority consisting of following persons, namely:—

Sl. No. Particulars Designation
1. Sh. Tapan Ray,

Secretary,

Ministry of Corporate Affairs,

Shastri Bhawan,

New Delhi-110001.

Chairperson- ex-officio

(Till he continues the post of Secretary in Ministry of Corporate Affairs)

2. Sh. Gyan Bhushan,

Executive Director,

Securities and Exchange Board of India,

SEBI Bhavan, Plot No. C4-A, “G” Block,

Bandra Kurla Complex, Bandra (E),

Mumbai-400051.

Member- ex-officio

(Till he continues the post of Executive Director in the Securities and Exchange Board of India)

3. Sh. U. S. Paliwal,

Executive Director,

Reserve Bank of India,

17th Floor, Central Office Building,

Shahid Bhagat Singh Marg, Fort,

Mumbai-400001.

Member- ex-officio

(Till he continues the post of Executive Director in Reserve Bank of India)

4. Sh. Amarjit Chopra,

11, Empire Estate, Sultanpur,

Mehrauli-Gurgaon Road,

New Delhi-110030.

Member
5. Sh. N. L. Meena,

Flat No. 109, Tower-2,

Ganga Block, Sector D-6,

Vasant Kunj,

New Delhi-110070

Member
6. Smt. Anita Kapur,

B-9/12, Ground Floor,

Vasant Vihar,

New Delhi-110057.

Member

2. The term of office of members at serial no. 4 to 6 shall be governed by rule 8 of the said rules. Non-official members of the Authority shall be entitled for reimbursement of actual expenditure incurred for attending the meetings as per the provisions of sub-rule (10) of rule 11 of said rules.

Just 1% of population pay taxes, reveals government data : 02-05-2016


Taxpayers account for just about one per cent of India’s population, but tax outgo was over Rs 1 crore for as many as 5,430 individuals, as per the latest data disclosed by the government for assessment year 2012-13.

As part of a transparency drive, the government has made public direct tax data for last 15 years. Data for individuals has been published only for 2012-13 assessment year, which shows taxes for income in financial year ended March 31, 2012.

A total of 2.87 crore individuals filed income tax returns for that year, but 1.62 crore of them did not pay any tax — leaving the number of taxpayers at just about 1.25 crore which was close to one per cent of the country’s total population of about 123 crore at that time.

The tax outgo was less than Rs 1.5 lakh for a vast majority of nearly 89 per cent taxpayers (over 1.11 crore). Their average tax payable was just about Rs 21,000, while the collective amount stood at over Rs 23,000 crore.

The three individuals in the top-bracket of Rs 100-500 crore paid a total tax of Rs 437 crore — resulting in an average tax outgo of Rs 145.80 crore.

As many as 5,430 individuals paid income tax of over Rs 1 crore. Out of this, the tax range was Rs 1-5 crore for more than 5,000 individuals, resulting in a total outgo of Rs 8,907 crore.

As per the overall data, total income tax collections rose nine-fold to Rs 2.86 lakh crore in 2015-16, from Rs 31,764 crore in 2000-01.

The data further said that the bulk of individuals who filed returns for the assessment year 2012-13 earned an annual salary between Rs 5.5 lakh and Rs 9.5 lakh.

Over 20.23 lakh taxpayers earned Rs 5.5-9.5 lakh, while their cumulative salary earnings stood at Rs 1.40 lakh crore in the financial year 2011-12.

Further 19.18 lakh individuals earned salary of Rs 2.5-3.5 lakh that year.

 Source : The Hindu

 

I-T exemptions for private varsities : 02-05-2016


Private universities can claim income-tax exemption only on two conditions: Firstly, an educational institution or a university must be solely for the purpose of education and without any profit motive. Secondly, it must be wholly or substantially financed by the government. Both conditions must be satisfied under Section 10(23C) (iiiab) of theIncome Tax Act before exemption can be granted, the Supreme Court ruled in the case, Visvesvaraya Technological University vs CIT. The university’s claim under this provision was rejected by the revenue authorities, leading to the appeal. The court noted that during a short period of a decade (1999-2010) the university had generated a huge surplus of about Rs 500 crore collecting fees under different heads. “The expenditure incurred represented only a minuscule part of the fees collected,” the judgment observed. None of the benefits granted to the university has gone to the students. It expanded from 64 engineering colleges to 194. The government grants were meagre (about one per cent), the Supreme Court said, concluding that “the university is neither directly nor even substantially financed by the government so as to be entitled to exemption from payment of income tax.”

Time limit in cheque bounce cases

If a complaint of cheque bounce is filed after the period of limitation, the magistrate must give reasons for condoning the delay; he cannot order prosecution as a matter of course, the Supreme Court stated while quashing the judgment of the Kerala High Court in the case, K S Joseph vs Philips Carbon Black Ltd. The company filed criminal cases under the Negotiable Instruments Actagainst the drawer of the cheques, which were not paid on his order to stop payment. The company issued notice on February 3 and the complaint was filed on May 24, after 62 days’ delay. However, the magistrate issued summons to the drawer in a “short and summary” order. The high court dismissed his appeal. But on his second appeal, the Supreme Court directed the magistrate to pass a reasoned order for condoning delay after hearing the accused person.

Corruption law covers co-op managers

The Supreme Court has ruled that a manager in a multi-state cooperative society is a ‘public servant’ and could be tried for offences under the Prevention of Corruption Act. The trial court and the Madhya Pradesh court had held that the National Cooperative Consumers Federation of India Ltd, Jabalpur, was not a state entity and, therefore, its assistant manager was not a ‘public servant’ coming within the scope of the anti-corruption law. Therefore, the CBI appealed to the Supreme Court. Setting aside the high court ruling in the case, CBI vs PG Jain, the Supreme Court noted that under the Multi-State Cooperative Societies Act, the Jabalpur society and the likes are listed in the schedule to the Act as “national cooperative society” by Parliament. Moreover, the Centre owned 85 per cent of the shares in the society and, therefore, aided and controlled by it. The Supreme Court allowed the CBI to prosecute the manager.

Probe into HPCL allotment of LPG

Hindustan Petroleum Corporation Ltd (HPCL) has come in for severe criticism from the Supreme Court in the allotment of LPG distributorship for Hajipur in Bihar. In this case, Abhishek Kumar was the first in the merit list of candidates. But the company officers visited him and, thereafter, his allotment was cancelled without giving any reason; it was given to another person. Kumar moved the Patna High Court. The single-judge bench found the turnaround of HPCL strange and observed that it was “large-hearted” in some cases and “blind” in others. It was “either under pressure or obligation to accommodate another candidate”. The high court ordered investigation by the vigilance department into such aspects. The division bench, however, upheld the HPCL decision. On appeal, the Supreme Court restored the order of the single judge. It indicted the public sector undertaking for “inventing new grounds for justifying the cancellation of the candidature of Abhishek from the merit list, which is totally impermissible in law.”

Test to levy excise on packing material

Excise on packing materials like gunny bags, crates and cartons is a contentious issue arising in the tribunals. The test is in the terms of the agreement between the manufacturer, who send the goods, and the buyer. The Supreme Court dismissed the appeal of Tata Chemicals in a case in which the company claimed that there was an arrangement between it and the buyers of soda ash produced by it to the effect that sales made in gunny bags supplied by it could be returned and upon such return the value of the bags would be returned to the buyers. The judgment said that the law is that “if an arrangement exists between the seller and the buyer of excisable goods for return of the packing materials by the buyer to the seller, carrying an obligation on the seller to return the value of the packing materials to the buyer on such return, such value is not liable to be included in the assessable value of the finished product. Furthermore, if such an arrangement exists, the question of actual return is not relevant.” Such an arrangement could not be proved here.

I-T notices to Alcatel group quashed

The Delhi HC has quashed notices issued by the income tax (I-T) authorities to Alcatel-Lucent group companies seeking to reopen assessments for periods from 2004 to 2009. Alcatel, a French company, supplies telecom equipment to Indian firms. It said that it has no permanent establishment here as the sales and payments were made outside India and no income arose that was taxable in this country. The HC, while allowing 16 writ petitions, stated that the taxmen “merely repeated the words of the Income Tax Act that there has been a failure to disclose material particulars. This is certainly not sufficient as far as the legal requirement is concerned.”

Jewellers’ association wins import case

The Delhi High Court has quashed a circular issued by the Central Board of Excise and Customs in October 2015 on a petition by the Bullion and Jewellers Association. The association argued that the gold jewellery imported by its members from Indonesia was denied the benefit of preferential custom duty. The circular also directed custom officers to disregard certificates issued by the Indonesian authorities and the confirmation given by the government-owned companies in Indonesia. The court asked the authorities to release the imported gold according to law, ignoring the circular.

Source : PTI

Real Estate Bill is an act now, may protect home buyers : 02-05-2016


The Real Estate (Regulation and Development) Bill, 2016, became an act on May 1, kick-starting the process of making rules as well as putting in place institutional infrastructure to protect the interests of home buyers in India.

While acknowledging that the act is a positive development, property experts said the new rules should address problems faced by builders in getting sanctions and approvals in a timely manner. “Government authorities should also be made accountable for  timebound approvals through the rules that will be made,” said Anshuman Magazine, managing director of property advisory firm CBRE South Asia.

He said that if this happens, it will be one of the major steps towards the recovery of the Indian real estate market and will improve the confidence of both consumers and institutional investors – domestic or foreign. “Of course, it should not become another hurdle for development, which will then raise property prices in the long term,” said  Magazine.

he Ministry of Housing & Urban Poverty Alleviation notified 69 of the act’s 92 sections that come into force from May 1. Rules for implementing the provisions of the act have to be formulated by the central and state governments within six months – by October 31 – the maximum period stipulated in Section 84 of the act.

The housing ministry will make the rules for Union Territories while the Ministry of Urban Development will do so for Delhi.

The key to providing succour  to home buyers will be the setting up of Real Estate Regulatory Authorities, which will require all projects to be registered, and the formation of Appellate Tribunals to adjudicate disputes.

According to Section 20 of the act, state governments have to establish the regulatory authorities within one year of the law coming into force. These authorities will decide on the complaints of buyers and developers in 60 days.

The act seeks to protect the rights of home buyers, mandates registration of projects, including those that have not got completion or occupancy certificates.

Registration will require builders to set aside 70% of the funds collected from buyers and pay interest in case of delays. Any officer, preferably the secretary of the department dealing with housing, can be appointed as the interim regulatory authority.

Once the regulators are set up, they will get three months to formulate regulations concerning their functioning. Real Estate Appellate Tribunals need to be formed within a year – by April 30, 2017. These fast-track tribunals will decide on disputes over orders of the regulators within 60 days.

A committee chaired by the secretary of the housing ministry has started work on formulation of model rules so that states and UTs can frame their rules quickly, besides ensuring uniformity across the country. The ministry will also will come out with model regulations for the regulatory authorities.

The remaining sections of the act that have to be notified relate to aspects such as the functions and duties of promoters, rights and duties of allottees, prior registration of real estate projects with the regulatory authorities, recovery of interest on penalties, enforcement  of orders, offences, penalties and adjudication.

Considering that there 12 months left for the regulatory authorities to be set up by the states, builders are expected to speed up work to avoid the stringent provisions of the new real estate regulatory act.

Source : The Economic Times

Govt rolls back decision on EPF rate, fixes it at 8.8% : 30-04-2016


The finance ministry has yielded to the pressure from trade unions by agreeing to notify soon 8.8% rate of interest on the employees’ provident fund (EPF) deposits for 2015-16.

The move would bring cheers to EPF Organisation’s  around 5 lakh active subscribers and central trade unions who had denounced the finance ministry’s decision to ratify the rate at 8.7%, despite  the Central Board of Trustee’s (CBT) recommending 8.8%.

A seemingly elated labour and employment minister Bandaru Dattatreya said, “I am happy that the finance ministry has agreed to 8.8% rate of interest for 2015-16. The rates will be notified soon.”

This would be third roll-back by the finance ministry in matters related to EPFO in two months under the protest of the trade unions. Recently, it had withdrawn a proposal to tax on EPF and another on barring withdrawal of employers’ contribution to the EPF.

At 8.8%, the returns would be the highest in three years. In the previous two fiscals, EPFO had doled out 8.75% rate of interest to its subscribers. Rates were, however, lower at 8.5% in 2012-13 and 8.25% in 2011-12. Generally, CBT recommends the rate of interest to be accrued to EPF subscribers and the finance ministry ratifies the rate for a particular year.

Justifying the 8.7% rate of interest, the finance ministry had earlier said that the retirement fund body would leave with a surplus of around Rs 1,000 crore for the year 2015-16, lower than Rs 1,604 crore surplus it had in 2014-15, had it doles out 8.7% rate of interest. If offered 8.8% returns, the surplus would get further squeezed to just Rs 674 crore.

The labour ministry, on the other hand, were under tremendous pressure to stick to the CBT-recommended 8.8% rate from the trade unions including the RSS-affiliated Bharatiya Mazdoor Sangh (BMS). The labour minister is also the chairman of the CBT. Trade unions on Friday went on a nation-wide protest against the finance ministry’s decision.

BMS’ general secretary Virjesh Upadhyay thanked prime minister, finance minister and labour minister for “upholding the CBT decision on EPF interest rate.”

Source : PTI

FinMin blinks on PF decision : 30-04-2016


In a third flip-flop, the government has decided to reverse its earlier decision of reducing the interest rate on Employees’ Provident Fund deposits for 2015-16 and instead keep it at 8.8 per cent, in line with the stand of the Central Board of Trustees (CBT) of the EPF Organisation (EPFO).

The labour ministry had tried to persuade its finance counterpart to give in and the consultations worked, said labour minister Bandaru Dattatreya. The CBT had recommended 8.8 per cent in February; on Monday, the minister had informed the Lok Sabha that the finance ministry was approving only 8.7 per cent — a CBT decision has to be ratified  by the latter on this issue. It was probably the first such occasion when the finance ministry had so disagreed.

There have been other retreats in recent days on EPF decisions. Such as on the earlier decision to tax 60 per cent of PF money on withdrawal and also on the stringent conditions decided for premature withdrawal.

In its reasoning on the interest rate, the finance ministry said EPFO’s earnings for 2015-16 were not enough to pay 8.8 per cent. Till now, it noted, the interest income earned on 90 million inoperative accounts, a total principal amount of Rs 35,500 crore, was being distributed among existing account holders but this would no longer be possible, owing to a recent CBT decision. The labour ministry gave an explanation for why this wasn’t quite so.

Also, said finance ministry sources, the labour ministry had clarified that the earnings in 2014-15 turned out to be more than the estimates, and were used to recommend 8.8 per cent.

Sources also said finance had advised labour to create a reserve fund for the future, to help protect workers from interest rate shocks in a regime of falling rates.

As of end-March 2015, the EPFO had earned interest of Rs 2,800 crore on inoperative accounts, on which it had stopped paying interest since 2011.According to an official panel, EPFO would earn Rs 34,844 crore in 2015-16, sufficient to offer an interest rate of 8.95 per cent to the retirement fund body’s 50 million subscribers.

“We were able to explain to the ministry that we never touch that amount and, hence, have a cushion,” explained labour secretary Shankar Agarwal.

Trade unions had protested at the finance ministry’s stand; they marked Friday’s announcement as a victory.

Source : The  Economic Times

No. PRESS RELEASE Dated: 29-4-2016


Release of Data by Income Tax Department – Circular – Dated 29-4-2016 – Income Tax

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

PRESS RELEASE

New Delhi, 29th April, 2016

Subject: Release of Data by Income Tax Department – reg.

Income Tax Department has released Time Series Data for Financial Year 2000-01 to 2014-15 based on internal reporting/ MIS of the Income Tax Department or figures reported by Controller General of Accounts or data published by other Government agencies along with PAN Allotment Statistics pertaining to Financial Year 2013-14 and Income Tax Return Statistics for Assessment Year 2012-13 (FY 2011-12). The same is available on the official website of the Income Tax Department www.incometaxindia.gov.in for viewing. The data will be periodically updated to make it as current as possible. The objective of publishing this statistics is to encourage wider use and analysis of Income tax data by Departmental personnel as well as various stakeholders including economists, scholars, students, researchers and academicians for purposes of tax policy formulation and revenue forecasting.

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

Notification No : 30/2016 Dated: 29-4-2016


Income-tax (11th Amendment) Rules, 2016 – 30/2016 – Dated 29-4-2016 – Income Tax

 

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 30/2016

New Delhi, the 29th April, 2016

INCOME-TAX

S.O. ___(E).- In exercise of the powers conferred by sections 192, 200 and 206C, read with section 295 of theIncome-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1.   (1) These rules may be called the Income-tax (11th Amendment) Rules, 2016.

(2) They shall come into force from the 1st day of June, 2016.

2. In the Income-tax Rules, 1962 (hereafter referred to as the said rules), after rule 26B, the following rule shall be inserted, namely:-

“26C. Furnishing of evidence of claims by employee for deduction of tax under section 192.- (1) The assessee shall furnish to the person responsible for making payment under sub-section (1) of section 192, the evidence or the particulars of the claims referred to in sub-rule (2), in Form No.12BB for the purpose of estimating his income or computing the tax deduction at source.

(2) The assessee shall furnish the evidence or the particulars specified in column (3), of the Table below, of the claim specified in the corresponding entry in column(2) of the said Table:-

Table

Sl. No

Nature of claims

Evidence or particulars

(1)

(2)

(3)

1.

House Rent Allowance. Name, address and permanent account number of the landlord/landlords where the aggregate rent paid during the previous year exceeds rupees one lakh.

2.

Leave travel concession or assistance. Evidence of expenditure.

3.

Deduction of interest under the head “Income from house property”. Name, address and permanent account number of the lender.

4.

Deduction under Chapter VI-A. Evidence of investment or expenditure.”.

3. In the said rules, in rule 30,-

(a) in sub-rule (2A), for the words “seven days”, the words “thirty days” shall be substituted;

(b) in sub-rule (4), for the portion beginning with the word “shall” and ending with the words “ has been credited”, the following words, figures, letter and brackets shall be substituted, namely:-

“shall submit a statement in Form No. 24G to the agency authorised by the Principal Director of Income-tax (Systems) in respect of tax deducted by the deductors and reported to him.”;

(c) after the sub-rule (4), the following sub-rules shall be inserted, namely:-

“(4A) Statement referred to in sub-rule (4) shall be furnished-

(a) on or before the 30th day of April where the statement relates to the month of March; and

(b) in any other case, on or before 15 days from the end of relevant month.

(4B) Statement referred to in sub-rule (4) shall be furnished in the following manner, namely:-

(a) electronically under digital signature in accordance with the procedures, formats and standards specified under sub-rule (5); or

(b) electronically alongwith the verification of the statement in Form 27A or verified through an electronic process in accordance with the procedures, formats and standards specified under sub-rule (5).

(4C) The persons referred to in sub-rule (4) shall intimate the number (hereinafter referred to as the Book Identification Number) generated by the agency to each of the deductors in respect of whom the sum deducted has been credited.”;

(d) for sub-rule(5) , the following rules shall be substituted, namely:-

“(5) The Principal Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the statements and shall be responsible for the day-to-day administration in relation to furnishing of the information and verification of the statements.”.

4. In the said rules, in rule 31A, for sub-rule (2), the following sub-rule shall be substituted, namely:-

“(2) Statements referred to in sub-rule (1) for the quarter of the financial year ending with the date specified in column (2) of the Table below shall be furnished by the due date specified in the corresponding entry in column (3) of the said Table:

Table

Sl. No.

Date of ending of quarter of financial year

Due date

(1)

(2)

(3)

1.

30th June 31st July of the financial year

2.

30th September 31st October of the financial year

3.

31st December 31st January of the financial year

4.

31st March 31st May of the financial year immediately following the financial year in which the deduction is made”.

5. In the said rules, in rule 37CA,-

(a) in sub-rule (3), for the portion beginning with the word “shall” and ending with the words “ has been credited”, the following words, figures, letter and brackets shall be substituted, namely:-

“shall submit a statement in Form No. 24G to the agency authorised by the Principal Director of Income-tax (Systems) in respect of tax collected by the collectors and reported to him.”;

(b) after sub-rule (3),the following sub-rules shall be inserted, namely:-

“(3A) Statement referred to in sub-rule (3) shall be furnished-

(a) on or before the 30th day of April where the statement relates to the month of March; and

(b) in any other case, on or before 15 days from the end of relevant month.

(3B) Statement referred to in sub-rule (3) shall be furnished in the following manner, namely:-

(a) electronically under digital signature in accordance with the procedures, formats and standards specified under sub-rule (4); or

(b) electronically along with the verification of the statement in Form 27A or verified through an electronic process in accordance with the procedures, formats and standards specified under sub-rule (4).”;

(c) for sub-rule(4), the following sub-rule shall be substituted, namely:-

“(4) The Principal Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the statements and shall be responsible for the day-to-day administration in relation to furnishing of the information and verification of the statements.”.

Notification No. : F. No. 3/516/2015-CL.II Dated: 29-4-2016


Central Government satisfied the delegates powers to appoint Inspectors for inspection of books and papers of a company

Notification [F.No. 3/516/2015-CL.II] dt. 29-4-2016

S.O. – In exercise of the powers conferred by sub-section (1) of section 458 of the Companies Act (18 of 2013), the Central Government being satisfied that circumstances warrant, hereby delegates the powers to appoint Inspectors for inspection of books and papers of a company under sub-section (5) of section 206, as ordered by Central Government, to the Regional Directors.

Here’s why Modi govt has cut LPG subsidy funds by 17% : 29-04-2016


Thanks to the fall in global oil prices, the Narendra Modi government has reduced the provision for subsidising domestic cooking gas by 17%.

“The government had decided to provide a fixed subsidy of Rs 18 per kg under direct benefit transfer for domestic LPG during April-October, which has been revised to Rs 15 per kg November 2015 onwards,” a senior petroleum ministry official told FE.

The budgetary support for PDS kerosene, however, remains at Rs 12/litre.

In order to offer clarity on subsidy sharing mechanism to both upstream (ONGC, Oil India and GAIL) and oil marketing companies (IOC, BPCL and HPCL), the government has put in place a fixed budgetary provisioning model for domestic LPG and kerosene. However, the actual subsidy turned out to be lower than the budgeted provision, letting the government create a pool account to keep the additional funds.

The average subsidy on domestic LPG got reduced by about 63% to Rs 11.08/kg in FY16 against Rs 29.63/kg in FY15. This made the government revise the provision for LPG subsidy downwards by Rs 3/kg. The benchmark Brent crude oil price fell nearly 44% to an average of $48.73/barrel in FY16 against $86.6/barrel in FY15.

“The pool account had savings of around Rs 8,000-9,000 crore by October-November 2015, which was utilised to clear the advances to OMCs. Now, the balance in pool account is about Rs 800-900 crore,” another government official said.

Not just the fall in global commodity prices, but the Modi government has successfully brought down the subsidy on domestic cooking gas by also relaunching UPA’s flagship programme of direct bank transfer of subsidy which was discontinued by the previous government. At the same time, more than one crore consumers have voluntarily given up their cooking gas subsidy.

The direct benefit transfer on LPG, which has been recognised by the Guinness Book of World Records as the largest cash transfer programme in the world, has helped to save about Rs 15,000 crore by stopping black marketing and diversions, Prime Minister Narendra Modi had said in his address from the ramparts of the Red Fort on August 15, 2015.

On April 25 this year, petroleum minister Dharmendra Pradhan informed the Lok Sabha that the government has decided to rationalise the subsidy outgo by excluding such LPG consumers from the purview of subsidy whose or whose spouse have taxable income of Rs 10 lakh and above during the previous financial year computed as per the Income Tax Act, 1961, with effect from January 1.

Source : The Hindu

Luxury item like gold jewellery can’t stay out of tax net: Arun Jaitley : 29-04-2016


The government has ruled out rollback of 1% excise duty on gold jewellery levied in the budget, calling it a tax on a luxury item. Finance minister Arun Jaitley said gold cannot remain out of the tax net when goods used by common people were being taxed.

Jaitley referred to items like soap, toothpaste, razor, pencil, ink, fruit juices and baby food attracting excise duty. “Why should the luxury items be exempted from tax,” he said, responding to a calling attention motion in Rajya Sabha. He added that even imitation jewellery attracted 6% excise duty.

Rubbishing Congress leader Raj Babbar’s charge that government was killing the trade and hurting local artisans, the finance minister reasoned that trade had not developed to the extent that annual turnovers of small jewellers had crossed Rs 6 crore. “This is implemented on big chains,” he said, adding it was a step towards implementation of the goods and services tax (GST).

Maintaining that a 18% GST  rate cannot be reached if luxury items were not taxed, he said the levy will be imposed only on corporate jewellers having a turover of up to Rs12 crore last year.

“Small jewellers and artisans are not covered within the ambit of this levy,” FM said While referring to states levying value added tax (VAT) on jewellery, Jaitley said if states felt the levy was not in order they should first remove VAT.

“Each state imposes VAT on gold and in  Kerala it is as high as 5%. If you (opposition) are so much concerned then get it removed from Kerala,” he said. Jaitley recalled that the UPA regime had imposed taxes on jewellery in 2005 and withdrawn it in 2009 in face of stiff opposition. It again imposed it in 2012 but the decision was rolled back again. Miffed Congress and Samajwadi Party staged a walkout from the House.

Sticking to his decision, the minister added, “We have to decide on which items we will impose excise duty and if there is any structured trade, they do not get the right to resort to agitation against tax.”

Jewellers have been on strike since the budget protesting against the levy on the grounds that it will lead to harassment. He allayed jewellers’ fears citing there will be no physical verification and tax can be paid on self-certification based on VAT returns.

“If any excise official or khakidressed man harrasses, jeweller just needs to click a snap on their mobile and send it to me,” finance minister said. The government has also formed a committee under former Chief Economic Advisor Ashok Lahiri that would also include three representatives of jewellers to address their concerns. So far, 206 jewellers have registered and the deadline for it has been extended till June 30 from March 31.

Source : PTI

Companies need not make adjustments in net profit for MAT under IndAS : 29-04-2016


Giving some clarity to companies switching to the new accounting standards, an expert Committee of Finance Ministry has said that there may not be any rise in tax burden for them. The committee, led by retired Indian Revenue Service Officer MP Lohia, has concluded that corporates will not have to make any adjustments to net profits while computing book profits to pay minimum alternate tax (MAT).

“Considering the implicit relation between distributable profits which is available for payment of dividend distribution tax, no further adjustments are required to be made to the net profits (Excluding net other comprehensive income) of India AS compliant companies, other than those already specified,” the Committee report said. The government had set up the expert panel in June last year to resolve the differences arising in the computation of MAT when companies with a turnover of over Rs. 500 crore adopt the Indian Accounting Standards (IndAS) from 2016-17. A number of firms had expressed concerns over their tax liabilities rising significantly due to the new system of accounting.

The Finance Ministry has now sought public comments on the report by May 10, before it finalises the guidelines. “The Committee submitted its report on 18 March, 2016 after having consultation with the Ministry of Corporate Affairs (MCA),” it said in a statement. “The net profits under Ind AS may include a sizeable amount of notional or unrealised gains or losses. If the MCA prescribes any further adjustments to the current year profits for computation of distributable profits, the requirement for any additional adjustments to the book profit under section 115JB may be examined,” said the Committee in its report. It also recommended that items that are a part of the net other comprehensive income should be included in book profits for MAT purposes at an appropriate point of time.

These include changes in revaluation surplus, re-measurements of defined benefit plans, gains and losses from investments in equity instruments designated at fair value. It further said those adjustments recorded in reserves and which would subsequently be reclassified to the profit and loss account, should be included in book profits in the year in which these are classified to the profit and loss account.

Experts welcomed the report and said it is in harmony with the current structure. “Industry can now start preparing themselves for the accounting standards. It has indicated that the same treatment would be carried forward,” said Vikas Gupta, Partner, Nangia & Co. Sunil Shah, Partner, Deloitte, concurred, saying: “The usual adjustments will continue to be made. But, there could be an impact in cases where unrealised gains and losses on fair value accounting are recorded in the profit and loss account, which is permissible under IndAS.

Source : The Hindu

66 – 28-4-2016


CIRCULAR NO 66/RBI., Dated: April 28, 2016

Opening and Maintenance of Rupee / Foreign Currency Vostro Accounts of Non-Resident Exchange Houses: Rupee Drawing Arrangement

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to paragraph (C) 3 vii of the A. P. (DIR Series) Circular No. 28 [A. P. (FL/RL Series) Circular No. 02] dated February 06, 2008 and paragraph No. 3(h) and 5C of Master Direction No.2 dated January 1, 2016 on Opening and Maintenance of Rupee / Foreign Currency Vostro Accounts of Non-Resident Exchange Houses: Rupee Drawing Arrangement regarding collateral cover under Speed Remittance Procedure which inter-alia stipulated that the Exchange Houses shall keep with the AD Category – I bank a cash deposit in any convertible foreign currency equivalent to three days’ estimated drawings on which market related interest rate may be paid. The Exchange House can also keep the said collateral in the form of guarantees from a bank of international repute. The adequacy of collateral should be reviewed by the AD Category – I bank at regular intervals. These requirements were relaxed vide A. P. (DIR Series) Circular No. 16 [A. P. (FL/RL Series) Circular No. 3] dated November 27, 2009 and the collateral requirement was brought down to one day’s estimated drawings.

2. To further streamline the remittance arrangement under the Speed Remittance Procedure and make remittances cost-effective, it has now been decided to do away with the mandated requirement of maintenance of collateral or cash deposits by the Exchange Houses with whom the banks have entered into the Rupee Drawing Arrangement. The AD banks are free to determine the collateral requirement, if any, based on factors, such as, whether the remittances are pre-funded, the track record of the Exchange House, whether the remittances are effected on gross (real-time) or net (file transfer) basis, etc., and may frame their own policy in this regard.

3. Master Direction No.2 dated January 1, 2016 is being updated, to reflect the changes. The other instructions issued vide the above mentioned circulars shall remain unchanged.

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

5. The directions contained in this Circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999), as amended from time to time and are without prejudice to permission /approvals, if any, required under any other law.

RBI/2015-16/386

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

65 – 28-4-2016


A P (DIR Series)

CIRCULAR NO

65/RBI., Dated: April 28, 2016

Import of Goods: Import Data Processing and Monitoring System (IDPMS)

Attention of Authorised Dealers is invited to Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Government of India Notification No. G.S.R. 381(E) dated May 3, 2000 viz. Foreign Exchange Management (Current Account Transaction) Rules, 2000 on import of goods read with A.P. (DIR Series) Circular No. 9 dated August 24, 2000 which provides the procedure, mode/manner of payment for imports and submission of related returns.

2. Reserve Bank of India had constituted a Working Group (Chairman: Shri A. K. Pandey, CGM, FED) comprising of representatives from Customs, Directorate General of Foreign Trade (DGFT), Special Economic Zone (SEZ), Foreign Exchange Dealers Association of India (FEDAI) and select Authorised Dealer banks (AD banks), to suggest putting in place a comprehensive IT- based system to facilitate efficient processing of all import transactions and effective monitoring thereof. The Working Group had recommended development of a robust and effective IT- based system “Import Data Processing and Monitoring System “(IDPMS) on the lines of “Export Data Processing and Monitoring System” (EDPMS) in consultation with the Customs authorities and other stakeholders.

3. To track the import transactions through banking system, Customs will modify the Bill of Entry format to display the AD Code of bank concerned, as reported by the importers. Primary data on import transactions from Customs and SEZ will first flow to the RBI secured server and thereupon depending on the AD code shall be shared with the respective banks for taking the transactions forward. The AD bank shall enter every subsequent activity, viz. document submission, outward remittance data, etc. in IDPMS so as to update the RBI database on real time basis. It is therefore, necessary that AD banks upload and download data on daily basis.

4. For non EDI (manual) Customs ports, till they are upgraded to EDI (computerised) ports, nodal branch of AD Category – I banks will upload Bills of Entry (BoE) data based on original BoE with stamp/signature of the Customs as submitted by importer. Under no circumstances, AD category – I banks will process the transactions till the concerned BoE is reflected in the IDPMS. Customs will share a copy of manual BoE with respective Regional Office of RBI for information as they presently do for shipping bills in the case of exports.

5. The date of operationalization of IDPMS will be notified shortly. All import remittances outstanding as on the notified date shall have to be uploaded in IDPMS. Further, to facilitate smooth processing of import transactions and closure of BoE and advance remittances in IDPMS, the following guidelines will be followed by the AD category – I banks:

6. Write off of import bills

i) AD Category I banks can consider closure of bills in IDPMS that involve write off to the extent of 5% of invoice value in cases where the amount declared in BoE varies from the actual remittance marginally due to discounts, fluctuation in exchange rates, change in the amount of freight, insurance, etc. Cases, where write off is on account of quality issues; short shipment or destruction of goods by the port / Customs / health authorities, may be closed with remarks subject to submission of satisfactory documentation for the same, irrespective of the amount involved.

ii) While allowing write off, AD Category – I banks must ensure that:

a) The case is not the subject matter of any pending civil or criminal suit;

b) The importer has not come to the adverse notice of the Enforcement Directorate or the Central Bureau of Investigation or any such other law enforcement agency; and

c) There is a system in place under which internal inspectors or auditors of the AD category – I banks (including external auditors appointed by authorised dealers) should carry out random sample check / percentage check of write-off of import bills; and

iii) Cases not covered by the above instructions / beyond the above limits, may be referred to the concerned Regional Office of Reserve Bank of India.

iv) The above guidelines are only meant to facilitate closure of bills in IDPMS and do not in any way absolve the importer from remitting / receiving the amount in case circumstances change.

7. Extension of Time

i) AD Category – I banks can consider granting extension of time for settlement of import dues up to a period of six months at a time (maximum up to the period of three years) irrespective of the invoice value for delays on account of disputes about quantity or quality or non-fulfilment of terms of contract; financial difficulties and cases where importer has filed suit against the seller. In cases where sector specific guidelines have been issued by Reserve Bank of India for extension of time (i.e. rough, cut and polished diamonds), the same will be applicable.

ii) While granting extension of time, AD Category -I banks must ensure that:

a) The import transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies;

b) While considering extension beyond one year from the date of remittance, the total outstanding of the importer does not exceed USD one million or 10 per cent of the average import remittances during the preceding two financial years, whichever is lower; and

c) Where extension of time has been granted by the AD Category – I banks, the date up to which extension has been granted may be indicated in the ‘Remarks’ column.

iii) Cases not covered by the above instructions / beyond the above limits, may be referred to the concerned Regional Office of Reserve Bank of India.

8. Follow-up for Evidence of Import

i) As per extant guidelines, AD Category – I banks have to submit a statement on half-yearly basis as at the end of June & December of every year, in form BEF furnishing details of import transactions, exceeding USD 100,000 in respect of which importers have defaulted in submission of appropriate document evidencing import within six months from the date of remittance using the online eXtensible Business Reporting Language (XBRL) system on bank-wide basis to the respective Regional Offices of the RBI.

ii) On operationalization of IDPMS, all outstanding import remittances, irrespective of the amount involved, will be uploaded into the system and submission of a separate BEF statement would be discontinued from a date to be notified separately.

iii) AD Category – I banks are required to follow up submission of evidence of import and remittance within stipulated time irrespective of the amount involved.

9. AD Category – I banks shall put in place a system to ensure that all import transactions and related remittances are processed only through IDPMS from the date to be notified shortly. The AD category – I banks should, therefore be in readiness mode for switching to the proposed IT based system. The requisite message formats and technical specifications have been shared with AD category -I banks via e-mail. These have also been placed on website (https://edpms.rbi.org.in).

10. Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers concerned.

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

RBI/2015-16/385

(A K Pandey)
Chief General Manager

64/2015-16 [(1)/13(R)] – 28-4-2016


A P (DIR Series)

CIRCULAR NO

64/RBI., Dated: April 28, 2016

Foreign Exchange Management (Remittance of Assets) Regulations, 2016

Attention of Authorised Dealers (ADs) is invited to (a) A.D. (M.A. Series) Circular No. 11 dated May 16, 2000 in terms of which ADs were advised of various Rules, Regulations, Notifications/ Directions issued under the Foreign Exchange Management Act, 1999 (hereinafter referred to as the Act) and (b) Para 2.3 and 3.2 of Master Direction No. 13 on Remittance of Assets. On a review it is felt necessary to revise the regulations issued under the Foreign Exchange Management (Remittance of Assets) Regulations, 2000, as amended from time to time. Accordingly, in consultation with the Government of India, the said regulations have been repealed and superseded by the Foreign Exchange Management (Remittance of Assets) Regulations, 2016 (Notification No. FEMA 13(R)/2016-RB dated April 1, 2016, hereinafter referred to as Remittance of Assets Regulations).

2. Some key definitions in the regulations are:

a) A ‘Non-resident Indian (NRI)’ is a person resident outside India who is a citizen of India

b) A ‘Person of Indian Origin (PIO)’ is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:

(i) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or

(ii) Who belonged to a territory that became part of India after the 15th day of August, 1947; or

(iii) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or

(iv) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)

Explanation: PIO will include an ‘Overseas Citizen of India’ cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955.

c) ‘Remittance of asset’ means remittance outside India of funds in a deposit with a bank/ firm/ company, provident fund balance or superannuation benefits, amount of claim or maturity proceeds of Insurance policy, sale proceeds of shares, securities, immovable property or any other asset held in India in accordance with the provisions of the Act or rules/ regulations made under the Act;

d) ‘Expatriate staff’ is a person whose provident/ superannuation/ pension fund is maintained outside India by his principal employer outside India;

e) ‘Not permanently resident’ is a person resident in India for employment of a specified duration or for a specific job/ assignment, the duration of which is not more than three years.

3. The salient features of the Remittance of Assets regulations are given as under:

a) Remittance of capital assets in India held by a person whether resident in or outside India would require the approval of the Reserve Bank except to the extent provided in the Act or Rules or Regulations made under the Act.

b) In terms of regulation 4(1) of the Remittance of Assets regulations, ADs may allow remittance of assets, up to USD one million per financial year, by a foreign national (not being a PIO or a citizen of Nepal or Bhutan), on submission of documentary evidence, in case:

(i) the person has retired from employment in India;

(ii) the person has inherited the assets from a person referred to in section 6(5) of the Act;

(iii) the person is a non-resident widow/ widower and has inherited assets from the person’s deceased spouse who was an Indian citizen resident in India.

In case the remittance is made in more than one instalment, the remittance of all instalments should be made through the same AD.

c) In terms of regulation 4(1), ibid, ADs may allow remittance of balance amount, held by a foreign student in a bank account in India, after completion of his/her studies/training in India.

d) In terms of regulation 4(2), ibid, ADs may allow NRIs and PIOs, on submission of documentary evidence, to remit up to USD one million, per financial year:

(i) out of balances held in their Non-Resident (Ordinary) Accounts (NRO accounts)/ sale proceeds of assets/ assets acquired in India by way of inheritance/ legacy;

(ii) out of assets acquired under a deed of settlement made by either of his parents or a relative as defined in Companies Act, 2013. The settlement should take effect on the death of the settler.

In case the remittance is made in more than one instalment, the remittance of all instalments should be made through the same AD. Further, where the remittance is to be made from the balances held in the NRO account, the Authorised Dealer should obtain an undertaking from the account holder stating that “the said remittance is sought to be made out of the remitter’s balances held in the account arising from his/ her legitimate receivables in India and not by borrowing from any other person or a transfer from any other NRO account and if such is found to be the case, the account holder will render himself/ herself liable for penal action under FEMA.”

e) In terms of regulation 4(3), ibid, ADs may allow remittances by Indian companies under liquidation on directions issued by a Court in India.

f) In terms of regulation 5, ibid, ADs may also allow Indian entities to remit their contribution towards the provident fund/ superannuation/ pension fund in respect of their expatriate staff resident in India but “not permanently resident” in India.

g) In terms of regulation 6, ibid, ADs may permit remittance of assets on closure or remittance of winding up proceeds of branch office/ liaison office (other than project office) as per Reserve Bank’s directions from time to time.

h) In terms of regulation 7, ibid, remittance of assets on hardship ground and remittances by NRIs and PIOs in excess of USD one million/financial year would require the prior approval of the Reserve Bank.

i) Any transaction involving remittance of assets under these regulations are subject to the applicable tax laws in India.

4. The new regulations have been notified vide Notification No. FEMA. 13(R)/2016-RB dated April 1, 2016 c.f. G.S.R. No.388 (E) dated April 1, 2016 and shall come into force with effect from April 1, 2016. The Master Direction No.13 has also been amended to incorporate the changes.

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

6. The directions contained in this circular have been issued under Section 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.

RBI/2015-16/ 384

(A K Pandey)
Chief General Manager

No. PRESS RELEASE Dated: 28-4-2016


Framework for computation of book profit for the purposes of levy of MAT under section 115JB of the Income-tax Act, 1961 for Indian Accounting Standards (Ind AS) compliant companies. – Circular – Dated 28-4-2016 – Income Tax

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 28th April, 2016

PRESS RELEASE

Subject: Framework for computation of book profit for the purposes of levy of MAT under section 115JB of the Income-tax Act, 1961 for Indian Accounting Standards (Ind AS) compliant companies.

On the basis of the recommendations of the Committee on MAT-Ind AS, the Central Government has notified 10 ICDS vide Notification No. S.O.892(E) dated 31st March, 2015. With the approval of the Finance Minister , the above said Committee was also requested to suggest the framework for computation of book profit for the purposes of levy of MAT under section 115JB of the Income-tax Act, 1961 for Indian Accounting Standards (Ind AS) compliant companies in the year of adoption and thereafter. The Committee submitted its report on 18th March, 2016 after having consultation with the Ministry of Corporate Affairs (MCA) which is now placed on www.incometaxindia.gov.in for inviting comments/suggestions from stakeholders.

The stake holders and general public are requested to bring out issues/points which in their opinion would require further clarification/guidance. These issues/points may be submitted by 10th May, 2016 at the email addresses (dirtpl3@nic.in) or by post at the following address with “Computation of book profit for Ind-AS compliant companies” written on the envelope:

Director (Tax Policy & Legislation)-III

Central Board of Direct Taxes,

Room No.147-G,

North Block,

New Delhi-110001

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

Notification No: 29/2016 Dated: 28-4-2016


Income-tax (10th Amendment) Rules, 2016 – 29/2016 – Dated 28-4-2016 – Income Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 29/2016

New Delhi, the 28th April, 2016

INCOME-TAX

S.O. ___(E).- In exercise of the powers conferred by section 35, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (10th Amendment) Rules, 2016.

(2) They shall come into force on the 1st day of July, 2016.

2. In the Income-tax Rules, 1962 (hereafter referred to as the said rules), in rule 6,-

(a) in sub-rule (7), for the words and brackets “Director General (Income-tax Exemptions)” wherever they occur, the words “Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the sponsor” shall be substituted;

(b) in sub-rule (7A),-

(A) for clause (b), the following clauses shall be substituted, namely:-

“(b) The prescribed authority shall furnish electronically its report,-

(i) in relation to the approval of in-house research and development facility in Part A of Form No. 3CL;

(ii) quantifying the expenditure incurred on in-house research and development facility by the company during the previous year and eligible for weighted deduction under sub-section (2AB) of section 35 of the Act in Part B of Form No.3CL;

(ba) The report in Form No.3CL referred to in clause (b) shall be furnished electronically by the prescribed authority to the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over such company within one hundred and twenty days,-

(i) of the grant of the approval, in a case referred to in sub-clause (i) of clause (b);

(ii) of the submission of the audit report, in a case referred to in sub-clause (ii) of clause (b);”;

(B) in clause (c), for the words, figures and letters “a copy thereof shall be furnished to the Secretary, Department of Scientific and Industrial Research by 31st day of October of each succeeding year”, the words, figures, letters and brackets “a report of audit in Form No.3CLA shall be furnished electronically to the Secretary, Department of Scientific and Industrial Research on or before the due date specified in Explanation 2 to sub-section (1) of section 139 of the Act for furnishing the return of income, for each succeeding year” shall be substituted;

(c) after sub-rule (7A), the following sub-rule shall be inserted, namely:-

“8. For the purposes of this rule, the Principle Director General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data, and shall also be responsible for the day-to-day administration in relation to furnishing the information in the manner so specified.”.

3. In the said rules, in Appendix II,-

(a) in Form No.3CK,-

(i) in Part A, for item 3, the following shall be substituted, namely:-

“3. Address, phone number of the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the company.

3A. Please specify the nature and business/activity of the company-

(a) business of bio-technology

(b) manufacture/production of article or things (Please specify the product).”;

(ii) in Part B,-

(A) for items (ii) and (iii), the following shall be substituted, namely:-

“(ii) the above Research and Development facility shall be exclusively used by the First Party to carry out scientific research relating to bio-technology or manufacture or production of any eligible article or thing under sub-section (2AB) of section 35 of the Act,

(iii) the First Party shall provide full co-operation to the Second Party in carrying out the Research and Development work relating to bio-technology or manufacture or production of eligible article or thing under sub-section (2AB) of section 35 of the Act,”;

(B) in item (v), for the words and brackets, “Director General of Income-tax (Exemptions) within a period of sixty days”, the words “Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the First Party within a period of one hundred and twenty days” shall be substituted;

(iii) in Part C, for items (iii) and (iv), the following shall be substituted, namely:-

“(iii) render full co-operation in carrying out the Research and Development work relating to bio-technology or manufacture or production of any eligible article or thing under sub-section (2AB) of section 35 of the Act;

(iv) ensure that the company does not manufacture any product listed in the Eleventh Schedule of the Act;

(v) ensure that the company shall reflect the capital and revenue expenditure on in-house research and development facility in the schedules/notes to accounts in the audited financial statement of the company prepared for the purposes of its annual report and for the purposes of computation of income-tax;

(vi) submit the information as per Annexure-I and Annexure-II every year for the approved period on or before the due date specified in Explanation 2 to sub-section (1) of section 139 of the Act for furnishing the return of income;

(vii) ensure that the assets acquired by the approved facility will be utilised only for the approved purpose and shall not be disposed of without the approval of the Secretary, Department of Scientific and Industrial Research.”;

(iv) after Part C, the following shall be inserted, namely:-

“Annexure-I

(a) Information to be furnished separately in respect of each research and development facility approved by prescribed authority under section 35(2AB) of the Act.

1. Name and address of the registered office of the company

2. Permanent Account Number of the company

3. Previous year

4. Assessment year

5. A brief note on progress of each of the projects shown in the application to the prescribed authority at the time of approval. Any changes with regard to the scope of the projects as originally envisaged may be highlighted.

6. Details of any additional projects taken up during the previous year.

7. Details of changes, if any, in the research and development infrastructure during the previous year.

8. Details of research and development achievements and technologies commercialised during the previous year.

9. Details of patents obtained and/or filed during the previous year.

10. Details of any other changes in the approved research and development centre.

I certify that the above details are true and correct to the best of my knowledge and belief.

Signature of the Principal Officer of the company

(Name, designation and address)

Date:

Place:

Rate cut will ensure EPFO has surplus for provisioning: FinMin : 28-04-2016


With the government facing flak for its decision to cut the interest rate on the employees’ provident fund to 8.7 per cent for 2015-16, the Finance Ministry has said this was suggested to ensure sufficient provisioning for future liabilities.

“We have communicated that the Employees’ Provident Fund Organisation (EPFO) needs to have adequate surplus to meet any shortfalls in the coming year,” said a Finance Ministry official, while noting that the final decision has to be notified by the Labour Ministry.

“There has been a decision to credit interest in all inoperative accounts as well. So, there is nothing wrong with some surplus,” said another person familiar with the development.

Sources said the Labour Ministry, which is understood to be consulting the EPFO, is likely to discuss the interest rate proposal with the Finance Ministry again.

Open to discussions

“There can be further discussions if the Labour Ministry so wants. As of now, our suggestion on the interest rate is final,” said Finance Ministry officials.

Labour Minister Bandaru Dattatreya had on Monday informed the Lok Sabha that the Finance Ministry had ratified an interest rate of 8.7 per cent, against the recommendation of 8.8 per cent by the Central Board of Trustees of the EPFO.

In fact, after announcing the “interim rate”, the Labour Ministry was also planning to hike the rate further as it had a surplus of about ₹1,000 crore.

The Finance Ministry’s decision has been perceived as a move to keep the Provident Fund interest rate in sync with the rates for popular small savings schemes, such as the Public Provident Fund and Kisan Vikas Patra, which are now aligned to G-sec yields of the previous quarter.

Unions’ strike call

Central trade unions have opposed the “unilateral” rate cut by the government and have decided to hold demonstrations against it on April 29.

They said the Central Board of Trustees had recommended an 8.8 per cent rate as an interim measure as there was an indication that it could be increased further in view of availability of funds generated by the EPF.

Source : The Hindu

Long gap between GST panel meetings : 28-04-2016


With the Centre’s biggest proposed legislative reform, goods and services tax (GST), roll-out well past the deadline of April 2016, things might have slowed down at state level, too. The empowered committee of state finance ministers has not met to discuss the legislation for five months now.

West Bengal Finance Minister Amit Mitra was elected chairman of the empowered committee in February, after former chairman K M Mani stepped down as Kerala finance minister on graft charges. Mitra is yet to call a meeting.

This is significant, considering the Narendra Modi government is seen escalating efforts for the passage of the constitutional amendment Bill towards the unified indirect tax legislation.

The Union government is making all efforts to enable the GST roll-out, including pushing for passage of constitutional amendment Bill in the Rajya Sabha during the ongoing Budget session.

The Lok Sabha has already passed the Bill, stalled in the other House for want of majority support. After the passage, Bills of the GST itself would come before Parliament and state Assemblies. Rules will, then, be framed. The empowered committee needs to discuss key issues on the proposed rules. The empowered committee met in February to elect the chairman, but Mitra himself did not attend for health reasons.

In the earlier meeting in November 2015, Delhi Finance Minister Manish Sisodia was selected to chair a meeting for a day. It had decided on a sub-panel to decide on the issue of a threshold, as states were divided on whether GST should kick in from Rs 10 lakh or Rs 25 lakh of annual turnover.

The next round was to take place in December 2015, but it did not happen. The committee was to draft a GST law and business processes for payments, refunds and returns filing.

The Constitution amendment Bill could not be cleared in the previous session of Parliament, too. Congress has been demanding a cap of GST rate at 18 per cent in the Bill, but has met with stiff opposition from the ruling Bharatiya Janata Party as it will curb the flexibility of the proposed GST Council to change rates when needed.

Source : Business Standard

ST clarificatory Circular 192 falls short of expectations – 26-04-2016


Taxindiaonlinelogo-jpg

          By S Sivakumar, LL.B, FCA, FCS, ACSI, MBA, Advocate

THE TRU has come out with four notifications and a circular dated April 13, 2016, seeking to clarify the levy of service tax on services rendered by the Government.

These are –

Notification No. 22/2016-Service Tax, Dated: April 13, 2016

Notification No. 23/2016-Service Tax, Dated: April 13, 2016

Notification No. 24/2016-Service Tax, Dated: April 13, 2016

Notification No. 24/2016-Central Excise (NT), Dated: April 13, 2016

CBEC Circular No. 192/02/2016-Service Tax, Dated-April 13, 2016

While the intent behind these is laudable, it would seem that the Circular would create more confusion than clarify.

In Sl Nos 3 and 4, the circular clarifies that, there would be no service tax on taxes, cesses, duties, fines and penalties including fines and penalties payable to the Government for violation of a statute, bye-laws, rules or regulations, on the basis that, these are not consideration for any particular service as such and hence not leviable to service tax. Thanks to this clarification, any late fee or penalty payable for, let’s say, late or non-filing of the ST-3 return is also not subject to service tax levy. Also, in terms of Notification No. 22/2016-ST dated 13-4-2016, fines and liquidated damages payable to the Government for non-performance of contracts are not subject to service tax. There are also welcome clarifications in terms of services provided by one Government to another Government or local authority, in terms of Sl.No. 1 of the circular. There is also a welcome exemption in terms of services provided by way of grant of passport, visa, etc. to an individual who may be carrying out a profession or business, in terms of Notification No. 22/2016-ST dated 13-4-2016, as is the exemption provided in Notification No. 22/2016-ST dated 13-4-2016 where the gross amount charged does not exceed Rs 5,000/-. So far so good.

I have an arguable issue in the matter of clarification given at Sl.No. 5, wherein, it has been clarified as under :

“It is clarified that any activity undertaken by Government or a local authority against a consideration constitutes a service and the amount charged for performing such activities is liable to Service Tax. It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not. As long as the payment is made (or fee charged) for getting a service in return (i.e., as a quid pro quo for the service received), it has to be regarded as a consideration for that service and taxable irrespective of by what name such payment is called. It is also clarified that Service Tax is leviable on any payment, in lieu of any permission or license granted by the Government or a local authority.”

The Government seems to believe there is always a quid pro quo in terms of a service rendered by the Government, whenever a ‘fee’ is paid (as contrasted to a case where a ‘tax’ is paid). It would then become necessary to understand and appreciate the difference between a ‘fee’ and a ‘tax’, as a ‘fee’ which is essentially in the nature of a ‘tax’ cannot be subjected to the levy of service tax.

In Sri Krishna Das v Town Area Committee, Chirgaon [(1990) 3 SCC 645], the Apex Court has succinctly discussed the difference between a ‘fee’ and a ‘tax’ by observing, as under:

Quote:

“22. A fee is paid for performing a function. A fee is not ordinarily considered to be a tax. If the fee is merely to compensate an authority for services performed or as compensation for the services rendered, it can hardly be called a tax. However, if the object of the fee is to provide general revenue of the authority rather than to compensate it, and the amount of the fee has no relation to the value of the services, the fee will amount to a tax. In the words of Cooley, “A charge fixed by statute for the service to be performed by an officer, where the charge has no relation to the value of the services performed and where the amount collected eventually finds its way into the treasury of the branch of the government whose officer or officers collect the charge is not a fee but a tax.”

23. Under the Indian Constitution the State Government’s power to levy a tax is not identical with that of its power to levy a fee. While the powers to levy taxes is conferred on the State legislatures by the various entries in List II, in it there is Entry 66 relating to fees, empowering the State Government to levy fees “in respect of any of the matters in this list, but not including fees taken in any court”. The result is that each State legislature has the power, to levy fees, which is co-extensive with its powers to legislate with respect to substantive matters and it may levy a fee with reference to the services that would be rendered by the State under such law. The State may also delegate such a power to a local   authority. When a levy or an imposition is questioned, the court has to inquire into its real nature inasmuch as though an imposition is labelled as a fee, in reality it may not be a fee but a tax, and vice versa. The question to be determined is whether the power to levy the tax or fee is conferred on that authority and if it falls beyond, to declare it ultra vires.

24. We have seen that a fee is a payment levied by an authority in respect of services performed by it for the benefit of the payer, while a tax is payable for the common benefits conferred by the authority on all tax payers. A fee is a payment made for some special benefit enjoyed by the payer and the payment is proportional to such benefit. Money raised by fee is appropriated for the performance of the service and does not merge in the general revenue. Where, however, the service is indistinguishable from the public services and forms part of the latter it is necessary to inquire what is the primary object of the levy and the essential purpose which it is intended to achieve. While there is no quid pro quo between a tax payer and the authority in case of a tax, there is a necessary co-relation between fee collected and the service intended to be rendered. Of course the quid pro quo need not be understood in mathematical equivalence but only in a fair correspondence between the two. A broad co- relationship is all that is necessary.”

Unquote

In another interesting decision, viz. Jindal Stainless Ltd. &   Anr. v. State of Haryana & Ors . [(2006) 7 SCC 241] = 2006-TIOL-34-SC-MISC-CB, a Constitution Bench of the Apex Court has stated as under:

Quote

“40. Tax is levied as a part of common burden. The basis of a tax is the ability or the capacity of the taxpayer to pay. The principle behind the levy   of a tax is the principle of ability or capacity. In the case of a tax, there is no identification of a specific benefit and even if such identification is there, it is not capable of direct measurement. In the case of a tax, a particular advantage, if it exists at all, is incidental to the State’s action. It is assessed on certain elements of business, such as, manufacture, purchase, sale, consumption, use, capital, etc. but its payment is not a condition precedent. It is not a term or condition of a licence. A fee is generally a term of a licence. A tax is a payment where the special benefit, if any, is converted into common burden.

41. On the other hand, a fee is based on the “principle of equivalence”. This principle is the converse of the “principle of ability” to pay. In the case of a fee or compensatory tax, the “principle of equivalence” applies. The basis of a fee or a compensatory tax is the same. The main basis of a fee or a compensatory tax is the quantifiable and measurable benefit. In the case of a tax, even if there is any benefit, the same is incidental to the government action and even if such benefit results from the government action, the same is not measurable. Under the principle of equivalence, as applicable to a fee or a compensatory tax, there is an indication of a quantifiable data, namely, a benefit which is measurable.”

Unquote

In another interesting decision, the Supreme Court in Calcutta Municipal Corporation and Others v M/s Shrey Mercantile Pvt Ltd &Others 2005 AIR SC 1879 held as under:

Quote

“According to “Words & Phrases”, Permanent Edition, Vol. 41 Page 230, a charge or fee, if levied for the purpose of raising revenue under the taxing power is a “tax”. Similarly, imposition of fees for the primary purpose of “regulation and control” may be classified as fees as it is in the exercise of “police power”, but if revenue is the primary purpose and regulation is merely incidental, then the imposition is a “tax”. A tax is an enforced contribution expected pursuant to a legislative authority for purpose of raising revenue to be used for public or governmental purposes and not as payment for a special privilege or service rendered by a public officer, in which case it is a “fee”. Generally speaking “taxes” are burdens of a pecuniary nature imposed for defraying the cost of governmental functions, whereas charges are “fees” where they are imposed upon a person to defray the cost of particular services rendered to his account.”

Unquote

Applying the law laid down by the Apex Court in these decisions, it would seem that in many instances, the so-called ‘fee’ is actually a ‘tax’ and consequently, service tax cannot be levied. An example that immediately comes to my mind are the fees that are charged by the Municipal Corporations on owners of flats, which are normally charged on a per square feet basis, which have to be treated as ‘taxes’. Similarly, fees collected by the State Government agencies towards providing various connections related to electricity, water, etc. might also be considered as ‘taxes’ and consequently, service tax may not be leviable.

Taking this discussion forward…in terms of the circular, even sovereign and statutory functions of the Government can be treated as ‘services’. In its circular No. 96/7/2007-ST dated August 23, 2007 , (serial no. 999.01) the Board had expressed the following view, viz.

“Many sovereign/public authorities (i.e. agencies constituted/ set up by Government) perform various functions and duties which are statutory in nature (e.g. Regional Transport Officer issuing fitness certificate, Factories inspector inspecting factories, Directorate of Boilers inspecting and certifying boilers etc.). These are mandatory and statutory functions. It cannot be said that these authorities are providing any service to any individual for consideration. Hence, these are not taxable services. However, if these authorities provide any non-statutory service, those will be liable to service tax, if the service falls within the definition of taxable service”.

One would wonder as to how this view could have undergone a change with the advent of the negative list based service tax regime. Can the Government, while performing a sovereign or statutory function be ever regarded as a service provider? There are several decisions that were rendered in the context of the positive list based service tax regime, wherein, it has been held that, service tax cannot be levied on statutory functions performed by Government Agencies.

In State of Madhya Pradesh v CCE, Gwalior 2006-TIOL-1227-CESTAT-DEL, the CESTAT took the view that, supervision charges collected as levy cannot be described as consideration for services provided for storage and warehousing. In M/s ELECTRICAL INSPECTORATE - 2007-TIOL-2175-CESTAT-BANGthe CESTAT took the view that, State Government Departments actions carried in furtherance of Sovereign functions and in terms of legislations cannot be a subject matter of Service Tax.

As we know…. consideration, which is a sine qua non for an activity to be considered as a service, is defined in Section 2(d) of the Indian Contract Act, as under:

“When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”.

Unlike a commercial transaction, it cannot be said that, the Government, i.e. the promisee is undertaking an activity at the desire of the business entity, i.e. the promisor, especially in respect of sovereign and statutory functions, as the Government is in any case, required to perform these functions as part of its constitutional mandate. To bring these sovereign and statutory functions and activities under the service tax net is fraught with legal complications, for sure.

Before concluding…

In my view, fees paid under statutes such as the Companies Act, Factories Act, Shops and Establishments Act, etc. cannot be subjected to service tax.

Notwithstanding the fact that the Government’s move to collet service tax from the business entities on ‘services’ rendered by Government, etc. is likely to face legal challenges, business entities should expect a tough time from the overzealous Department, for whom, a Board Circular, however, illegal it might be, is more sacrosanct than a binding decision of the Apex Court.

It is not certain that the business entities that pay service tax under the reverse charge mechanism, in respect of services rendered by the Government, would be able to avail of CENVATcredit. The Department could always seek to deny credit on the basis that the fees that are paid to Government Departments have no ‘nexus’ with the output service.

 

No. 4/2016 Dated: 27-4-2016


Clarification with regard to Companies (Accounting Standards) Amendment. Rules 2016 – Dated 27-4-2016 – Companies Law

General Circular No. 04/2016

F. No.01/01/2009-CL-V

Government of India

Ministry of Corporate Affairs

5th Floor, A Wing, Shastri Bhavan,

Dr R.P. Road, New Delhi

Dated: 27th  April, 2016

To

All Regional Directors,

All Registrars of Companies,

All Stakeholders.

Subject : Clarification with regard to Companies (Accounting  Standards) Amendment. Rules 2016

Sir,

Stakeholders have sought clarifications with regard to the accounting period  for  which  the  accounts would  need  to be prepared  using the Accounting Standards, as amended through the Companies (Accounting  Standards) Amendment Rules, 2016. The matter has been examined in the Ministry and it is hereby clarified that the amended Accounting Standards should  be  used  for  preparation  of accounts  for  accounting   periods commencing on or after the date of notification.

This issues with the approval of the competent authority.

Yours faithfully

(Sudhir Kapoor)

Deputy Director

GST rollout, infrastructure funding an uphill climb for Indian government: Moody’s : 27-04-2016


Implementation of the Goods and Services Tax (GST) and bridging large infrastructure deficit are a difficult tasks before the Indian government, Moody’s Investors Service said on Wednesday.

In a report, Moody’s said a history of double-digit inflation, elevated government debt, weak infrastructure and a complex regulatory regime have constrained India’s credit profile.

“We also expect that some aspects of the government’s policy agenda — such as the implementation of GST and bridging India’s large infrastructure deficit will still face an uphill climb,” it said.

As a positive, Moody’s noted that easing of constraints on investment coupled with RBI’s inflation targeting and ongoing efforts to clean up bank balancesheets could propel growth.

Moody’s has a ‘positive’ outlook on its ‘Baa3’ rating on India, which is just a notch above the junk grade.

“Our positive outlook on India’s rating is based on our expectation of continued but gradual policy efforts to reduce the sovereign risks posed by high fiscal deficits, volatile inflation and weak bank balancesheets,” it said.

“The government has, in successive Budgets, stuck to its fiscal consolidation targets. Meanwhile, the central bank’s adoption of inflation targeting and ongoing efforts to clean up bank balancesheets will lower financial risks that would otherwise develop as growth accelerated.”

The government has eased constraints on private investment, both foreign and domestic, which should support growth and the balance of payments.

Indirect tax reform GST is currently stuck in the Rajya Sabha where the ruling NDA does not enjoy a majority. A single rate GST will replace central excise, state VAT, entertainment tax, octroi, entry tax, luxury tax and purchase tax on goods and services to ensure seamless transfer of goods and services.

Besides, the government is working on steps to modernise India’s infrastructure and is looking for avenues to fund development. It has set up a maiden sovereign wealth fund, NIIF, and is scouting for investors to buy 51 per cent stake in it. The government holds 49 per cent in NIIF.

In its report on Asia-Pacific sovereigns, Moody’s said high levels of public and private sector debt may weigh on sovereign credit quality as growth cools and financing conditions tighten.

“Each government’s policy effectiveness will determine how its credit profile navigates this climate of subdued demand and greater financial uncertainty,” it said.

According to Moody’s, policymakers across Asia face the challenge of reviving domestic growth in an environment of depressed global demand.

“Lower commodity prices and muted inflation offer monetary policy space to many central banks. However, most countries in the Asia-Pacific have less room for fiscal stimulus than they did prior to the global financial crisis,” the rating agency noted.

Source : The Economic Times

New rule applies on service tax : 27-04-2016


From the beginning of this month, services provided by a government or local authority to a business entity became liable to service tax, with some exemptions. Till enactment of the Finance Act, 2015, these services provided by a government or a local authority (with specific exclusion) were covered by a ‘negative list’. Service tax applied only on the ‘support service’ provided by the government or local authority to a business entity. In the 2015 Act, an enabling provision was made to exclude any services provided by a government or local authority to a business entity from the negative list. This amendment was given effect from April 1 this year, through a notification issued on March 1.

Clarifying the effect, the Central Board of Excise and Customs (CBEC) has said any activity undertaken by a government or local authority for any consideration (amount) constitutes a service. The amount charged for this is liable for service tax. It does not matter if such activities are a mandatory requirement under the law and whether the amount charged for such a service is laid down in a statute or not. As long as the payment is made (or fee charged) for getting a service, it has to be regarded as a consideration for that service and taxable, irrespective of the name for such a payment. It is also clarified that service tax is leviable on any payment in lieu of any permission or licence granted by a government or a local authority.

Fines, liquidated damages and taxes payable to a government or a local authority will not attract service tax, it adds.

Exporters and importers should note that services provided by a government by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import/export cargo on payment of merchant overtime charges are exempted. Services provided by a government or local authority by way of registration required under any law for the time being in force or for testing, calibration, safety check or certification relating to protection or safety of workers, consumers or the public at large, required under any law for the time being in force are also exempted. Also, any services where the gross amount charged for these does not exceed Rs 5,000.

Consequent to these recent changes, any fee in excess of Rs 5,000 for obtaining an import or export licence or authorisation will attract service tax. The composition fee for grant of extension of the export obligation period for advance authorisations and Export Promotion Capital Goods, settlement amounts paid by order of the Settlement Commission and fees for compounding of offences will also attract service tax. The Directorate General of Foreign Trade is yet to issue instructions in this regard.

Source : Business Standard

No.1028/2016-CX, Dated : 26-04-2016


GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
NEW DELHI

CIRCULAR NO

1028/16/2016-CX , Dated: April 26, 2016

To

All Principal Chief Commissioner / Chief Commissioners of Customs, Central Excise & Service Tax;
All Director Generals of Customs, Central Excise & Service Tax;
All Principal Commissioners/ Commissioners of Customs, Central Excise & Service Tax;
Webmaster, CBEC

Subject:- Clarification with regard to disposal of Call Book cases which have been decided by Courts or Board has issued clarification-reg.

Attention is invited to Circular No. 162/73/95-CX, dated 14-12-1995, Circular No. 719/35/2003-CX, dated 28.05.2003 and Circular No. 992/16/2014-CX, dated 26.12.2014, where the Board had specified the following categories of cases which can be transferred to the Call Book, namely,

i. Cases in which the department has gone in appeal to the appropriate authority,

ii. Cases where injunction has been issued by Supreme Court/ High Court/ CEGAT, etc.

iii. Cases where audit objections are contested. (stands rescinded vide CircularNo. 1023/11/2016-CX, dated 8.4.2016)

iv. Cases where the board has specifically ordered the same to be kept pending and to be entered into the Call Book.

v. Cases referred to Settlement Commission.

2. References have been received from field formations requesting clarification on disposal of Call Book cases pertaining to (i), (ii) and (iv) above, when the same have been decided on merit by Hon’ble Supreme Court or High Courts and where such order of Hon’ble High Court has attained finality, or in cases where Board has, after the issue of instruction as in clause (iv) above, has issued a clarification on merit.

3. The matter has been examined. It is hereby clarified that such cases shall be taken out of Call Book and adjudicated where:-

(i) The issue involved has either been decided by Hon’ble Supreme Court or Hon’ble High Court and such order of the Hon’ble High Court has attained finality or,

(ii) Board has issued new instruction or circular clarifying the issue involved, subsequent to issue of the order to transfer the case to the Call Book.

4. A separate direction to take such cases out of the Call Book should not be awaited from the Board. This clarification applies to cases involving Central Excise duty, Customs duty and Service Tax.

5. Field formations may be informed accordingly. Difficulty experienced, if any, in implementing the circular should be brought to the notice of the Board. Hindi version would follow.

[F.No. 21/1/2016-CX.I]

(Santosh Kumar Mishra)
Under Secretary to the Government of India

No. 11/2016 Dated: 26-4-2016


Payment of interest on refund under section 244A of excess TDS deposited under section 195 of the Income tax Act, 1961 – Circular – Dated 26-4-2016 – Income Tax

CIRCULAR NO 11/2016

F.No.279/Misc./M-140/2015-ITJ

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF DIRECT TAXES

New Delhi, 26th April, 2016

Subject:- Payment of interest on refund under section 244A of excess TDS deposited under section 195 of the Income tax Act, 1961-reg.

The procedure for refund of tax deducted at source under section 195 of the Income tax Act, 1961, to the person deducting the tax is delineated in CBDT Circular No. 7/2007 dated 23.10.2007. Circular No. 7/2007 states that no interest under section 244A of the Act, is admissible on refunds to be granted in accordance with the circular or on the refunds already granted in accordance with Circular No. 769 or Circular 790 dated 20.4.2000.

2. The issue of eligibility for interest on refund of excess TDS to a tax deductor has been a subject matter of controversy and litigation. The Hon’ble Supreme Court of India in the case of Tata Chemical Limited, Civil Appeal No. 6301 of 2011 vide order dated 26.02.2014, held that, “Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest.”

3. In view of the above judgment of the Apex Court it is settled that if a resident deductor is entitled for the refund of tax deposited under Section 195 of the Act, then it has to be refunded with interest under section 244A of the Act, from the date of payment of such tax.

4. Accordingly, it is advised that no appeals may henceforth be filed on this ground by the officers of the department and appeals already filed on this issue may not be pressed upon.

5. This may be brought to the notice of all concerned.

(Sadhana Panwar)

DCIT (OSD)(ITJ),

CBDT, New Delhi

No. 10/2016 Dated: 26-4-2016


Limitation for penalty proceedings under sections 271D and 271E of the Income tax Act, 1961 – Circular – Dated 26-4-2016 – Income Tax

CIRCULAR NO 10/2016

F.No.279/Misc./M-140/2015-ITJ

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF DIRECT TAXES

New Delhi, 26th April, 2016

Subject:- Limitation for penalty proceedings under sections 271D and 271E of the Income tax Act, 1961 – reg.

The issue whether the limitation for imposition of penalty under sections 271D and 271E of the Income tax Act, 1961, (hereinafter referred to as the Act) is determined under section 275(1)(a) or section 275(1)(c) of the Act, has given rise to considerable litigation.

2. The Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs. Worldwide Township Projects Ltd, vide its order dated 21.5.14 in ITA No. 232/2014, considered the issue and observed that, “It is well settled that a penalty under this provision is independent of the assessment. The action inviting imposition of penalty is granting of loans above the prescribed limit otherwise than through banking channels and as such infringement of Section 269SS of the Act is not related to the income that may be assessed or finally adjudicated. In this view Section 275(1)(a) of the Act would not be applicable and the provisions of Section 275(1)(c) would be attracted. “The judgment has been accepted by the Central Board of Direct Taxes.

3. In view of the above, it is a settled position that the period of limitation of penalty proceedings under section 271D and 271E of the Act is governed by the provisions of section 275(1)(c) of the Act. Therefore, the limitation period for the imposition of penalty under these provisions would be the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. The limitation period is not dependent on the pendency of appeal against the assessment or other order referred to in section 275(1)(a) of the Act.

4. Accordingly, no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this issue before various Courts/Tribunals may not be pressed upon.

5. The above may be brought to the notice of all concerned.

 (Sadhana Panwar)

DCIT (OSD)(ITJ),

CBDT, New Delhi

No. 09/DV/2016 (Departmental View) Dated: 26-4-2016


Commencement of limitation for penalty proceedings under sections 271D and 271E of the Income tax Act, 1961 – Circular – Dated 26-4-2016 – Income Tax

CIRCULAR NO. 09/DV/2016

(Departmental View)

F.No.279/Misc./M-116/2012-ITJ

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF DIRECT TAXES

New Delhi, 26th April, 2016

Subject:- Commencement of limitation for penalty proceedings under sections 271D and 271E of the Income tax Act, 1961 – reg.

It has been brought to the notice of the Central Board of Direct Taxes (hereinafter referred to as the Board) that there are conflicting interpretations of various High Courts on the issue whether the limitation for imposition of penalty under sections 271D and 271E of the Income tax Act, 1961 (hereafter referred to as the Act) commences at the level of the Assessing Officer (below the rank of Joint Commissioner of Income Tax.) or at level of the Range authority i.e. the Joint Commissioner of Income Tax./Addl. Commissioner of Income Tax.

Some High Courts have held that the limitation commences at the level of the authority competent to impose the penalty i.e. Range Head while others have held that even though the Assessing Officer is not competent to impose the penalty, the limitation commences at the level of the Assessing Officer where the Assessing Officer has issued show cause notice or referred to the initiation of proceedings in assessment order.

2. On careful examination of the matter, the Board is of the view that for the sake of clarity and uniformity, the conflict needs to be resolved by way of a “Departmental View”.

3. The Hon’ble Kerala High Court in the case of Grihalaxmi Vision v. Addl. Commissioner of Income Tax, Range 1, Kozhikode ,vide its order dated 8.7.15 in ITA Nos. 83 & 86 of 2014, observed that, “Question to be considered is whether proceedings for levy of penalty, are initiated, with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply.”

4. The above judgment reflects the “Departmental View”. Accordingly, the Assessing Officers (below the rank of Joint Commissioner of Income Tax.) may be advised to make a reference to the Range Head, regarding any violation of the provisions of section 269SS and section 269T of the Act, as the case may be, in the course of the assessment proceedings (or any other proceedings under the Act). The Assessing Officer, (below the rank of Joint Commissioner of Income Tax) shall not issue the notice in this regard. The Range Head will issue the penalty notice and shall dispose/complete the proceedings within the limitation prescribed u/s 275(1)(c) of the Act.

5. Where any High Court decides this issue contrary to the “Departmental View”, the ”Departmental View” thereon shall not be operative in the area falling in the jurisdiction of the relevant High Court. However, the CCIT concerned should immediately bring the judgment to the notice of the Central Technical Committee. The CTC shall examine the said judgment on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for.

6. The above clarification may be brought to the notice of all officers.

(Sadhana Panwar)

DCIT(OSD)(ITJ),

CBDT, New Delhi

Notification No: G.S.R 832(E) Dated: 26-4-2016


Section 396 of CA 2013 – Jurisdiction of the state of Telangana – G.S.R 832(E) – Dated 26-4-2016 – Companies Law

Ministry of Corporate Affairs

Notification

New Delhi,

Dated: 26th April, 2015

S.O. - In exercise of the powers conferred by sub-section (1) of section 396 of the Companies Act, 2013 (18 of 2013) (herein after referred to as the said Act), the Central  Government notified  the jurisdictions of Regional  Directors  vide notification number G.S.R 832(E) dated 03.11.2015 to discharge the functions  under sub-section (1) of section 396 of the said Act.

2. In the said notification in serial number (7), in column (2), for the words “States of Karnataka and Andhra Pradesh” the words “States of Karnataka, Andhra Pradesh and Telangana” shall be substituted and shall be deemed to have been substituted with effect from 3rd November, 2015.

[F. No. 1/16/2013-CL-V]

Amardeep Singh Bhatia,

Joint Secretary to the Government of India

No.1027/2016-CX, Dated : 25-04-2016


GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
(CENTRAL BOARD OF EXCISE & CUSTOMS)
NEW DELHI

CIRCULAR NO

1027/15/2016-CX, Dated : April 25, 2016

To

Principal Chief Commissioner /Chief Commissioner of Central Excise (All),
Principal Chief Commissioner /Chief Commissioner of Central Excise and ServiceTax (All),
Principal Commissioner of Central Excise, Service Tax (All),
Web-master, CBEC

Subject:- Withdrawal of Circulars/Instruction on excisability of bagasse, aluminium/ zinc dross – reg.

Excisability of bagasse and similar other by-products or wastes arising during the course of manufacture of an excisable product has been an issue under dispute. Following circulars/instruction have been issued from time to time on the subject:-

(a) Circular No. 904/24/2009-CX dated 28.10.2009,

(b) Circular No. 941/02/2011-CX dated 14.02.2011,

(c) Instruction F.No.17/02/2009-CX (Pt.) dated 12.11.2014.

2. The issue came before the Hon’ble Supreme Court in a case of M/s Union of India and Ors vs M/s DSCL Sugar Ltd - 2015-TIOL-240-SC-CX dated 15.07.2015. Hon’ble Supreme Court examined the issue and reaffirmedthat bagasse is not a manufactured product. The Judgement applies to both periods, before and after the insertion of explanation in Section 2(d) of the Central Excise Act, 1944 by the Finance Act, 2008. It may also be noted that Hon’ble High Court of Bombay in case of M/s Hindalco Industries Ltd. vs. Union of India [2015 (315) E.L.T. 10 (Bom.)] = 2014-TIOL-2266-HC-MUM-CX came to similar conclusion in relation to dross and skimming of aluminium, zinc or other non-ferrous metal.

3. In the light of the above judgments,circulars of the Board on the subject viz 904/24/2009-CXdated 28.10.2009, 941/02/2011-CX dated 14.02.2011 and instruction issued vide F.No.17/02/2009-CX(Pt.) dated 12.11.2014 have become non-est and are hereby rescinded. Cases kept in Call Book on the above issue may be taken out and adjudicated.

4.1 It may also be noted that rule 6 of the Cenvat Credit Rule (CCR), 2004 was amended with effect from 01.03.2015 by inserting explanation 1 and explanation 2 in sub-rule (1) of rule 6. These explanations continue in the present rule 6 also and are reproduced below for ease of reference :-

“Explanation 1. – For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory.

Explanation 2. – Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereunder.”

4.2 Consequently, Bagasse, Dross and Skimmings of non-ferrous metals or any such byproduct or waste, which are non-excisable goods and are cleared for a consideration from the factory need to be treated like exempted goods for the purpose of reversal of credit of input and input services, in terms of rule 6 of the CENVAT Credit Rules, 2004.

5. Difficulty experienced, if any, in implementing the circular should be brought to the notice of the Board. Hindi version would follow.

F. No. 96/115/2015-CX.1

(Santosh Kumar Mishra)
Under Secretary to the Government of India

No. 1/2016 Dated: 25-4-2016


Extension of time till 29-4-2016 for filing ST-3 returns – Dated 25-4-2016 – Service Tax

 

F.No.137/99/2011-Service Tax

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

Service Tax Wing

New Delhi, dated the 25th April, 2016

ORDER NO: 1/2016-Service Tax

In exercise of the powers conferred by sub-rule(4) of rule 7 of the Service Tax Rules, 1994, the Central Board of Excise & Customs hereby, extends the date of submission of the Form ST-3 for the period from 1st October 2015 to 31st  March 2016, from 25th April, 2016 to 29th April, 2016.

The circumstances of a special nature, which have given rise to this extension of time, are as follows:

“Difficulties have been faced by  assessees in accessing the ACES application on 25th April 2016″

Rajeev Yadav

Director (Service Tax)

Central Board of Excise and Customs

No.1026/2016-CX, Dated : 23-04-2016


GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
(CENTRAL BOARD OF EXCISE AND CUSTOMS)
(TAX RESEARCH UNIT)
NEW DELHI

CIRCULAR NO

1026/14/2016-CX, Dated: April 23, 2016

To

Principal Chief Commissioners / Chief Commissioners of Central Excise (All);
Principal Chief Commissioners / Chief Commissioners of Customs & Central Excise (All);
All Director Generals of Customs, Central Excise & Service Tax

Subject: Imposition of Central Excise duty on jewellery – Constitution of sub-committee of the High Level Committee – regarding.

Kindly refer to the Circular No. 1021/9/2016-CX dated 21.03.2016 issued vide F. No. 354/25/2016-TRU.

2. In this regard, the time limit for taking central excise registration of an establishment by a jeweller is being extended up to 01.07.2016. Though, the liability for payment of central excise duty will be with effect from 1st March, 2016, the assessee jewelers may make the payment of excise duty for the months of March, 2016; April, 2016 and May, 2016 along with the payment of excise duty for the month of June, 2016.

3. Wide publicity may be given to this circular. Difficulty, if any, in implementing the circular should be brought to the notice of the Board. Hindi version would follow.

F.No. 354/25/2016-TRU

(Anurag Sehgal)
Under Secretary

F.No. C-18013/08/2015-Ad.IVA – 22-04-2016


F.No. C-18013/08/2015-Ad.IVA
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
(CENTRAL BOARD OF EXCISE & CUSTOMS)
NEW DELHI

Dated: April 22, 2016

To

All Principal Chief Commissioners/Directors General and
All Cadre Controlling authorities under CBEC.

Subject: Handling of Court/CAT cases by the filed formations under CBEC- Instruction regarding

It has come to the notice of the Board that in a number of cases where O.As/WPs/SLPS were filed before the Courts/CATs against the Departments, there have been inordinate delays in filing Counter replies especially in those cases where the jurisdictional CCs/DGs have not been made respondents. This has led to adverse orders and indictments from the Courts/Tribunal and imposition of fines on the department.

2. Instructions have been issued by the Board from time to time for handling of court matters. However, it has been observed that these instructions have not been adhered to by many of zonal offices under CBEC. In this context, attention is invited to para 3 of the D.O. letter No.A-12034/38/2012.Ad.IIIB(Pt) dated 15.10.2012(copy enclosed) wherein detailed instructions with respect to the action to be taken on receipt of a copy of an OAIWP/SLP, as the case may be, has been given. Further, instructions on handling court cases has also been issued by the Board vide letter No.C-18-12/06/2013-Ad.II.B dated 05.04.2013 (copy enclosed)

3. It is once again reiterated that appropriate action should be taken in time for preparation and filing of counter reply to court cases so as to avoid adverse orders and indictment from the courts.

(Amarjit Singh)
Deputy Secretary to the Government of India

Encl: As above.

No.1025/2016-CX, Dated : 22-04-2016


GOVERNMENT OF INDIA
MINISTRY OF FINANCE
TAX RESEARCH UNIT
NEW DELHI

CIRCULAR NO

1025/13/2016-CX, Dated: April 22, 2016

To,

Principal Chief Commissioners/Chief Commissioners of Central Excise (All);
Principal Chief Commissioners/Chief Commissioners of Customs And Central Excise (All);
All Director Generals of Customs, Central Excise And Service Tax

Subject: Imposition of Central Excise duty on jewellery – Constitution of sub-committee of the High Level Committee -regarding

In continuation to the Circular No. 1021/9/2016-CX dated 21.03.2016, issued vide F. No. 354/25/2016-TRU, the composition of the Sub-Committee referred to therein would be as under:

(i) Dr. Ashok Lahiri, Chairman.

(ii) Shri Gautam Ray, Member.

(iii) Shri Rohan Shah, Legal expert [Managing Partner, Economic Laws Practice].

(iv) Shri Manoj Kumar Dwivedi, Joint Secretary [Department of Commerce].

(v) Shri Alok Shukla, Joint Secretary [Tax Research Unit, Central Board of Excise and Customs, Department of Revenue].

2. Names of the trade representatives in the Sub-Committee would be decided in consultation of with Dr. Ashok Lahiri, Chairman of the Sub-Committee.

3. Terms of reference of the Sub-Committee will include the issues related to compliance procedure for the excise duty, including records to be maintained, operating procedures and any other issues that may be relevant.

4. All associations will be given an opportunity to submit representation before the subcommittee in writing and the all India associations to state their case in person.

5. Any further communications with the regard to the aforesaid Sub-Committee may be sent through e-mail to highlevelcommittee@gmail.com or by post addressed to the Office of the High Level Committee (HLC), Suite No. 215, The Janpath Hotel, Janpath Road, Opp. BSNL Building, New Delhi-110001.

6. Wide publicity may be given to this circular. Hindi version would follow.

F.No.354/25/2016-TRU

(Anurag Sehgal)
Under Secretary

No. F.NO.309/11/2016-OT Dated: 22-4-2016


Report of the Committee for Recommending Standard Definition of Certain Terms – Circular – Dated 22-4-2016 – Income Tax

F.NO.309/11/2016-OT

Government of India

Ministry of Finance

Central Board of Direct Taxes

New Delhi, dated 22nd April 2016

Sub : Report of the Committee for Recommending Standard Definition of Certain Terms

A Committee was constituted by the Board, vide OM of even number dated 22nd January 2016, under the chairmanship of Shri Avadhesh Kumar Mishra, CIT (TDS)-2, Delhi to recommend standard definitions of certain commonly used terms relating to direct tax administration, such as “taxpayer”, “tax-base”, “new assessee/taxpayer”, “stop-filer/non-filer” etc.

2. The Committee deliberated upon the prevalent definitions/usage of these terms in the context of functioning of the Income Tax Department and also in the light of statutory provisions. After discussions, the Committee recommended that the following definitions of these terms be adopted for the purpose of generating relevant statistics, as also for reporting to Parliamentary Committees and various outside agencies:-

2.1 To be defined with reference to a given Financial Year:-

I. Tax-base - as on the first date of a Financial Year – Number of persons who have either filed ITRs, or in whose case tax has been paid, or deducted/collected (TDS/TCS), in any of the three consecutive financial years previous to the financial year under reference;

II.  New taxpayer added - during a Financial Year- Number of persons who are not included in the tax-base, as on first date of the Financial Year, but who have either filed ITRs, or in whose case tax has been paid, or deducted/collected (TDS/TCS), for the first time, during the financial year under reference;

III.  Taxpayer - for a Financial Year – Any person who has either filed a return of income or in whose case tax has been paid or deducted or collected at source during the financial year under reference.

IV.  Potential taxpayer - for a Financial year – Any person who is not included in the tax-base, as on the first date of the Financial Year, but in whose case information is available on record to indicate that such person was liable to file ITR, or pay any tax, or tax was required to be deducted/collected (TDS/TCS) in respect of such person, during the financial year under reference;

2.2 To be defined with reference to a given Assessment Year:-

I.  Assessee - for a given Assessment Year – As per the definition provided in the Income Tax Act, including any person who is liable to pay any tax, or in respect of whom any proceedings is pending under the Act, for the reference assessment year;

II.  Non-filer - for a given Assessment Year – Any person who is liable to pay any tax, or file an ITR for the reference assessment year, as per information available on record, but no such ITR for the relevant assessment year has been entered on the System.

3. In the context of above definitions, the words “tax paid” includes taxes paid by way of Advance Tax, Self-Assessment Tax, Taxes deducted/collected at source (TDS/TCS), Tax paid against regular assessment, Dividend Distribution Tax etc.

3.1 Further, the words “information available on record” in the above definition would include information received from departmental sources, third parties e.g. banks, financial intermediaries, law enforcement agencies, foreign tax authorities, etc. and information available in public domain.

4. The recommendations of the Committee have since been accepted by the CBDT with the directions that these standard definitions of the above terms should henceforth be adopted for data generation and reporting purpose

(Salil Mishra)

Director (OT & WT)

63 – 21-4-2016


A P (DIR Series)

CIRCULAR NO

63/RBI., Dated: April 21, 2016

Foreign Investment in units issued by Real Estate Investment Trusts, Infrastructure Investment Trusts and Alternative Investment Funds governed by SEBI regulations

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations 2000, notified vide Notification No. FEMA 1/2000-RB dated May 3, 2000, as amended from time to time and Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time (Principal Regulations).

2. With a view to rationalising foreign investment regime for Alternative Investment vehicles and to facilitating foreign investment in collective investment vehicles for real estate and infrastructure sectors, it has been decided, in consultation with the Government of India, to allow foreign investment in the units of Investment Vehicles registered and regulated by SEBI or any other competent authority. At present, Investment Vehicle will include the following:

• Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014;

• Infrastructure Investment Trusts (InvITs) registered and regulated under the SEBI (InvITs) Regulations, 2014;

• Alternative Investment Funds (AIFs) registered and regulated under the SEBI (AIFs) Regulations 2012.

Further, unit shall mean beneficial interest of an investor in the Investment Vehicle and shall include shares or partnership interests.

3. The salient features of the new investment regime are:

i) A person resident outside India including a Registered Foreign Portfolio Investor (RFPI) and a Non-Resident Indian (NRI) may invest in units of Investment Vehicles.

ii) The payment for the units of an Investment Vehicle acquired by a person resident or registered / incorporated outside India shall be made by an inward remittance through the normal banking channel including by debit to an NRE or an FCNR account.

iii) A person resident outside India who has acquired or purchased units in accordance with the regulations may sell or transfer in any manner or redeem the units as per regulations framed by SEBI or directions issued by RBI.

iv) Downstream investment by an Investment Vehicle shall be regarded as foreign investment if either the Sponsor or the Manager or the Investment Manager is not Indian ‘owned and controlled’ as defined in Regulation 14 of the Principal Regulations.

v) In case the sponsors or managers or investment managers are organized in a form other than companies or LLPs, SEBI shall determine whether the sponsor or manager or investment manager is foreign owned and controlled.

vi) The extent of foreign investment in the corpus of the Investment Vehicle will not be a factor to determine as to whether downstream investment of the Investment Vehicle concerned is foreign investment or not.

vii) Downstream investment by an Investment Vehicle that is reckoned as foreign investment shall have to conform to the sectoral caps and conditions / restrictions, if any, as applicable to the company in which the downstream investment is made as per the FDI Policy or Schedule 1 of the Principal Regulations.

viii) Downstream investment in an LLP by an Investment Vehicle that is reckoned as foreign investment has to conform to the provisions of Schedule 9 of the Principal Regulations as well as the extant FDI policy for foreign investment in LLPs.

ix) An Alternative Investment Fund Category III with foreign investment shall make portfolio investment in only those securities or instruments in which a RFPI is allowed to invest.

x) The Investment Vehicle receiving foreign investment shall be required to make such report and in such format to Reserve Bank of India or to SEBI as may be prescribed by them from time to time.

4. Further, in terms of Regulation 4(b) (iv) of Notification No. FEMA 1/2000-RB dated May 3, 2000, foreign investment in any company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage “in real estate business, or construction of farm houses” is prohibited. However, Explanation (i) ibid provides that “real estate business” shall not include development of townships, construction of residential /commercial premises, roads or bridges. It is now clarified that foreign investment in units of REITs registered and regulated under the SEBI (REITs) Regulations, 2014 will not be included in “real estate business” for the purpose of these regulations.

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

6. Reserve Bank has since amended the subject Regulations accordingly through the Foreign Exchange Management (Permissible Capital Account Transactions) (Fourth Amendment) Regulations, 2015, Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Eleventh Amendment) Regulations, 2015 and Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016 which have been notified vide Notification No. FEMA 345/2015-RB dated November 16, 2015, vide G.S.R. No.859 (E) dated November 16, 2015, Notification No. FEMA 355/2015-RB dated November 16, 2015, vide G.S.R. No.858 (E) dated November 16, 2015 and Notification No. FEMA 362/2016-RB dated February 15, 2016, vide G.S.R. No.166 (E) dated February 15, 2016 respectively.

7. The directions contained in this circular have been issued under section 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.

RBI/2015-16/377

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

Notification No. S.O. 1471(E) 19-4-2016


De-notification to certain specified area from the sector specific Special Economic Zone for aluminium and aluminium related industry at Shendre Industrial Area, District Aurangabad, Maharashtra – S.O. 1471(E) – Dated 19-4-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 19th April, 2016

S.O. 1471(E).-Whereas, M/s. Maharashtra Industrial Development Corporation, a fully owned State Industrial Promotion Organisation of the State of Maharashtra, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for aluminium and aluminium related industry at Shendre Industrial Area, District Aurangabad in the State of Maharashtra;

And, whereas, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zone Rules, 2006, had notified an area of 118.13 hectares vide Ministry of Commerce and Industry Notification Number S. O. 2145(E) dated 22nd December, 2006;

And, whereas, the Sector of the SEZ was changed from Aluminium & Aluminium related industries to Engineering & Electronics sector vide Ministry of Commerce and Industry letter dated 15th October, 2009;

And, whereas, M/s. Maharashtra Industrial Development Corporation vide letter No. MIDC/D-3/SEZ/A-47433 dated 17th February, 2016 has clarified that the actual area of the SEZ is only 110.31 ha instead of 118.13 ha, which was originally notified on 22nd December, 2006;

And, whereas, M/s. Maharashtra Industrial Development Corporation has now proposed to de-notify an area of 53.09 hectares from the above Special Economic Zone;

And, whereas, the State Government of Maharashtra has given its “No Objection” to the proposal vide Letter No. SEZ-2014/CR-74/Ind-2 dated 04th August, 2015.

And, whereas, the Development Commissioner, SEEPZ Special Economic Zone has recommended the proposal for de-notification of an area of 53.09 Hectares from the Special Economic Zone;

Now, whereas, the Central Government is satisfied that the requirements under sub-section (8) of section 3 of the said Act and other related requirements are fulfilled;

Now, therefore, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby de-notifies an area of 53.09 hectares, thereby making resultant area as 57.22 hectares, comprising the Gat numbers and the area given below in the table, namely:-

TABLE

S. No.

Gat No.

Area to de-notified (in Hectares)

1.

66

3.63

2.

67

6.47

3.

68

0.33

4.

79

0.63

5.

80

0.004

6.

82

2.13

7.

83

0.45

8.

86

0.38

9.

87

0.19

10.

88

0.86

11.

89

4.89

12.

90

6.25

13.

91

12.95

14.

92

4.0

15.

93

0.85

16.

94

0.57

17.

95

0.6

18.

96

0.64

19.

97

2.05

20.

98

1.72

21.

99

0.87

22.

100

1.74

23.

102

0.89

24.

Total

53.094

25.

Total Area of SEZ after above deletion

57.22

                [F. No. F.2/133/2005-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

No. PRESS RELEASE Dated: 18-4-2016


Draft rules for grant of Foreign Tax Credit – Circular – Dated 18-4-2016 – Income Tax

 

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

PRESS RELEASE

New Delhi, 18th April, 2016

Subject: Draft rules for grant of Foreign Tax Credit – reg.

The Income-tax Act, 1961 (the Act) provides that the Central Board of Direct Taxes may prescribe rules specifying the procedure for grant of relief or deduction of income-tax paid in any country or specified territory outside India, under section 90/ 90A/ 91 of the Act against the income-tax payable under the Act.

The draft rules for grant of Foreign Tax Credit are uploaded on the website of the Department at www.incometaxindia.gov.in for comments from stakeholders and general public.

The comments and suggestions on the draft rules may be sent by 02.05.2016 at the email address dirtpl4@nic.in or by post at Director (TPL-IV), Central Board of Direct Taxes, Room No. 147-F, North Block, New Delhi.

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

 

 

No. F.NO.142/24/2015-TPL Dated: 18-4-2016


Under Section 90/90A/91 of IT Act 1961 – Draft Rules for Granting Relief or Deduction – Circular – Dated 18-4-2016 – Income Tax

DATED 18-4-2016

Clause (ha) of sub-section (2) of section 295 of the Income-tax Act, 1961 (the Act) provides that the Central Board of Direct Taxes (CBDT) may prescribe rules specifying the procedure for the granting of relief or deduction, as the case may be, of any income-tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, against the income-tax payable under the Act.

II. A Committee was set up by CBDT to suggest the methodology for grant of Foreign Tax Credit (FTC) after examining the various issues related to it. After due consideration of the issues raised by various stakeholders, the Committee submitted its report. Taking into account, the report of the Committee and the provisions of the Act the draft rules for grant of FTC are proposed as under:

(1) An assessee being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule.

(2) The foreign tax shall mean,-

(a)    in respect of a country or specified territory with which India has entered into an agreement for avoidance of double taxation of income in terms of section 90 or 90A of the Act, the tax covered under the said agreement;

(b)    in respect of any other country or specified territory, the tax payable under the law in force in that country in the nature of income-tax referred to in clause (iv) of the Explanation to section 91.

(3) The credit for foreign tax shall be available against the amount of tax, surcharge and cess payable under the Act but not in respect of any sum payable by way of interest, fee or penalty.

(4) No credit shall be available in respect of any amount of foreign tax which is disputed in any manner by the assessee.

(5) The credit of foreign tax shall be the aggregate of the amounts of credit computed separately for each source of income arising from a particular country or specified territory and given effect to in the following manner:

(i)    the credit shall be the lower of the tax payable under the Act on such income and the foreign tax paid on such income;

(ii)    the credit shall be determined by conversion of the currency of payment of foreign tax at the telegraphic transfer buying rate on the date on which such tax has been paid or deducted.

(6) In a case where any tax is payable under the provisions of section 115JB or 115JC of the Act, the credit of foreign tax shall be allowed against such tax in the same manner as is allowable against any tax payable under the normal provisions of the Act.

(7) Where the amount of foreign tax credit available against the tax payable under the provisions of section 115JBor 115JC exceeds the amount of tax credit available against the normal provisions, then while computing the amount of credit under section 115JAA or section 115JD in respect of the taxes paid under section 115JB or section115JC, as the case may be, such excess shall be ignored.

(8) No credit of any foreign tax shall be allowed unless the following documents are furnished by the assessee, namely:-

(i)    certificate from the tax authority of a country or specified territory outside India specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee. However, in a case where the foreign tax is deducted at source, the assessee may furnish a certificate of tax deducted from the person responsible for deduction of such tax;

(ii)    acknowledgement of online tax payment or bank counter foil or slip or challan for tax payment where the payment of foreign tax has been made by the assessee; and

(iii)    a declaration that amount of foreign tax in respect of which credit is being claimed is not under any dispute.

III. The comments and suggestion of stakeholders and general public on the above draft rules are invited. The comments and suggestions may be submitted by 02nd May, 2016 at the email address (dirtpl4@nic.in) or by post at the following address with “Comments on draft rules for granting Foreign Tax Credit” written on the envelope:

LETTER [F.NO.142/24/2015-TPL]

President cautions judges against perils of ‘judicial activism’ : 16-04-2016


President Pranab Mukherjee today cautioned judges against the perils of “judicial activism”, saying the equilibrium in the exercise of authority must be maintained at all times and self-restraint should be used when confronted with such a situation.

Maintaining that the Constitution is supreme, Mukherjee said “each organ of our democracy must function within its own sphere and must not take over what is assigned to the others”.

“Judicial activism should not lead to the dilution of separation of powers, which is a constitutional scheme. The balance of power between the three organs of the state is enshrined in our Constitution,” he said, stressing that “the Constitution is supreme”.

The President said that the equilibrium in the exercise of authority must be maintained at all times and noted that the exercise of powers by the legislature and executive is subject to judicial review.

“However, the only check possible in the exercise of powers by the judiciary is self-imposed discipline and self- restraint by the judiciary itself,” he said while inaugurating the fourth retreat of the judges of the Supreme Court at the National Judicial Academy here.

Mukherjee, however, maintained that the independence and integrity of the judiciary is “of the highest importance, not only to the judges but also to people at large who seek judicial redress against perceived legal injury or executive excess”.

“The Constitution invests our independent judiciary, especially the apex court, with extensive jurisdiction over the acts of the legislature and the executive.

“Judicial review is part of the basic structure and cannot be altered even by taking the procedure provided in law. It is the judiciary which ensures the effectiveness of judicial review,” he said.

He also lauded the judiciary for “enlarging the scope of justice” in a developing country like India.

“For the enforcement of our developing country, our judiciary has enlarged the scope of justice. For the enforcement of fundamental rights, the Supreme Court, through judicial innovation and activism, has expanded the common law principle of ‘locus standi’,” he said.

The President further noted that “it has been made possible for courts to permit anyone with sufficient interest and acting bona fide to maintain an action for judicial redress and to activate the judicial process”.

“In the support of rights, courts have found a postcard written by a citizen or newspaper article to be material enough to set off judicial action. This has helped to bring justice closer to the common man,” he said.

The President said the judiciary, which is one of the three important pillars of our democracy, is the final interpreter of the Constitution and laws.

“It helps maintain the social order by swiftly and effectively dealing with those on the wrong side of the law. As an upholder of the rule of law and enforcer of the right to liberty, the role of the judiciary is sacrosanct.

“The faith and confidence of people in the judiciary must always be maintained. For justice to have meaning to the  people, it must be accessible, affordable and quick,” he said.

Talking about the Supreme Court, Mukherjee said the apex court has “captured the ethos” of India’s developing society while interpreting the mandate of good governance in the light of contemporary situations and challenges facing the country, “whether due to global winds of change or from within”.

“This has not been merely an exercise in interpretation of laws or legal order, much less an exercise in edifying jurisprudence, it has captured the ethos of our developing society as it has evolved from the colonial shackles to a social order replete with the essence of human dignity, of aspirations of a populace maturing into a sovereign, socialist, secular, democratic republic as mandated by the makers of our Constitution,” he said.

The President further emphasised that the Constitution is “a living document, not a relic cast in stone”.

“It is a magna carta of socio-economic transformation,” he said.

The President said that an “affordable” judicial system is a must in a country like India, where a section of the population is at the bottom of the socio-economic pyramid.

“Access to justice for the poorest would ensure justice for all,” he said, noting that Mahatma Gandhi had said his “notion of democracy is that under it the weakest shall have the same opportunities as the strongest”.

Mukherjee also stressed on the need for greater efforts to ensure legal literacy. “Instilling positive values in our young lawyers is vital,” he said.

Talking about the issue of delay in providing justice, Mukherjee said that “quick delivery of justice is sine qua non for efficient jurisprudence” and used the old adage “justice delayed is justice denied” to stress his point.

“Justice should be speedy, accessible and affordable,” he added.

In this regard, the President also rued that the courts are “overburdened” on account of the large number of pending cases.

“There are over three crore cases pending in various courts throughout the country. Out of these, about 38.5 lakh cases are pending in 24 high courts.

“The pendency of cases in the high courts has slightly declined from 41.5 lakh in 2014 to 38.5 lakh in 2015, but we still have a long way to go,” he said.

Mukherjee said pending cases must be “quickly cleared” through multi-dimensional efforts, using statutory and procedural norms in areas like process service, adjournments and delivery of judgements.

“I am sure a paradigm shift in the way the public perceives the legal system will come through persistent efforts by judges to clear case backlogs and reduce life cycles of cases. This must be taken as an opportunity to bring in innovation in speedy dispensation of justice.

“Use of information technology and e-governance can make a positive impact in this regard,” he said.

Talking about vacancies in courts, he rued that the high courts in the country were functioning with only 60 per cent of their sanctioned strength and lauded Chief Justice TS Thakur for speedily filling up vacancies in the high courts and the apex court.

“Since the assumption of work of Collegium from the first week of January this year, total 145 appointments were made as on April 12. This shows the speed with which the Collegium is now functioning,” Mukherjee said.

He also showered praises on the apex court, saying it has earned a global reputation for its superior standards and lofty ideas.

“Landmark judgements passed by this court have not only strengthened the legal and constitutional framework of our country but are widely cited by the judiciary in many other countries seeking to build progressive jurisprudence. The bench of the Supreme Court is known for its intellectual wisdom and legal scholarship.

“(It) has over the years been served by judges who have provided intellectual depth, vigour and vitality necessary to create a world-class institution. I am confident this court will always remain a sentinel of justice,” he said.

This is the fourth Retreat of Supreme Court Judges after the first one in 2005.

During the event, CJI Thakur, Law Minister DV Sadananda Gowda, Chief Justice of Madhya Pradesh High Court Justice AM Khanwilkar and Chief Minister Shivraj Singh Chouhan were also present.

Source : PTI

Indian economy like ‘one-eyed’ king in land of blind: Raghuram Rajan : 16-04-2016


With India being often described as ‘the bright spot in the global economy’, Reserve Bank Governor Raghuram Rajan sees this as a case of “the one-eyed man” being king in the land of the blind.

Amid gloomy global economic conditions, Indian economy has been described by many as one of the few bright spots, including by IMF, while RBI under Rajan has also been credited with necessary steps to minimise the impact of external shocks on the country’s financial system.

“I think we have still to get to a place where we feel satisfied. We have this saying — ‘In the land of the blind, the one-eyed man is king’ (andha me kaana raja). We are a little bit that way,” Rajan said when asked for his take on the ‘bright spot’ theory and what was his “secret sauce” to ensure this positioning.

Rajan, a former chief economist of the International Monetary Fund and an on-leave professor of finance at the University of Chicago Booth School of Business, was here for Spring Meetings of the World Bank and the IMF, as also for the G20 Meeting of Finance Ministers and Central Bank Governors.

“We feel things are turning to the point where we could achieve what we believe is our medium-run growth potential. Because things are falling into place. Investment is starting to pick up strongly. We have a fair degree of macro-stability. Of course, not immune to every shock, but immune to a fair number of shocks,” Rajan said in an interview to MarketWatch.

MarketWatch is published by Dow Jones & Co and is part of The Wall Street Digital Network.

Rajan, known to have frank views on state of affairs in the Indian and global economy, said “a bunch of good things have happened” in India, but there were “still some things to do”.

He listed out achievements on fronts like current account and fiscal deficit and said inflation has come down from 11 per cent to below 5 per cent, making room for interest rates to come down.

“Of course, structural reforms are ongoing. The government is engaged in bringing out a new bankruptcy code. There is Goods and Services Tax on the anvil. But there is a lot of exciting stuff which is already happening,” he said.

Rajan recalled a new platform he launched last week that allows mobile-to-mobile transfers between any two bank accounts in India.

“It is a public platform, so anybody can participate. It is not owned by any one company unlike Apple Pay or Android Pay or whatever. I think it is the first of its kind.

“So, technological developments are happening and making for a more, hopefully, reasonable life for a lot of people. Let’s see how it goes,” he said.

Asked about his views on comparison between India and China, the RBI Governor said India was nearly a decade behind in terms of start of the reform process and this reflects in the relative size of the two economies.

“We are about a quarter to a fifth their size. I think that we could catch up if we do the right things over a period of time.

“It is extraordinary what good policies they (China) followed to get where they are, so we have to be very good at our policy-making as well as our implementation. I think what people admire China for is how they have managed to get things done.

“Now we have some strengths of our own, and we should emphasize those I think there is a significant amount of flair and creativity in the Indian economy and we have to try and capitalise on those as we are trying to grow. We shouldn’t follow the same path that others have followed.

“But that means working very hard and creating the appropriate infrastructure, creating the human capital that we need to succeed. Building up a good regulatory environment, light but effective, and, of course, building adequate access to finance.”

Rajan refused to call his monetary policy actions “opportunistic easing” and said RBI was still in an accommodative phase. He has been saying rates can come down further if inflation cools further and monsoon turns out to be good.

“Now, given all the pushes and pulls in the global economy, you can forecast but you’re not quite sure your forecast will come out. So, we’re sort of a little more data-driven than we would be in more normal times. As the data come in and we get more certainty about how things are playing out, we will act accordingly.”

On monsoon, Rajan said it is a very important factor in India.

“It does significantly influence sentiment in rural areas, rural demand. It certainly affects about 50 per cent of our population which is tied in some way to agriculture. Only 15 per cent of value-added is agriculture and that is still falling, but many people have rural links. So, the monsoon does impact all that.

“It has a moderate impact on food prices because good food management can alleviate the effect of the monsoon. But if we have a bountiful monsoon, then we don’t need effective food management to get lower food prices. We are all keeping our fingers crossed. The good news seems to be that the meteorological department is saying it is probably going to be a good monsoon.”

To a question about whether he would get another term after his current tenure as RBI chief ends in September, Rajan said, “It is a question that has to be answered.”

Source : The Economic Times

NASSCOM upset over inter-state tax levy on e-commerce transactions : 15-04-2016


Nasscom came out strongly against the decision of the state governments to levy taxes on inter-state ecommerce transactions, calling the move flawed, detrimental to growth of small and medium enterprises and would result in additional costs for them.

Nasscom, the industry body representing Indian software industry, released the statement after the Government of Gujarat passed a Bill on March 30, proposing an entry tax on consumers for e-commerce transactions.

“Such tax structures will lead to an additional burden on SME traders, increase litigation and also reduce business efficiencies. It will also restrict choice of the customer,” said R Chandrashekhar, president, Nasscom.

“The e-commerce sector aspires to unify the country digitally into a single entity. Providing unrestricted cross border access to sellers as well as buyers is the prerogative of the government and is an important driver towards creating an ease of doing business,”  Chandrashekhar said.

The e-commerce industry has been up in arms about the levy of “entry taxes” being applied by different states, saying that such taxes increase cost of the goods brought into the states. Entry taxes are payable by the consumers and will be collected and deposited by entities that bring specified goods to a state from any other part of the country.

The move to levy interstate taxes is “flawed”, said Nasscom, because it was “akin to introducing trade barriers  to free inter-state trade thereby restricting market access within the country”.

It further added that e-commerce had helped small and medium businesses grow, irrespective of their location, and that such taxes would discourage local manufacturing by SMEs.

ET has earlier reported that Flipkart recently dragged the states of Uttarakhand and West Bengal to court over the issue of entry tax. It got a stay from both the governments, which is expected to act as a deterrent for other states that are in the process of imposing entry taxes on goods bought online.

“The proposed levy will have a short life in light of the impending GST reform,” Nasscom added.

“For collecting and depositing the tax, the deemed tax payer would be required to significantly revamp the IT systems to track the tax charged on inter-state sale of goods to Gujarat and determine the differential tax which has to be paid in the form of entry tax,” it added. Inter-state tax levies will  affect logistics companies and the outside-state sellers selling goods to customers in the state, Nasscom said. The states of Assam, Odisha, Uttarakhand, Rajasthan and Mizoram have enforced such levies, and Punjab, Himachal Pradesh, UP and Madhya Pradesh have proposed similar taxes.

Source : PTI

 

Time ripe for reevaluation of fiscal policy: FM Arun Jaitley at G20 : 15-04-2016


Emphasising the need for globally coordinated policy decisions to remedy the global economic turbulence, Finance Minister Arun Jaitley today said the time is ripe for a reevaluation of the fiscal policy space.

“We feel that the efficacy of monetary policy instruments has reached its limits and that its pass through has not been seamless. The time is ripe for a reevaluation of the fiscal policy space, with a greater focus placed on public investment,” Jaitley said at the G-20 Finance  Ministers and Central Bank Governors meeting on ‘Global Economy and Framework for Strong, Sustainable and Balanced Growth’.

The key downside risks which could derail the fragile global recovery are – weak demand, tighter financial markets, softening trade and volatile capital flows, he noted.

“India has always emphasised the need for globally coordinated policy decisions to remedy the global economic turbulence,” the minister said.

“We also appreciate the efforts being undertaken by the Chinese government in rebalancing their economy and in particular in reducing excess capacity in several sectors,” he said adding that this would create necessary space for manufacturing activity in other countries.

Noting that declines in both imports and exports were recorded in all G20 economies in 2015, Jaitley stressed the need to articulate an effective and tangible policy response to revive the trade engine of the global economy.

“Countries must avoid trade protectionist measures, and refrain from competitive devaluations,” Jaitley said.

“We should also take note of the asymmetry in the global financial safety net,” he said.

While advanced economies have access to swap lines in order to smooth currency shocks, emerging market economies, which are highly dependent on reserve currencies both for borrowing and for international transactions, do not have recourse to these, he added.

“Global and regional financial safety net and oversight needs to be augmented, including through new financing mechanisms,” he said.

Jaitley said individual and collective efforts to restore growth back to pre-crisis levels have had limited success.

The distribution of risks to the Global Economic Outlook continues to remain tilted to the downside, and global growth continues to disappoint.

Even the projection of future global growth has been subject to recurring downward revisions, he said.

Jaitley said India has consistently recorded the highest growth figures in the world for the last three quarters.

“We expect this momentum to continue, assuming a normal monsoon. That being said, the fading impact of lower input costs on value addition in manufacturing, persisting corporate sector stress and risk aversion in the banking system, and the weaker global growth and trade outlook pose downside risks to India’s growth outlook,” he said.

The Indian government is dealing with these challenges through various policy measures, the minister said.

Source : The Economic Times

7.5 per cent growth not enough for India’s requirement: Arun Jaitley : 14-04-2016


India’s current growth rate of 7.5 per cent is not enough as per its own requirement standard and the country has the “potential” to do “better”, Union Finance MinisterArun Jaitley has said.

Expressing concern over the decline in India’s exports, Jaitley said the country’s growth parameters were on track and the government is moving ahead on its reform agenda with inclusiveness and successfully meeting all its fiscal parameters.

“On 7.5 per cent by global standards or by world standards in the current situation are we doing well? The answer is Yes. But by our own requirement standards are we doing well enough? I think, we can do better,” Jaitley said yesterday at the Carnegie Endowment for International Peace, a global American think-tank.

“The fact that in this otherwise a globally adverse environment by putting some domestic policies in place, by using investments and surpluses cleverly we have managed to sustain some growth. One of the biggest areas of worry has been the declining exports,” he said.

Noting that both in value terms and volume terms, the global situation has impacted export, Jaitley, who is on a week-long visit to the US, said that things could improve if some of the variables change.

“On 7.5 per cent by global standards or by world standards in the current situation are we doing well? The answer is Yes. But by our own requirement standards are we doing well enough? I think, we can do better,” Jaitley said.

“Does 7.5 per cent satisfy either the Indian government, me or the Prime Minister or India’s political opinion, the answer is no. I think, by our own yardstick, we realise that we have potential in a helpful environment to do better,” he said, adding that in an adverse global situation, probably one does settle for that rate.

“But if hopefully with any of these variable factors growth returning to the rest of the world at some stage, better Indian monsoon, and continued favourable environment of oil prices and the impetus of policy direction in India, if the reforms go on…if we are able to cross those hurdles, our ability to do much better would be there,” Jaitley said. Earlier welcoming Jaitley, Carnegie’s president William Burns, who is the former Deputy Secretary of State, said that India had a very important role to play globally, particularly in Asia.

India has surprised China by emerging as the fastest growing emerging economies of the world.

“Two years after the BJP came into power there is change in India’s economic situation. Under the leadership of Prime Minister Modi and Jaitley India today is the world’s fastest growing major economy,” Burns said, adding that inflation was moderated and government was committed to reforms.

Jaitley said that about two years ago, when the current government had taken over the situation looked quite challenging, but since then the global situation has never been helpful.

In the 21 months the key emphasis of the Modi government has been decisiveness, consistency in terms of policy direction and transparency in functioning, he said.

“In terms of economic direction, this government is yet to commit a major mistake,” he said.

Jaitley arrived in the US capital yesterday to attend the annual spring meeting of the International Monetary Fund (IMF) and the World Bank, in addition to meeting his Chinese and American counterparts.

During his week-long stay, Jaitley would also travel to New York to meet with private sector leaders with an objective to attract foreign direct investments to India.

Source : The financial Express

Using IT dept’s new tax calculator? Why you need to exercise caution : 14-04-2016


The income tax department recently launched its calculator to enable taxpayers to gauge their annual tax liability.

The income tax department recently launched its calculator to enable taxpayers to gauge their annual tax liability. The calculator has been calibrated to include IT-related amendments made in Budget 2016. Once you feed in your basic details and information, the calculator computes your tax liability.

But how good is the calculator? Is it comprehensive or would you need more help when you file your returns?

“Tax computation remains complex because of so many sections/sub-section, deduction, exemptions, limit, rules and changes in all these from time to time. In present case, there are some limitation being a calculator as compared to consultant (who has the complete knowledge of tax). Therefore, the calculator should be used for guidance and one should consult an expert for complexity. A layman is at risk to some extent due to their limited tax intelligence,” Sudhir Kaushik, CEO and founder, Taxspanner.com told FeMoney.

However, he says that the calculator is a good option for calculating tax for earlier years. “The IT department’s tax calculator is a good option for computing the tax payable for assessment year (AY) 2010-11 to 2016-17 if you know basic tax laws, especially for earlier year computation which at times may not be easy,”Kaushik said.

Nidhi Goyal, Managing Director, Tax and Regulatory Affairs, Protiviti India, said the tax calculator is part of the government’s efforts to encourage and simplify tax payment process. “Though the calculator would provide the taxpayer with easy check on their tax liability, there is a word of caution from the tax department that taxpayer should not solely rely on it as complicated cases of ITR have different requirements which may not be addressed by the calculator,” Goyal said.

With the help of analysis by Sudhir Kaushik of Taxspanner.com, FeMoney brings to you some of the missing fields and mistakes in the calculator and provides you some tips to assess your tax in a better way. \

Following are the highlights:

A. Deduction section:
1. Employee’s contribution/self-employed contribution towards NPS (upto 10%) (u/s. 80CCD):

a. If the income from salaries is entered, the calculator should restrict the same to 10 per cent of the salary income.

b.If the income from salaries is not entered, the calculator should restrict the same to 10 per cent of the gross total income.

This is not being captured by the calculator at present.

2. Deduction u/s 80G (donations) should have been more in detail. The amount needs to be restricted as follows:

There are 4 types of deduction –

a. Unrestricted 100 per cent deduction

b. Unrestricted 50 per cent deduction

c. Restricted 100 per cent deduction

d. Restricted 50 per cent deduction

3. Deduction u/s 80CCF is not available from AY 2013-14 but the calculator allows to enter amount. However, does not calculates this deduction but it would have been better to restrict and inform through pop up.

4. Deduction u/s 80GG is not provided in the calculator which can be claimed by individuals paying rent but not getting any HRA.

5. The calculator is asking individuals to input the due date for submission of return. The individuals might not be aware of the due dates and hence there can be a ready reference of extended due dates for each assessment year in the calculator.

6. Income from salaries should have been named as “Net taxable salaries after exemptions and professional tax/entertainment tax deductions’. In salary option, there should be helping tips for user.

7. More than one rented property owners would not find it easy to compute the tax liability.

8. Interest on house loan is deductible with conditions and individuals are not having complete knowledge hence chances of wrong claim/assumptions are there. Hence, providing help is necessary.

9. Capital gains computation needs knowledge of indexation before putting the amount in the calculator. Moreover, the determination of short-term and long-term at times need expertise.

10. Relief u/s 87A is inbuilt in calculation but is not displaying in calculator. Hence it may create confusion for the user.

11. Marginal relief is also not displaying if income is more than Rs 1 crore. It is inbuilt in calculations automatically.

12. If a salaried person is receiving arrears then relief option u/s 89 is not there.

Source : PTI

Maritime India Summit 2016: What Narendra Modi government expects from the initiative : 14-04-2016


Maritime India Summit 2016: India’s maiden flagship initiative of the Shipping Ministry, the Maritime India Summit 2016, is all set to attract massive investment in the sector. Modi government has laid special emphasis on the need build shipping and port infrastructure.

According to Shipping Minister Nitin Gadkari, the Summit provides a unique platform for participants to explore potential business opportunities in Indian maritime sector.

MIS 2016 is being organised from April 14-16, 2016 at Mumbai and will be inaugurated by Prime Minister Narendra Modi.

India is also set to double its ports capacity to 3000 million tonnes (MT) by 2025, Gadkari has said. The capacity of ports stood at 1,500 MT in 2015.

“We will double the capacity of our ports to 3000 MTPA by 2025,” Gadkari said recently. According to Gadkari, the MIS is in pursuance of the government’s policy of giving prime importance to developing the countries infrastructure. We take a look at some interesting facts about the Maritime India Summit:

1) PM Modi will release a national perspective plan on the Sagarmala Project with details of investments

2) At the three-day summit, agreements entailing investments of over Rs 82,000 crore will be signed. This includes 35 concession agreements of Rs 5,900 crore, 20 work orders of Rs 8,250 crore and 86 MoUs involving an investment of over Rs 68,700 crore.

3) More than a dozen union ministers are expected to address the summit, for which 3,000 delegates, including 300 from 41 countries, have registered.

4) To be held at NSE Grounds in suburban Goregaon, the summit will have 13 technical sessions, 200 exhibitors and 52 participants from South Korea, which is the partner country for the event.

5) It will also have a museum resembling a ship displaying the maritime history of the country, made by art director Nitin Desai.

6) India and South Korea also signed a memorandum of understanding for cooperation and mutual assistance in the port sector.

Source : Business Standard

62 – 13-4-2016


A P (DIR Series)

CIRCULAR NO

62/RBI., Dated: April 13, 2016

Overseas Direct Investment (ODI) – Rationalization and reporting of ODI Forms

Attention of the Authorised Dealer (AD – Category I) banks is invited to the Notification No. FEMA 120/RB-2004 dated July 7, 2004 [Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004] (the Notification), as amended from time to time. Attention of AD Category – I banks is also invited to A. P. (DIR Series)Circular No. 68 dated June 01, 2007 and A. P. (DIR Series) Circular No. 15 dated August 21, 2012 on rationalisation of ODI Forms and instructions issued vide A. P. (DIR Series)Circular No. 24 dated August 14, 2013 wherein Resident Individuals (RI) were allowed to set up overseas JV/WOS within the Liberalised Remittance Scheme (LRS) limit. Attention of AD Category – I banks is also invited to A.P. (DIR Series) Circular No. 36 dated February 24, 2010, A.P. (DIR Series) Circular No.131 dated May 31, 2012 on the operationalization of the online reporting system of ODI, Para B.7 and Part II of FED Master Direction No. 15/2015-16 dated January 1, 2016 and Part VIII of FED Master Direction No. 18/2015-16 dated January 1, 2016.

2. At present, application for ODI is required to be made in Form ODI – Part I (comprising six sections) for direct investments in Joint Venture (JV) / Wholly Owned Subsidiary (WOS) under automatic route / approval route. Further, remittances and other forms of financial commitment undertaken by the Indian Party (IP) are reported in Form ODI Part II. Annual Performance Report (APR) on the functioning of overseas JV / WOS in Form ODI Part III and details of disinvestment in Form ODI Part IV are currently required to be submitted through the designated Authorised Dealer Bank (AD bank). While Form ODI Part I and Part III are required to be submitted by the applicant undertaking ODI, the Form ODI Part II and Part IV are to be submitted by the AD bank on behalf of the applicant. In order to capture all data pertaining to the IP undertaking ODI as well as the related transaction, it has been decided to subsume Form ODI Part II within Form ODI Part I. Thus the Form ODI will have five sections instead of six.

3. The rationalised and revised Form ODI (Annex I) will now comprise the following parts:

Part I – Application for allotment of Unique Identification Number (UIN) and reporting of Remittances / Transactions:

Section A – Details of the IP / RI.

Section B – Capital Structure and other details of JV/ WOS/ SDS.

Section C – Details of Transaction/ Remittance/ Financial Commitment of IP/ RI.

Section D – Declaration by the IP/ RI.

Section E – Certificate by the statutory auditors of the IP/ self-certification by RI.

Part II – Annual Performance Report (APR)

Part III – Report on Disinvestment by way of

a) Closure / Voluntary Liquidation / Winding up/ Merger/ Amalgamation of overseas JV / WOS;

b) Sale/ Transfer of the shares of the overseas JV/ WOS to another eligible resident or non-resident;

c) Closure / Voluntary Liquidation / Winding up/ Merger/ Amalgamation of IP; and

d) Buy back of shares by the overseas JV/ WOS of the IP / RI.

4. Further, a new reporting format has also been introduced for Venture Capital Fund (VCF) / Alternate Investment Fund (AIF), Portfolio Investment and overseas investment by Mutual Funds as per the format in Annex II and Annex III. In case of reporting purchase and repurchase of ESOPs, the AD banks may continue to report the same in the existing format (Annex IV).

5. It is further advised that any post investment changes subsequent to the allotment of the UIN are required to be reported as indicated in the operational instructions on submission of Form ODI Part I (Annex I).

6. AD banks before executing any ODI transaction must obtain the Form ODI Part I from the applicant in terms of Regulation 6 (2) (vi) of the Notification, ibid. Further, the AD bank should report the relevant Form ODI in the online OID application and obtain UIN while executing the remittance.

7. In case of RI undertaking ODI, certification of Form ODI Part I by statutory auditor or chartered accountant need not be insisted upon. Self-certification by the RI concerned may be accepted.

8. The revised ODI forms and instructions for filling up the forms will come into effect immediately.

9. Reserve Bank reserves the right to place the information received through the forms in the public domain.

10. As hitherto, the AD banks would continue to receive the ODI forms as also documents related to the post investment changes in the physical form. These should be preserved UIN wise for submission to the Reserve Bank, if and when specifically required.

11. AD banks should put in place proper processes and systems and issue necessary instructions to all the dealing officials at the bank / branch level to ensure compliance with these guidelines.

Online Reporting of Form ODI

12. Online OID application has been revamped to further reduce the traditional paper based filing system, to provide the AD banks fast and easy accessibility to data for reference purpose, to improve the coverage and ensure proper monitoring of the flows in a dynamic environment. Accordingly, modules in online OID application have been added, wherein all the ODI forms as mentioned in this circular may be reported.

13. A concept of AD Maker, AD Checker and AD Authorizer has now been introduced in the online application process. The AD Maker shall initiate the transaction and submit to the AD Checker for verification of the transaction before submission to Reserve Bank. The AD Authorizer shall have the authority to ratify these ODI transaction which are pending due to various reasons, such as, delay arising on account of seeking further clarification from the IP / RI, technical difficulty in reporting the transaction in the online OID application and on account of delay in completing the due diligence process.

14. The AD bank may identify an official in the middle management level who may be assigned the responsibility of the AD Authorizer. The Authorizer shall be entrusted with the following responsibilities:

i. Examining the genuineness of the reason/s behind late submission of the ODI Forms.

ii. Ratifying those online transaction which are reported with a delay owing to operational difficulties after recording the facts in the online OID application under the Remarks column.

15. The Centralized Unit / Nodal Office of the AD bank should ensure online reporting of Overseas Investments in the application hosted on the website https://oid.rbi.org.in

16. The AD Maker, AD Checker and AD Authoriser identified by the AD Bank may obtain a user-id for accessing the online OID application by submitting a request in the prescribed format (Annex V).

17. Any non-compliance with respect to the instruction for submission of Form ODI Part I, Part II and Part III shall be treated as contravention of Regulation 6 (2) (vi), Regulation 15 and Regulation 16 respectively, of the FEMA Notification No 120/RB-2004 dated July 07, 2004 as amended. The Reserve Bank will take a serious view on non-compliance with the guidelines / instructions and initiate penal action as considered necessary.

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

19. Master Direction No. 15/2015-16 dated January 1, 2016 and Master Direction No. 18/ 2015-16 dated January 1, 2016 are being updated to reflect the changes.

20. 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.

RBI/2015-16/374

(A K Pandey)
Chief General Manager

61 – 13-4-2016


A P (DIR Series)

CIRCULAR NO

61/RBI, Dated: April 13, 2016

Overseas Direct Investment – Submission of Annual Performance Report

Attention of the Authorised Dealer (AD – Category I) banks is invited to the Notification No. FEMA 120/RB-2004 dated July 7, 2004 [Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004] (the Notification), as amended from time to time. Attention of AD Category – I banks is also invited to A. P. (DIR Series) Circular No. 68dated June 01, 2007 on Rationalisation of Forms, A. P. (DIR Series) Circular No. 29 dated September 12, 2012 on rationalisation of guidelines relating to submission of the Annual Performance Report (APR), A. P. (DIR Series) Circular No. 24 dated August 14, 2013 on Liberalised Remittance Scheme (LRS) by Resident Individuals under which they were allowed to set up JV / WOS outside India and para B.14 of FED Master Direction No. 15 /2015-16 dated January 1, 2016.

2. At present, an Indian Party (IP) / Resident Individual (RI) which has made an Overseas Direct Investment (ODI) has to comply with certain obligations prescribed under the Notification No. FEMA 120/RB-2004 dated July 07, 2004 as amended from time to time. One of these includes obligation for submission of an Annual Performance Report (APR) in Form ODI Part III to the Reserve Bank by 30th of June every year in respect of each Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside India set up or acquired by the IP / RI (as prescribed under Regulation 15 of FEMA Notification, ibid).

3. It has been observed that:

a) IP / RI are either not regular in submitting the APR or are submitting it with delay. This is not in line with Regulation 15 of the Notification, ibid.

b) Remittance/s and other forms of financial commitment are often facilitated by the designated Authorised Dealer bank (AD bank) under automatic route even though APR in respect of all overseas JV / WOS of the IP / RI effecting such remittance/s have not been submitted. This is in contravention of Regulation 6(2)(iv) of the Notification, ibid.

4. In order to provide AD banks greater capability to track submission of APRs and also improve compliance level in the matter of submission of APRs by the IPs / RIs, it is now advised as under:

a) The online OID application has been suitably modified to enable the nodal office of the AD bank to view the outstanding position of all the APRs pertaining to an applicant including for those JV / WOS for which it is not the designated AD bank. Accordingly, the AD bank, before undertaking / facilitating any ODI related transaction on behalf of the eligible applicant, should necessarily check with its nodal office to confirm that all APRs in respect of all the JV / WOS of the applicant have been submitted;

b) Certification of APRs by the Statutory Auditor or Chartered Accountant need not be insisted upon in the case of Resident Individuals. Self-certification may be accepted;

c) In case multiple IPs / RIs have invested in the same overseas JV / WOS, the obligation to submit APR shall lie with the IP / RI having maximum stake in the JV / WOS. Alternatively, the IPs / RIs holding stake in the overseas JV / WOS may mutually agree to assign the responsibility for APR submission to a designated entity which may acknowledge its obligation to submit the APR in terms of Regulation 15 (iii) of Notification, ibid, by furnishing an appropriate undertaking to the AD bank;

d) An IP / RI, which has set up / acquired a JV / WOS overseas in terms of the Regulations of the Notification, ibid, shall submit, to the AD bank every year, an APR in Form ODI Part II in respect of each JV / WOS outside India and other reports or documents by 31st of December each year or as may be specified by the Reserve Bank from time to time. The APR, so required to be submitted, shall be based on the latest audited annual accounts of the JV / WOS unless specifically exempted by the Reserve Bank.

5. AD banks may issue necessary instructions to all the dealing officials at the bank / branch level and put in place proper processes and systems to ensure compliance with the extant FEMA guidelines. Any non-compliance with the instruction relating to submission of APR shall be treated as contravention of Regulation 15 of the Notification No. FEMA 120/RB-2004 dated July 07, 2004 as amended and viewed seriously.

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

7. Master Direction No. 15/2015-16 dated January 1, 2016 and Master Direction No. 18/ 2015-16 dated January 1, 2016 are being updated to reflect the changes.

8.The directions contained in this circular have been issued under section 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.

RBI/2015-16/373

(A K Pandey)
Chief General Manager

60 – 13-4-2016


A P (DIR Series)

CIRCULAR NO

60/RBI., Dated: April 13, 2016

Issuance of Rupee denominated bonds overseas

Attention of Authorized Dealer Category – I (AD Category – I) banks is invited to the provisions contained in A.P. (DIR Series) circular No. 17 dated September 29, 2015 on issuance of Rupee denominated bonds overseas and paragraph no. 3.2, 3.3.1, 3.3.3 and 3.3.9 of Master Direction No.5 dated January 1, 2016 on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers. Attention of Authorized Dealer Category – I (AD Category – I) banks is also invited to paragraph no. 30 and 31 of the Fourth Bi-Monthly Monetary Policy Statement, 2015-16 issued on September 29, 2015, in terms of which:

i. The limits for Foreign Portfolio Investment (FPI) in debt securities is to be announced / fixed in Rupee terms and;

ii. The issuance of Rupee denominated bonds overseas will be within the aggregate limit of foreign investment permitted in corporate debt as notified from time to time.

2. According to the Monetary Policy Statement, the current limit of USD 51 billion for foreign investment in corporate debt, as was given in A.P. (DIR Series) circular No. 94 dated April 01, 2013, has been fixed in Rupee terms at Rs. 2443.23 billion. Issuance of Rupee denominated bonds overseas will be within this aggregate limit of foreign investment in corporate debt.

3. With fixing of aggregate limit of foreign investment in corporate debt in Rupee terms, the provision at Sr. No. 7 of the table in the Annex to the aforesaid circular dated September 29, 2015 regarding the amount of borrowing by issuance of Rupee denominated bonds overseas has also been modified. As the overall limit is now prescribed in Rupee terms, the maximum amount which can be borrowed by an entity in a financial year under the automatic route by issuance of these bonds will be Rs. 50 billion and not USD 750 million as given in the circular. Proposals to borrow beyond Rs. 50 billion in a financial year will require prior approval of the Reserve Bank.

4. Further, in order to have consistency regarding eligibility of foreign investors in corporate debt, the criteria for investors and location for issuance of these bonds has been modified. The Rupee denominated bonds can only be issued in a country and can only be subscribed by a resident of a country:

• that is a member of Financial Action Task Force (FATF) or a member of a FATF- Style Regional Body; and

• whose securities market regulator is a signatory to the International Organization of Securities Commission’s (IOSCO’s) Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding with the Securities and Exchange Board of India (SEBI) for information sharing arrangements; and

• should not be a country identified in the public statement of the FATF as:

(i) A jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or

(ii) A jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.

5. It has been decided to reduce the minimum maturity period for Rupee denominated bonds issued overseas to three years in order to align with the maturity prescription regarding foreign investment in corporate bonds through the Foreign Portfolio Investment (FPI) route.

6. Accordingly, the criteria mentioned at Sr. No. 3 and 4 of the table in the Annex to the aforesaid circular dated September 29, 2015 for recognized investors and maturity respectively, stands modified.

7. Borrowers issuing Rupee denominated bonds overseas should incorporate clause in the agreement / offer document so as to enable them to obtain the list of primary bond holders and provide the same to the regulatory authorities in India as and when required. The agreement / offer document should also state that the bonds can only be sold / transferred / offered as security overseas subject to compliance with aforesaid IOSCO / FATF jurisdictional requirements.

8. In order to capture inflows/ outflows (principal only) on account of the borrowing by issuance of these bonds, AD Category – I banks should report to the Foreign Exchange Department, External Commercial Borrowings Division, Central Office, Shahid Bhagat Singh Road, Fort, Mumbai – 400 001, the figures of actual drawdown(s) / repayment(s) by their constituent borrowers quoting the related loan registration number. Such reporting by email shall be made on the date of transaction itself. This reporting will be in addition to the returns filed with the Department of Statistics and Information Management of the Reserve Bank (viz Form 83 and ECB 2 Return) as in the case of availment of External Commercial Borrowings (ECB).

9. All other provisions of Circular dated September 29, 2015 remain unchanged. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.

10. The changes / revised instructions in respect of issuance of Rupee denominated bonds as mentioned at paragraph no. 3 to 7 above, will be applicable from the date of issuance of this Circular. Transactions already carried out as per earlier instructions / pipe line transactions where LRN has already been obtained / proposals where agreement have already been signed and / or offer document already issued may be concluded as per provisions contained in Circular dated September 29, 2015. Post-facto reporting of actual transactions, already undertaken shall, however, be made to the Foreign Exchange Department immediately at the email given in paragraph no.8 above.

11. Relevant paragraphs of the Master Directions No. 5 dated January 01, 2016 issued by RBI are being updated to reflect the changes.

12. The directions contained in this circular have been issued under section 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.

RBI/2015-16/372

(Shekhar Bhatnagar)
Chief General Manager-in-Charge

59 – 13-4-2016


A P (DIR Series)

CIRCULAR NO

59/RBI., Dated: April 13, 2016

Acceptance of deposits by Indian companies from a person resident outside India for nomination as Director

Attention of Authorised Dealers Banks is invited to Regulation 3 of the Foreign Exchange Management (Deposit) Regulations, 2016, notified vide Notification No. FEMA 5(R)/2016-RBdated April 1, 2016, in terms of which no person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India.

2. Under section 160 of the Companies Act, 2013, it is provided that a person who intends to nominate himself or any other person as a director in an Indian company is required to place a deposit with the said company. In this context, it has come to the notice of the Reserve Bank that there is ambiguity whether such deposits will require any specific approval from the Reserve Bank under Notification No. FEMA 5(R), in cases where the deposit is received from a person resident outside India.

3. It is clarified that keeping deposits with an Indian company by persons resident outside India, in accordance with section 160 of the Companies Act, 2013, is a current account (payment) transaction and, as such, does not require any approval from Reserve Bank. All refunds of such deposits, arising in the event of selection of the person as director or getting more than twenty five percent votes, shall be treated similarly.

4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned. Necessary amendments have been carried out in Master Direction No 14 on Deposits and Accounts.

5. The directions contained in this circular have been issued under section 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.

RBI/2015-16/371

(A K Pandey)
Chief General Manager

No. 192/02/2016 Dated: 13-4-2016


Clarification on issues regarding levy of Service Tax on the services provided by Government or a local authority to business entities – Dated 13-4-2016 – Service Tax

Circular No. 192/02/2016-Service Tax

F.No. 334/8/2016-TRU

Government of India

Ministry of Finance

Department of Revenue

(Tax Research Unit)

Dated- April 13, 2016

To,

Principal Chief Commissioners of Customs and Central Excise (All)

Principal Chief Commissioners of Central Excise & Service Tax (All)

Principal Director Generals of Goods and Service Tax/System/CEI

Director General of Audit/Tax Payer Services

Principal Commissioners/ Commissioners of Customs and Central Excise (All)

Principal Commissioners/Commissioners of Central Excise and Service Tax (All)

Principal Commissioners/Commissioners of Service Tax (All)

Principal Commissioners/Commissioners LTU/Central Excise/Service Tax (Audit)

Subject: – Clarification on issues regarding levy of Service Tax on the services provided by Government or a local authority to business entities – reg.

Madam/Sir,

Any service provided by Government or a local authority to a business entity has been made taxable w.e.f 1st April 2016. Post Budget 2016, representations have been received from several quarters including business and industry associations in respect of various aspects pertaining to the taxation of such services. Accordingly, the following clarifications are issued:-

Sl. No.

Issue

Clarification

1.

Services provided by Government or a local authority to another Government or a local authority. Such services have been exempted vide Notification No. 25/2012 -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016[Entry 54 refers]. However, the said exemption does not cover services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of theFinance Act, 1994.

2.

Services provided by Government or a local authority to an individual who may be carrying out a profession or business. 1. Services by way of grant of passport, visa, driving license, birth or death certificates have been exempted vide Notification No. 25/2012 -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016[Entry 55 refers].2. Further, for services provided upto a taxable value of ₹ 5000/-, Sl. No. 5 below may please be seen.

3.

Service Tax on taxes, cesses or duties. Taxes, cesses or duties levied are not consideration for any particular service as such and hence not leviable to Service Tax. These taxes, cesses or duties include excise duty, customs duty, Service Tax, State VAT, CST, income tax, wealth tax, stamp duty, taxes on professions, trades, callings or employment, octroi, entertainment tax, luxury tax and property tax.

4.

Service Tax on fines and penalties. 1. It is clarified that fines and penalty chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to Service Tax.2. Fines and liquidated damages payable to Government or a local authority for non-performance of contract entered into with Government or local authority have been exempted vide Notification No. 25/2012 -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016[Entry 57 refers].

5.

Services provided in lieu of fee charged by Government or a local authority. It is clarified that any activity undertaken by Government or a local authority against a consideration constitutes a service and the amount charged for performing such activities is liable to Service Tax. It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not. As long as the payment is made (or fee charged) for getting a service in return (i.e., as a quid pro quo for the service received), it has to be regarded as a consideration for that service and taxable irrespective of by what name such payment is called. It is also clarified that Service Tax is leviable on any payment, in lieu of any permission or license granted by the Government or a local authority.2. However, services provided by the Government or a local authority by way of:(i) registration required under the law;

(ii) testing, , calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under the law,
have been exempted vide Notification No. 25/2012 – -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016 [Entry 58 refers].

3. Further, services provided by Government or a local authority where the gross amount charged for such service does not exceed ₹ 5000/-have been exempted vide Notification No. 25/2012 -ST dated 20.6.2012 as amended byNotification No. 22/2016 -ST dated 13.4.2016 [Entry 56 refers]. However, the said exemption does not cover services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994. Further, in case of continuous service, the exemption shall be applicable where the gross amount charged for such service does not exceed ₹ 5000/-in a financial year.

4. It is also clarified that Circular No. 89/7/2006-Service Tax dated 18-12-2006& and Reference Code 999.01/23.8.07 in Circular No. 96/7/2007-ST dated 23.8.2007 issued in the pre-negative list regime are no longer applicable.

6.

Services in the nature of allocation of natural resources by Government or a local authority to individual farmers. Services by way of allocation of natural resources to an individual farmer for the purposes of agriculture have been exempted vide Notification No. 25/2012 -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016 [Entry 59 refers]. Such allocations/auctions to categories of persons other than individual farmers would be leviable to Service Tax.

7.

Services in the nature of change of land use, commercial building approval, utility services provided by Government or a local authority. Regulation of land-use, construction of buildings and other services listed in the Twelfth Schedule to the Constitution which have been entrusted to Municipalities under Article 243W of the Constitution, when provided by governmental authority are already exempt under Notification No. 25/2012 -ST dated 20.6.2012. The said services when provided by Government or a local authority have also been exempted from Service Tax vide Notification No. 25/2012 -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016 [Entry 39 refers].

8.

Services provided by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of theConstitution . Such services have been exempted vide Notification No. 25/2012 -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016[Entry 60 refers].

9.

Whether Service Tax is payable on yearly installments due after 1.4.2016 in respect of spectrum assigned before 1.4.2016. Service Tax is payable on such installments in view of rule 7 of Point of Taxation Rules, 2011 as amended by vide Notification No. 24/2016 -ST dated 13.4.2016. However, the same have been specifically exempted videNotification No. 25/2012 -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016 [Entry 61 refers]. The exemption shall apply only to Service Tax payable on one time charge, payable in full upfront or in installments, for assignment of right to use any natural resource and not to any periodic payment required to be made by the assignee, such as Spectrum User Charges, license fee in respect of spectrum, or monthly payments with respect to the coal extracted from the coal mine or royalty payable on extracted coal which shall be taxable.

10.

When does the liability to pay Service Tax arise upon assignment of right to use natural resource where the payment of auction price is made in 10 (or any number of) yearly (or periodic) instalments under deferred payment option for rights assigned after 1.4.2016. Rule 7 of the Point of Taxation Rules, 2011 has been amended videNotification No. 24/2016 -ST dated 13.4.2016 to provide that in case of services provided by Government or a local authority to any business entity, the point of taxation shall be the earlier of the dates on which:(a) any payment, part or full, in respect of such service becomes due, as indicated in the invoice, bill, challan, or any other document issued by Government or a local authority demanding such payment; or(b) such payment is made.

Thus, the point of taxation in case of the services of the assignment of right to use natural resources by the Government to a business entity shall be thedate on which any payment, including deferred payments, in respect of such assignment becomes due or when such payment is made, whichever is earlier. Therefore, if the assignee/allottee opts for full upfront payment then Service Tax would be payable on the full value upfront. However, if the assignee opts for part upfront and remainder under deferred payment option, then Service Tax would be payable as and when the payments are due or made, whichever is earlier.

11.

How to determine the date on which payment in respect of any service provided by Government or a local authority becomes due for determination of point of taxation (Sl. No. 10 refers)? The date on which such payment becomes due shall be determined on the basis of invoice, bill, challan, or any other document issued by the Government or a local authority demanding such payment [Point of Taxation Rules, 2011 as amended by Notification No. 24/2016 -ST dated 13.4.2016refers]. For instance, Notice Inviting Applications (NIA) dated January 9, 2015 issued vide File No. 1000/16/2014-W.F./Auction for auction of right to use spectrum and letter dated March 29, 2015 issued vide File No. 1000 /23 / 2014 -W.F. /Auction by Department of Telecommunications to successful bidders of spectrum indicate the dates on which the payments in respect thereof become due. These may be accessed athttp://www.dot.gov.in/sites/default/files/u 8/NIA_January_2015.pdf and http://www.dot.gov.in/sites/default/files/u 8/Payment Methodology And Payment Details.pdf respectively.

12.

Whether Service Tax is leviable on spectrum user charges and license fee payable after 1.4.2016 for the year 2015-16. Service Tax is payable on such payments in view of rule 7 of Point of Taxation Rules, 2011 as amended by Notification No. 24/2016 -ST dated 13.4.2016. However, the same have been specifically exempted vide Notification No. 25/2012 -ST dated 20.6.2012 as amended by Notification No. 22/2016 -ST dated 13.4.2016 [Entry 62 refers].

13.

Whether Service Tax is payable on the interest charged by Government or a local authority where the payment for assignment of natural resources is allowed to be made under deferred payment option. Rule 6(2)(iv) of the Service Tax (Determination of Value) Rules, 2006 has been amended vide Notification No. 23/2016 -ST dated 13.4.2016 so as to provide that interest chargeable on deferred payment in case of any service provided by Government or a local authority to a business entity, where payment for such service is allowed to be deferred on payment of interest, shall be included in the value of the taxable service.

14.

When and how will the allottee of the right to use natural resource be entitled to take CENVAT Credit of Service Tax paid for such assignment of right. The CENVAT Credit Rules, 2004 have been amended vide Notification No. 24/2016 C.E. (N.T.) dated 13.4.2016. Consequently, the CENVAT Credit of the Service Tax on one time charges (whether paid upfront or in installments) paid in a year, may be allowed to be taken evenly over a period of 3 (three) years. [Rule 4(7) of CENVAT Credit Rules, 2004 as amended refers]. Detailed illustrations explaining how the CENVAT Credit is to be availed, are given in para 2 below.However, the Service Tax paid on spectrum user charges, license fee, transfer fee charged by the Government on trading of spectrum would be available in the year in which the same is paid. Likewise, Service Tax paid on royalty in respect of natural resources and any periodic payments shall be available as credit in the year in which the same is paid. The existing eighth proviso in sub-rule (7) of rule 4 of CENVAT Credit Rules, 2004 is being omitted because the same is superfluous.Amendments have also been made in CENVAT Credit Rules, 2004 so as to allow CENVAT credit to be taken on the basis of the documents specified insub-rule (1) of rule 9 of CENVAT Credit Rules, 2004 even after the period of 1 year from the date of issue of such a document in case of services provided by the Government or a local authority or any other person by way of assignment of right to use any natural resource [Fifth Proviso to sub-rule (7) of Rule 4 of CENVAT Credit Rules, 2004].

15.

On basis of which documents can CENVAT Credit be availed in respect of services provided by Government or a local authority. CENVAT Credit may be availed on the basis of challan evidencing payment of Service Tax by the Service recipient [Clause (e) of sub-rule (1) of rule 9 ofCENVAT Credit Rules, 2004, refers].

2. Illustration explaining how the CENVAT Credit is to be availed on Service Tax paid for assignment of right to use natural resources:

Government of India assigns right to use spectrum for a period of 20 years in an auction held in May 2016. The Notice Inviting Application (NIA) for auction of spectrum specifies that the successful bidders would have two payment options –

(a) Full upfront payment:

to make full upfront payment of full auction price (bid amount) by, let’s say, 25.6.2016;

or

(b) Deferred payment:

(i) An upfront payment of 33% of the final bid amount shall be made by 25.6.2016;

(ii) There shall be a moratorium of 2 years for payment of balance amount of one time charges for the spectrum, which shall be recovered in 10 equal annual instalments of ₹ 131.94 including interest for deferred payment.

(iii) The 1st instalment of the balance due shall become due on the third anniversary of the scheduled date of the first payment. Subsequent instalment shall become due on the same date of each following year.

(iv) The applicable rate of interest under deferred payment option shall be 10%.

CASE 1:

Company ABC becomes the successful bidder. The spectrum is assigned to ABC for a total consideration of ₹ 1000/-. ABC chooses to make full upfront payment on the due date. The Service Tax liability and eligibility of the CENVAT Credit in this case would be as follows:

(i) The amount of ₹ 1000/- will become due on 25.6.2016. Thus, according to rule 7 of the Point of Taxation Rules, 2011 the point of taxation shall be 25.6.2016.

(ii) According to rule 6(1) of the Service Tax Rules, 1994, the liability to pay Service Tax liability of ₹ 150/- on the consideration of ₹ 1000/- paid or payable would be required to be discharged by 6.7.2016.

(iii) According to the sixth proviso to rule 4(7) of the CENVAT Credit Rules, the CENVAT Credit in respect of the Service Tax paid would be spread over 3 years as follows:

Financial Year

Amount of CENVAT Credit eligible to be taken

(1/3 of total Service Tax paid)

2016-17

₹ 50/-

2017-18

₹ 50/-

2018-19

₹ 50/-

CASE 2:

In the above example, ABC assigns the right to use the spectrum to Company XYZ on 1.8.2019 (and issues invoice dated 1.8.2019) for a consideration of ₹ 930/-. The Service Tax liability and eligibility of CENVAT Credit would be as follows:

F.Y.

Due date for payment

Amount payable by ABC for assignment of spectrum (Rs.)

Amount charged by ABC for further assignment of spectrum to XYZ (Rs.)

Service Tax liability on ABC @ 15% (Rs.)

Date of Point of Taxation

Date of payment of Service Tax

CENVAT Credit available to ABC in the relevant F.Y. (Rs.)

CENVAT Credit available to XYZ in the relevant F.Y. (Rs.)

2016-17

25.6.2016

1000

-

150

25.6.2016

6.7.2016

50

-

2017-18

-

-

-

-

-

-

50

-

2018-19

-

-

-

-

-

-

50

-

2019-20

930

139.50

1.8.2019

6.9.2019

-

46.5

2020-21

-

-

-

-

-

-

-

46.5

2021-22

-

-

-

-

-

-

-

46.5

TOTAL

289.5

150

139.5

CASE 3:

Company ABC becomes the successful bidder. The spectrum is assigned to ABC for a total consideration of ₹ 1000/-. ABC chooses the deferred payment option. The payment schedule, Service Tax liability and eligibility of CENVAT Credit would be as follows:

F.Y.

Instalment

Due date for payment

Amount payable (Rs.)

Service Tax liability @ 15% (Rs.)

Date of Point of Taxation

Date of payment of Service Tax

Eligible CENVAT Credit in the relevant F.Y. (Rs.)

2016-17

Upfront payment (33%)

25.6.2016

330

49.50

25.6.2016

6.7.2016

16.5

2017-18

-

-

-

-

-

-

16.5

2018-19

-

-

-

-

-

-

16.5

2019-20

1st

25.6.2019

131.94

19.80

25.6.2019

6.7.2019

6.60*

2020-21

2nd

25.6.2020

131.94

19.80

25.6.2020

6.7.2020

6.60 +

6.60*

2021-22

3rd

25.6.2021

131.94

19.80

25.6.2021

6.7.2021

6.60 +

6.60 +

6.60*

2022-23

4th

25.6.2022

131.94

19.80

25.6.2022

6.7.2022

6.60 +

6.60 +

6.60*

2023-24

5th

25.6.2023

131.94

19.80

25.6.2023

6.7.2023

6.60 +

6.60 +

6.60*

2024-25

6th

25.6.2024

131.94

19.80

25.6.2024

6.7.2024

6.60 +

6.60 +

6.60*

2025-26

7th

25.6.2025

131.94

19.80

25.6.2025

6.7.2025

6.60 +

6.60 +

6.60*

2026-27

8th

25.6.2026

131.94

19.80

25.6.2026

6.7.2026

6.60 +

6.60 +

6.60*

2027-28

9th

25.6.2027

131.94

19.80

25.6.2027

6.7.2027

6.60 +

6.60 +

6.60*

2028-29

10th

25.6.2028

131.94

19.80

25.6.2028

6.7.2028

6.60 +

6.60 +

6.60*

2029-30

-

-

-

-

-

-

6.60 +

6.60

2030-31

-

-

-

-

-

-

6.60

TOTAL

247.5

247.5

Note: Figures with * indicate the amount of CENVAT credit available against Service Tax paid during that year.

CASE 4:

In the above example, if ABC further assigns the right to use the spectrum to Company XYZ on 1.8.2020 for a consideration of ₹ 200/-. The Service Tax liability and eligibility of CENVAT Credit would be as follows:

F.Y.

Instalment

Due date for payment

Amount payable to Govt for assignment of spectrum (Rs.) ABC

Amount charged by ABC for further assignment of spectrum to XYZ (Rs.)

Amount payable to Govt for assignment of spectrum (Rs.) XYZ

Service Tax liability @ 15% (Rs.) ABC

Service Tax liability @ 15% (Rs.) XYZ

Date of Point of Taxation

Date of payment of Service Tax

Eligible CENVAT Credit in the relevant F.Y. (Rs.) ABC

Eligible CENVAT Credit in the relevant F.Y. (Rs.) XYZ

2016-17

Upfront payment (33%)

25.6.2016

330

-

-

49.50

-

25.6.2016

6.7.2016

16.5

-

2017-18

-

-

-

-

-

-

-

-

-

16.5

-

2018-19

-

-

-

-

-

-

-

-

-

16.5

-

2019-20

1st

25.6.2019

131.94

-

-

19.80

-

25.6.2019

6.7.2019

6.60*

-

2020-21

2nd

25.6.2020

131.94

200

-

19.80 (on 2nd Instalment) + 30 (for further assignment to XYZ)

-

25.6.2020 (in respect of the 2nd installment) and 1.8.2020 (in respect of further assignment to XYZ)

6.7.2020 (in respect of the 2nd installment) and 6.9.2020 (in respect of further assignment to XYZ)

6.60 + 6.60* + 19.80 (being balance CENVAT Credit)

30/3 = 10*

2021-22

3rd

25.6.2021

-

-

131.94

-

19.80

25.6.2021

6.7.2021

-

10 +

6.60*

2022-23

4th

25.6.2022

-

-

131.94

-

19.80

25.6.2022

6.7.2022

-

10 +

6.60 +

6.60*

2023-24

5th

25.6.2023

-

-

131.94

-

19.80

25.6.2023

6.7.2023

-

6.60 +

6.60 +

6.60*

2024-25

6th

25.6.2024

-

-

131.94

-

19.80

25.6.2024

6.7.2024

-

6.60 +

6.60 +

6.60*

2025-26

7th

25.6.2025

-

-

131.94

-

19.80

25.6.2025

6.7.2025

-

6.60 +

6.60 +

6.60*

2026-27

8th

25.6.2026

-

-

131.94

-

19.80

25.6.2026

6.7.2026

-

6.60 +

6.60 +

6.60*

2027-28

9th

25.6.2027

-

-

131.94

19.80

25.6.2027

6.7.2027

-

6.60 +

6.60 +

6.60*

2028-29

10th

25.6.2028

-

-

131.94

19.80

25.6.2028

6.7.2028

-

6.60 +

6.60 +

6.60*

2029-30

-

-

-

-

-

-

-

-

-

6.60 +

6.60

2030-31

-

-

-

-

-

-

-

-

-

6.60

TOTAL

119.10

158.40

89.10

188.40

Note: Figures with * indicate the amount of CENVAT credit available against Service Tax paid during that year.

3. All concerned are requested to acknowledge the receipt of this Circular.

4. Wide publicity may be given so that the assessees and public are aware of the above. All the major Industry and Trade Associations may be informed accordingly. Difficulty if any, in the implementation of the Circular should be brought to the notice of the Tax Research Unit.

5. Hindi version would follow.

Yours faithfully,

(Abhishek Verma)

Technical Officer (TRU)

Notification No: 24/2016 Dated: 13-4-2016


Seeks to amend rule 7 of Point of Taxation Rules, 2011 – 24/2016 – Dated 13-4-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No. 24/2016-Service Tax

New Delhi, the  13th April, 2016

G.S.R.—(E).- In exercise of the powers conferred by clause (a) and clause (hhh) of subsection (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend thePoint of Taxation Rules, 2011, namely :-

1.  (1) These rules may be called the Point of Taxation (Third Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Point of Taxation Rules, 2011, in rule 7, after the third proviso, the following proviso shall be inserted namely:-

“Provided also that in case of services provided by the Government or local authority to any business entity, the point of taxation shall be the earlier of the dates on which, -

(a)  any payment, part or full, in respect of such service becomes due, as specified in the invoice, bill, challan or any other document issued by the Government or local authority demanding such payment; or

(b)  payment for such services is made.”.

[F. No. 334 / 8 /2016 -TRU]

(Mohit Tiwari)

Under Secretary to the Government of India

Note:-  The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 18/2011 – Service Tax, dated the 1st of March, 2011 vide number G.S.R. 175(E) dated the 1st of March, 2011 and last amended vide notification No. 21/2016 – Service Tax dated 30th March, 2016 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), by number G.S.R.370 (E), dated the 30th March, 2016.

Notification No: 23/2016 Dated: 13-4-2016


Seeks to amend rule 6 sub-rule (2), of Service Tax (Determination of Value) Rules, 2006 – 23/2016 – Dated 13-4-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No. 23/2016-Service Tax

New Delhi, the 13th April, 2016

G.S.R.____ (E).- In exercise of the powers conferred by clause (aa) of sub-section (2) of section 94 of the Finance Act,1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax (Determination of Value) Rules, 2006, namely:–

1.  (1) These rules may be called the Service Tax (Determination of Value) Amendment Rules, 2016.

(2)  They shall come into force on the date of their publication in the Official Gazette.

2. In rule 6, in sub-rule (2), in clause (iv), the following proviso shall be inserted namely:-

“Provided that this clause shall not apply to any service provided by Government or a local authority to a business entity where payment for such service is allowed to be deferred on payment of interest or any other consideration.”.

[F. No. 334 / 8 /2016 -TRU]

(Mohit Tiwari)

Under Secretary to the Government of India

Note:- The principal rules were published vide notification No.12/2006-Service Tax, dated the 19th  April, 2006, in the Gazette of India, Extraordinary, vide number G.S.R.228 (E), dated the 19th April, 2006 and last amended bynotification No.11/2014-Service Tax, dated the 11th July, 2014, vide number G.S.R.480(E),dated the 11th July, 2014.

Notification No: 22/2016 Dated: 13-4-2016


Seeks to amend Notification No. 25/2012- Service Tax dated 20.06.2012, so as to exempt from Service Tax, certain services provided by Government or a local authority to business entity – 22/2016 – Dated 13-4-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No. 22/2016-Service Tax

New Delhi, the 13th April, 2016

G.S.R.….(E).-In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.25/2012-Service Tax, dated the 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 467 (E), dated the 20th June, 2012, namely:-

In the said notification, in the first paragraph,-

(i)    in entry 39, after the words “Services by”, the words “Government, a local authority or” shall be inserted;

(ii)   after entry 53, the following entries shall be inserted, namely:-

“54.  Services provided by Government or a local authority to another Government or local authority:

Provided that nothing contained in this entry shall apply to services specified in sub-clauses (i),(ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994;

55. Services provided by Government or a local authority by way of issuance of passport, visa, driving licence, birth certificate or death certificate;

56. Services provided by Government or a local authority where the gross amount charged for such services does not exceed ₹ 5000/- :

Provided that nothing contained in this entry shall apply to services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994:

Provided further that in case where continuous supply of service, as defined in clause (c) of rule 2 of thePoint of Taxation Rules, 2011, is provided by the Government or a local authority, the exemption shall apply only where the gross amount charged for such service does not exceed ₹ 5000/- in a financial year;

57.  Services provided by Government or a local authority by way of tolerating non-performance of a contract  for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority under such contract;

58.   Services provided by Government or a local authority by way of-

(a)    registration required under any law for the time being in force;

(b)   testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under any law for the time being in force;

59.   Services provided by Government or a local authority by way of assignment of right to use natural resources to an individual farmer for the purposes of agriculture;

60.   Services by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution;

61.   Services provided by Government or a local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Government or the local authority before the 1st April, 2016:

Provided that the exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource;

62.   Services provided by Government or a local authority by way of allowing a business entity to operate as a telecom service provider or use radiofrequency spectrum during the financial year 2015-16 on payment of licence fee or spectrum user charges, as the case may be;

63. Services provided by Government by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges (MOT).”.

[F. No. 334 / 8 /2016 -TRU]

(Mohit Tiwari)

Under Secretary to the Government of India

Note:- The principal notification was published in the Gazette of India, Extraordinary, vide notification No. 25/2012 – Service Tax, dated the 20th  June, 2012, vide number G.S.R. 467 (E), dated the 20th June, 2012 and was last amended vide notification number 09/2016 – Service Tax, dated the 1st March, 2016 vide number G.S.R. 257(E), dated the 1st March, 2016.

ST on services rendered by ‘Govt’ – opening Pandora’s Box? : April 13, 2016


Taxindiaonlinelogo-jpgBy S Sivakumar, LL.B., FCA, FCS, ACSI, MBA, Advocate

 IN a move having widespread ramification, ‘all services’ rendered by ‘Government’ to business entities have being brought under the Reverse Charge Mechanism, with effect from 01.04.2016.

Section 65B(26A) of the Finance Act, 1994 defines ‘Government’ as under :

(26A) “Government” means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder”

Section 3(23) of the General Clauses Act, 1897, reads as under:

(23) “Government” or “the Government” shall include both the Central Government and any State Government ;

A combined reading of the above provisions would indicate that, public sector companies, electricity and public utility boards formed under the respective Acts, public sector banks and other corporations controlled by the Central and State Governments would not be treated as ‘Government’. It would seem that only the Government Departments would be treated as ‘Government’ for purposes of Section 65B(26).

In terms of Section 66D of Finance Act, 1994, except for services rendered by the Department of Posts, Renting of Immovable Property services, Transport of goods and/or passengers and Services in relation to a vessel or an aircraft, etc., all other services rendered by Government to business entities would be covered under the Reverse Charge Mechanism, due to the substitution of the words ‘support service’ by the words ‘any service’ in Clause (iv) of Section 66D(a) of the Finance Act, 1994. This development has manifold ramifications inasmuch as any service rendered by the Government would be liable to service tax under the Reverse Charge Mechanism.

Here is my take on some of the contentious issues that could emerge, post 1-4-2016 ….

Is RCM applicable on taxes and duties paid to the Government - It cannot be said that the Government is rendering services to the taxpayers by collecting taxes. The Apex Court had held in, D G Ghouse v State of Kerala (1980) 2 SCC 410 that, ‘tax’ is its widest sense would include all money raised by taxation and would include taxes levied by the Central or State legislatures and also those known as ‘rates’ or other charges levied by the local authorities under statutory powers. Hence, in my view, duties, taxes and penalties levied under the Income tax Act, Central Excise Act, Finance Act, 1994, etc. cannot be subject to the levy of service tax under RCM.

In general, it would seem that, RCM would be attracted in cases involving levy of ‘fee’ by the Government. In the case of a ‘fee’, there is an underlying assumption of a ‘service’ that is provided by the Government, inasmuch as, it can be stated that a ‘fee’ is a charge for the rendering of certain services by the Government. However, the Apex Court in Agricultural Marketing Committee v Rajam Jute and Oil Millers Association 131 STC 472(SC), it was held that, though quid pro quo between the levy of fees and the provision of services is a necessary pre-requisite, it is not necessary that there should be an exactitude between the two.

However, in terms of the ‘late fee’ that is levied for late filing of the ST-3 returns, RCM would be applicable, in my view, as this is not a tax or a penalty.

In practical situations, there could be a lot of confusion as to the applicability of service tax on fees levied for the purpose of raising revenue under the tax laws, as in these cases the fees so collected could be treated as ‘tax’.

Government’s sovereign activities vs support activities

In its master circular No. 967/2007-ST, dated: August 23, 2007, the Government had issued the following clarification, in respect to the issue raised in Sl.No. 999.01 viz.

Issue:

Sovereign/public authorities perform functions assigned to them under the law in force, known as “statutory functions”. For example, ·

Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments;

Regional Transport Officers (RTO) issue fitness certificate to motor vehicles;

Directorate of Boilers inspects and issues certificates for boilers; or

Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws.

Government’s clarification:

Authorities providing such functions, required to be performed as per law, may collect specific amount or fee and the amount so collected is deposited into government account.

Whether such activities of a sovereign / public authority, performed under a statute, can be considered as ‘provision of service’ for the purpose of levy of service tax and the amount or fee collected, if any, for such purposes can be treated as consideration for the services provided?

Activities assigned to and performed by the sovereign / public authorities under the provisions of any law are statutory duties. The fee or amount collected as per the provisions of the relevant statute for performing such functions is in the nature of a compulsory levy and are deposited into the Government account.

Such activities are purely in public interest and are undertaken as mandatory and statutory functions. These are not to be treated as services provided for a consideration. Therefore, such activities assigned to and performed by a sovereign / public authority under the provisions of any law, do not constitute taxable services. Any amount / fee collected in such cases are not to be treated as consideration for the purpose of levy of service tax.

However, if a sovereign / public authority provides a service, which is not in the nature of statutory activity and the same is undertaken for a consideration (not a statutory fee), then in such cases, service tax would be leviable as long as the activity undertaken falls within the scope of a taxable service as defined.

To what extent, the view expressed in the above referred Circular that no service tax can be levied on the activities undertaken by a sovereign or a public authority, would be valid post 1-4-2016 is not known, given the insertion of the words ‘all services’ in Section 66D(a)(iv) of the Finance Act, 1994. Obviously, the Government feels that most of the activities performed by the Government are ‘services’, exigible to the levy of service tax with effect from 1-4-2016. There could be a lot of confusion regarding activities involving payment of fees to the Central Governments for obtaining permits, licenses, approvals including licenses for imports and exports, registrations, etc., as a view can be taken that these fees or charges are paid against the sovereign functions performed by the Government which cannot be treated as ‘services’ within the meaning of the service tax law.

However, it would seem that fees paid for certain specific services could be straightway covered under the RCM. Thus, inspection fees paid to Government Departments, fee paid to the Ministry of Corporate Affairs for accessing third party public documents, Merchant Overtime Charges paid to customs officers, etc. could be subject to payment of service tax under RCM, as these charges are paid for obtaining specific services from the Government. However, filing fee paid to the MCA for filing of documents and financial statements under the Companies Act may not be treated as a ‘service’ as these fees are paid to the Government under the statute.

Taking this discussion forward…fees or charges paid to the Police Department for seeking private protection should involve RCM, as providing protection to private parties on request cannot be treated as an activity performed under a statutory or sovereign power.

Stamp duties paid on registration of properties would also not be subject to RCM, in my view, as these charges are levied under the Stamp Duty Acts of the State Governments.

Before concluding….

It would seem that, by seeking to insert clause (j) in Section 66E, in terms of which, assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof, would be treated as a ‘declared service’, the Government has ensured that it would collect tens of thousands of crores as service tax on the spectrum related charges collected from the corporates. This would seem to be a masterstroke, as this insertion in the list of declared services cannot even be challenged in the Courts.

Whenever in doubt, the business entities would be advised to play it safe by paying service tax under RCM and claim cenvat credit of the same.

It cannot be gainsaid that the Government has indeed opened a Pandora’s box by seeking to levy service tax on ‘all services’ rendered by the Government without clearly specifying as to whether the sovereign or statutory functions performed by the Government can be treated as ‘services’.

The Board would do well to come with a clarificatory circular on whether the fees or charges paid against sovereign or statutory powers exercised by the Government are liable to the levy of service tax under RCM, post 1-4-2016.

Government eases approval for foreign firms to set up branch offices : 13-04-2016


To improve ease of doing business for foreign entities, the government today relaxed approval process for setting up of their branch, liaison and project offices in the country.

Except for defence, telecom, private security, information and broadcasting and non-government organisation sectors, such approvals can now be given by certain banks, as against the earlier requirement of RBI approval for the same, the Finance Ministry said in a statement.

“Further, anyone who has been awarded a contract for a project by a government authority/PSU would be automatically given approval to open a bank account,” it said.

The sectors like defence, telecom, private security, information and broadcasting and non-government organisation, like earlier, will still require to seek the RBI approval before setting up their branch, liaison or project offices in India.

“As a measure towards improving the ease of doing business, it has now been decided that except for a few sectors viz defence, telecom, private security, information and broadcasting and non-government organisation and except a few countries, the power to grant approvals for establishment of branch, liaison, project offices by foreign entities, would be delegated to the Authorised Dealers Category-I Banks,” the statement added.

While the RBI gives permission in  those cases where 100 per cent FDI is allowed under automatic route, all other cases are referred to the government for approval.

The establishment of such offices in India by foreign entities is regulated in terms of FEMA 22/2000-RB.

The foreign entities can set up their offices in India without registering themselves as companies or trusts under Indian Laws.

As per RBI data, there are 106 authorised dealers category-I banks which includes IDFC Bank, Bandhan Bank, Doha Bank Credit, Suisse AG, Union Bank of India, State Bank of India, Punjab National Bank, Barclays Bank PLC and Abu Dhabi Commercial Bank, among others.

Source : PTI

Supreme Court to examine confidentiality of bank NPAs : 13-04-2016


The Supreme Court on Tuesday decided to examine if the total amount of defaults in repayment of loans running into “lakhs of crores of rupees” be made public, without disclosing the defaulters’ names. The Reserve Bank of India (RBI) counsel, however, resisted the proposal.

Pursuant to an earlier order of the apex court, RBI had submitted a list of individuals and companies, which had defaulted on bank loans of over Rs 500 crore, to a Bench headed by Chief Justice T S Thakur in a sealed envelope.

On Tuesday, the Chief Justice suggested that even if the names of the defaulters are not disclosed, the huge aggregate figure can be disclosed. “There is no confidentiality in figures; but the names may be kept out,” he observed.

RBI counsel Jaydeep Gupta cited provisions in the RBI Act and the Credit Information Companies (Regulation) Act, 2005, which mandate confidentiality of such information. “The disclosure of aggregate figure may have an impact on the economy,” he told the court. RBI also informed the court that it does not interfere in the day-to-day work of the banks.

Prashant Bhushan, counsel for Centre for Public Interest Litigation, who moved the petition, argued that the RBI was flouting the December 2015 order of the court regarding confidentiality of such bank account holders.

After this, the court decided to hold a full hearing on April 26 on the issue of confidentiality. The court also issued notice to the Finance Ministry and Indian Banks’ Association so that they can also put forth their viewpoints on the subject.

The Chief Justice observed that big defaulters were running away with huge NPAs while the farmers were being harassed for small loans. “We would like to be satisfied with the steps taken by RBI. If the banks do not act prudently, there is no hope of recovering loans,” he said.

During the hearing, Bhushan countered the RBI’s claim of confidentiality, pointing out that the Supreme Court in December had dismissed the Central bank’s appeal based on fiduciary relationship and confidentiality. It was a case of an RTI applicant seeking disclosure of the banks’ non-performing assets (NPAs). Bhushan said RBI was not raising any new point.

In that particular case, the Central Information Commission had directed RBI to disclose the NPAs to the person who had sought for it. But the RBI moved the Supreme Court with various arguments, which were ultimately rejected in a detailed judgment.

Bhushan further said that after the December judgment on RTI disclosure, RBI has asked the banks not to report NPAs to it, thus absolving itself of the responsibility.

Source : PTI

Govt may pay interest subsidy directly to borrowers : 12-04-2016


The Centre may revisit interest subvention schemes and replace them with back-end interest subsidies to improve transmission of monetary policy actions.

Interest subventions provide cheaper credit to a borrower up front, with the lender being compensated later by the government. A back-end subsidy involves direct payment of a subsidy at a later date to the borrower, who pays the market rate up front.

“We need to revisit our interest subvention schemes and replace them with back-end interest subsidies that do not interfere with marginal lending rates and yet have the same effect on loan repayments as interest subventions,” said Finance Secretary Ratan Watal on Monday.

The government currently provides interest subventions on export credit, farm loans, housing and education loans.

In his closing remarks at the second conference with State Finance Secretaries, Watal stressed that marginal distortions must be removed to ensure that the new system of setting marginal lending rates, started from April 1, is successful.

The government has moved to a quarterly review of the return on small savings in line with G-sec yields.

‘A better deal’

Watal said the decision to rationalise the small savings rate should be seen as a positive development that will help households get a “better deal” on lending rates.

Noting that monetary policy transmission cannot be left solely to the Reserve Bank of India, he said: “Our policy interventions can often interfere with the transmission of monetary policy actions.”

Analysts, however, noted that the impact of the back-end interest subsidy will depend on its design. Further, it would also have an effect on the industry.

“Specifically, for exporters, a back-end subsidy, such as one in cash, could impact their competitiveness while for other sectors, it could create a mismatch in their cash flow in the intervening period,” said Devendra Pant, Chief Economist, India Ratings.

In December 2015, a committee set up by the RBI on the Medium-term Path on Financial Inclusion had recommended phasing out the interest subvention scheme and ploughing the subsidy amount into a universal crop insurance scheme for small and marginal farmers.

It felt that the scheme had distorted the agricultural credit system and seems to have impeded long-term investment.

Source : PTI

15% duty on certain goods on India return after 1-yr foreign stay : 12-04-2016


Indians returning home after a year-long foreign stay will have to pay 15 per cent duty on bringing colour television, home theatre system and bullion other than ornaments into the country.

Until now, used personal and household articles including video cassette recorder/player, washing machine, electrical or LPG cooking range, computer and laptop, and domestic refrigerators of capacity up to 300 litres, besides jewellery up to Rs 50,000 by a gentleman and Rs 1 lakh by a lady were allowed duty free.

For other items, the Central Board of Excise and Customs (CBEC) notifies rules and rates every year.

For 2016-17, it listed 13 items that an Indian passport holder returning after having stayed abroad for at least 365 days during the two years immediately preceding the date of arrival in India, or any person on a bona fide transfer of residence to India can bring in duty free.

These are video cassette recorder/player, digital video disc player, music system, air-conditioner, microwave oven, word processing machine, fax machine, portable photocopying machine, washing machine, electrical or LPG cooking range, desktop computer, laptop computer and domestic refrigerators of the capacity up to 300 litres or its equivalent.

Colour Television, video home theatre system, dish washer, domestic refrigerators of capacity above 300 litres, deep freezer, video camera, cinematographic films of 35mm and above and gold or silver, in any form, other than ornaments would attract 15 per cent ad valorem customs duty, CBEC said.

For Indian passport holders, the total aggregate value of duty goods should not exceed Rs 5 lakh, CBEC said.

In a separate notification, CBEC said an Indian resident or a foreigner residing in India or a tourist of Indian origin, arriving from any country other than Nepal, Bhutan or Myanmar, shall be allowed clearance free of duty articles in his bona fide baggage including used personal effects and travel souvenirs and the 13 items in exempt list for long stay Indians.

For passenger arriving from Nepal, Bhutan or Myanmar, the ceiling of duty free baggage stands at Rs 15,000 for the 13 exempt items, it said.

CBEC said a 35 per cent ad valorem duty would be levied on any article the value of which exceeds the duty free allowance admissible.

These rules would however not apply to fire arms; cartridges of fire arms exceeding 50; cigarettes, cigars or tobacco in excess of the quantity prescribed for importation free of duty; alcoholic liquor or wines in excess of two litres; gold or silver in any form other than ornaments; flat panel (LCD or LED or Plasma) television; and goods imported through a courier service.

Source : The Financial Express

No. 3/2016 Dated: 12-4-2016


Relaxation of additional fees and extension of last date of filing of various e-Forms under the Companies Act – Dated 12-4-2016 – Companies Law

General Circular No 03 /2016

F. No. 01/34/2013 CL-V

Government of India

Ministry of Corporate Affairs

5th Floor, A Wing, Shastri Bhawan,

Dr. Rajendra Prasad Road, New Delhi -110001

Dated the 12th April, 2016

All Regional Directors,

All Registrar of Companies,

All stakeholders.

Subject: Relaxation of additional fees and extension of last date of filing of various e-Forms under the Companies Act – reg.

Sir

This Ministry has launched V2R2 on 28th March, 2016, downtime was given to Infosys from 25th March, 2016 to 27th March, 2016. Since the launch of the system, a number of stakeholders have faced issues and representations have been received from stakeholders to resolve the issues including, for allowing waiver of additional fee till the new system stabilizes.

2.  In view of the above, it has been decided to relax the additional fee payable on e-forms which are due for filing by companies between 25th March 2016 to 30th April,  2016 as one time waiver of additional fee and it is also clarified to stakeholders that if such due e-forms are filed after 10.05.2016, no such relaxation shall be allowed.

3. This issues with the approval of the Competent Authority.

Yours faithfully

(K.M.S. Narayanan)

Assistant Director

FinMin to replace interest subvention with back-ended subsidies : 12-04-2016


Concerned at the slow transmission of policy rate changes by banks, the Centre plans to replace interest subvention schemes with interest subsidies that do not interfere with lenders’ marginal lending rates. The government has also asked states to coordinate with one another in market borrowings so that there is no liquidity crunch.

“We need to revisit our interest subventions schemes and replace them with back-ended interest subsidies that do not interfere with the marginal lending rates, and yet have the same effect on the loan repayments as the interest subventions have,” Finance Secretary Ratan Watal said at a meeting with state finance secretaries here on Monday.

While the focus is on setting policy rates, equally important is the monetary policy transmission, said Watal. “This cannot be left entirely to the central bank. Our policy interventions can often interfere with the transmission of monetary policy actions.”

Noting that banks have moved to a new system of marginal setting of lending rates, he said, “This cannot succeed unless we remove the marginal distortions that have crept into our system over the years.”

He said the finance ministry’s decision to rationalise small savings rates should be seen as a positive development in this light. “Small savers and ordinary households are also needy creditors who deserve a better deal than they have been getting.” While the Reserve Bank of India has announced a number of path-breaking measures to systemically improve liquidity conditions, management of liquidity in the financial markets has remained an area of concern, he noted.

According to Watal, one of the reasons for the tight liquidity conditions, especially since October 2015, was that a number of government securities were simultaneously off-loaded by state governments to meet their borrowing requirements.

Having learnt from this experience, the Centre has now proposed a better coordinated and more evenly spaced borrowing schedule for 2016-17.

Source : Business Standard

No.1024/2016-CX, Dated : 11-04-2016


GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
(CENTRAL BOARD OF EXCISE AND CUSTOMS)
NEW DELHI

CIRCULAR NO

1024/12/2016-CX, Dated: April 11, 2016

To

All Principal Chief Commissioner / Chief Commissioners of Customs, Central Excise & Service Tax;
All Director Generals of Customs, Central Excise & Service Tax;
All Principal Commissioners/ Commissioners of Customs, Central Excise & Service Tax;
Webmaster, CBEC

Subject :- Clarification regarding re-refined used or waste-oil – reg

References have been received regarding excisability of re-refined used oil or waste oil. Various units are engaged in re-refining of waste oil or used lubricating oil collected from the transformers, service stations of vehicles etc. The matter has been examined.

Process

2. Used Oil contains impurities and contaminants such as moisture, diluents, sediments, metal particles and carbon. In refining units, waste or used oil undergoes various process such as dehydration-for removal of moisture, distillation-for removal of diluents, clay polishing- for removal of carbon by adsorption process, filtration-for removal of the clay and the dissolved carbon to render it usable. The oil so obtained from such waste or used oil is packed and sold as base oil, lubricating oil and transformer oil etc. to the consumers for further use.

Classification

2.1 “Waste oil” has been defined in note 3 of chapter 27 of First Schedule of Central Excise tariff Act, 1985 as waste containing mainly petroleum oils and oils obtained from bituminous minerals, whether or not mixed with water. These include:

(a) such oils no longer fit for use as primary products (for example, used lubricating oils used hydraulic oils and used transformer oil);

(b) sludge oils from the storage tanks of petroleum oils, mainly containing such oils high concentration of additives (for example, chemicals) used in the manufacture of primary products; and

(c) such oil in the form of emulsions in water or mixtures with water, such as those resulting from oil spills, storage tank washing, or from the use of cutting oils for machining operations.

2.2. Under Central Excise tariff heading 2710, there are three headings or sub-classifications at the single dash (-) level. The first of the three heading at single dash (-) level deals with petroleum oils and oils obtained from bituminous minerals……….etc. other than those containing bio-diesel and other than waste oil. Second heading at this level deals with those containing biodiesel other than waste oil and the third heading is meant for waste oil. Waste oil is further divided into two sub-classifications at eight digit level, with two dash (–), namely 27109100 and 27109900. Waste oil is classifiable in either of them depending upon its composition. Lubricating oil on the other hand is classifiable under CETH 27101980, a heading specifically covering lubricating oil.

3. It may be noted that used lubricating oil collected from service stations is not fit for use as primary products and will therefore be classified as waste oil whereas processed waste oil, which becomes fit for use as lubricating oil and would qualify as primary product, will be classified as lubricating oil.

Manufacture

4. Waste oil after processing may become lubricating oil but this process would not amount to manufacture in view of the judgement of tribunal in case of Collector vs Mineral Oil Corporation [1999 (114) ELT 166] = 2002-TIOL-530-CESTAT-DEL upheld by Hon’ble Supreme Court [2002 (140) ELT 248 (SC)]. However, the issue also needs to be examined in light of chapter note 4 of chapter 27 which was inserted in the Central Excise Tariff by the Finance Act of 2000.

5.1 Chapter note 4 of chapter 27 is a deeming fiction on manufacture and provides that:-

In relation to the lubricating oils and lubricating preparations of heading 2710, labelling or re-labelling of containers and re-packing from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumers, shall amount to manufacture”

5.2 This chapter note applies only to “lubricating oils and lubricating preparations of heading 2710″. Other goods falling under CETH 2710 are not covered by the chapter note. The deeming fiction provides that when one of the process listed in the chapter note is carried out on lubricating oil or lubricating preparations, it shall be deemed to be manufacture. These processes are-

(i) labelling or re-labelling of containers,

(ii) re-packing from bulk pack to retail packs,

(iii) adoption of any other treatment to render the product marketable to the consumers.

5.3 Thus for a re-refining unit, the test for levy of Central Excise duty is whether the lubricating oil (produced from the waste oil) has undergone any of the process listed in chapter note 4 of chapter 27 as explained above (paragraph 5.2). Where such process has been carried out, it would amount to manufacture and Central Excise duty would be leviable.

Application

6. A unit processing waste oil or used oil would need be examined in above light to decide whether the process undertaken by them amounts to manufacture. Where the process amounts to manufacture, Central Excise duty is payable. The issue is interpretational in nature and therefore where a demand is raised pursuant to this circular, it should be raised for normal period of limitations only. SSI benefit, where admissible, should be extended.

7. Field formations and trade may be informed suitably. Difficulty experienced, if any, in implementing the circular should be brought to the notice of the Board. Hindi version would follow.

F.No. 96/43/2015-CX.1

(Santosh Kumar Mishra)
Under Secretary to the Government of India

Banks Board Bureau discusses consolidation among PSBs : 11-04-2016


The Banks Board Bureau, headed by former Comptroller and Auditor General Vinod Rai, met for the first time on Friday to discuss consolidation among public-sector banks (PSBs) and board-level appointments, as well as means of recapitalising the lenders.

The meeting was held at the Reserve Bank of India (RBI)’s Mumbai central office and was addressed by Jayant Sinha, minister of state for finance.

  • Banks Board Bureau to discuss capital, consolidation today

While RBI Governor Raghuram Rajan and Deputy Governor S S Mundra were present at the start of the meeting, the core members of the bureau — Rai; H N Sinor, former joint managing director of ICICI Bank; Anil Khandelwal, former chairman and managing director of Bank of Baroda; and Roopa Kudva, former chief of rating agency Crisil — continued with the meeting for a few more hours. The bureau is a temporary arrangement, to be transitioned into a Bank Investment Company (BIC) that would act as a holding company for all government-owned lenders. The BIC will also be responsible for capital infusion in PSBs.

While the core members of the bureau refused to speak to the press, Sinha told reporters later in Delhi that the board discussed bank consolidation, tackling bad loans in bank books, and capital infusion in state-owned banks.

Sinha said the proposed transformation of IDBI Bank into a privately-owned lender was underway.Finance Minister Arun Jaitley had said in his Budget speech that the government would bring down its stake below 50 per cent in IDBI Bank and look into ways to consolidate existing banks.

“We have now undertaken this exercise of recapitalisation of banks within the existing resources. I am trying to find additional resources for that purpose, to strengthen the banks. Once they are strengthened, I’m going for consolidation of some of the banks,” Jaitley had said at an International Finance Corporation event in New Delhi earlier this week.

It is widely expected that India’s 27 public sector banks (including State Bank of India subsidiaries) would be brought down to around 10 banks as weak lenders would be merged with, or made subsidiaries of, stronger ones. The bureau, Jaitley said in his post-Budget interaction with the press, would spell out various modes of how to go for the consolidation.

PSBs have enormous amount of bad debt, lowering profitability and eroding their capital base. RBI’s asset quality review exposed further bad debt and banks reported ugly numbers in their December 2015 quarter results. The Punjab National Bank, for instance, showed a 93 per cent decline in profit after provisioning for these, and non-performing assets rising to 8.5 per cent of all loans. State Bank of India saw 62 per cent decline in net profit and fresh slippage of Rs 20,700 crore.

Jaitley had said in Budget 2016-17 that the government was moving towards privatising IDBI Bank. Capital infusion of Rs 25,000 crore in 2015-16 was also not enough for the PSBs. The bureau is expected to discuss a way forward.

Source : Business Standard

Filing income-tax returns gets more complicated : 11-04-2016


Filing income-tax returns is not a pleasant job for most, even for those who have no income to show other than salaries. And, the continuous changes in the income-tax returns form, often, makes the filing process more complicated. One has to be extremely careful about filling the various boxes in the Income Tax Return (ITR) form and ensure that it matches the details mentioned in the income certificates. And, with filing possible only online, there is no scope for any error, or else you can expect a notice from the income tax department.

This year might be a challenge for those who earn more than Rs 50 lakh. In addition to details of salary and various exemptions, these individuals also have to disclose the value of the non-financial assets they own. This value has to be the cost or acquisition value. The disclosures include particulars of assets like land, buildings, cash in hand, jewellery, bullion, aircraft, yachts and boats.

Another change this year is that individual taxpayers also need to report the details of the pass-through income received from business trusts or/and investment funds.

The intention behind the disclosure of assets is not to know the income per se, but to know if people have assets that are disproportionate to their income. Details of income, the tax deducted and your financial investments are already available with the tax department since these are linked to the Permanent Account Number (PAN). But the government now wants to know the value of your non-financial assets to rule out cases of disproportionate income. “The government wants to know how you have acquired an asset,” says Amit Maheshwari, partner, Ashok Maheshwary & Associates, chartered accountants.

Individuals are likely to face a challenge in determining cost of gifted assets (such as jewellery), inherited assets and for assets purchased several years earlier where records have not been retained, points out Tapati Ghose, partner, Deloitte Haskins & Sells.

CONFUSION OVER ASSET VALUE DECLARATION
  • The schedule mentions that the amount has to be mentioned at cost; experts suggest value at the time of acquiring the asset has to be mentioned
  • In the case of assets prior to 1981, one option is to declare the value at 1981-level because that is when the cost inflation index started
  • For assets purchased after 1981, an estimate has to be given of the value
  • In the case of inherited property, the value of the property when it was acquired by the previous owner has to be taken into account
  • If that is not known, an alternative is to assume the value as ‘0’

“A threshold limit for each category of asset for disclosure purposes would provide an administrative relief in case assets below a prescribed threshold are exempted from disclosure requirement. For instance, in the past, only cash value in excess of Rs 50,000 was required to be considered for wealth tax purposes,” Ghose adds.

The challenge is that most people don’t maintain records of purchases. According to the rules, salaried or individual taxpayers are not required to maintain books of accounts. This is applicable only to those who have business income. Now, to show the value of your assets it might become necessary to maintain records of your purchases.

It becomes even more challenging in case of ancestral property or gifts that you get through inheritance. How can you estimate the value of something that has been purchased years ago?

The instructions say that in case of inherited assets, the value in the hands of the previous owner can be mentioned. In case that is also not known, then what value needs to be reported should be clarified, says Kuldip Kumar, partner and leader -Personal Tax, PwC India.

“It can happen that you inherit jewellery from your parents, but they had inherited the same from their parents. In such a case, it will become difficult to ascertain the value of the jewellery. As an alternative, the taxpayer should be allowed to state the market value of the jewellery when the taxpayer became the owner of such jewellery, similar to how it is allowed in case of calculating capital gains,” Kumar adds.

If you have inherited the asset, then determination of the value would be difficult, according to Maheshwari . An alternative could be to show the value of the asset as ’0′. In case of inheritance, as there is no tax, this alternative can definitely be exercised.

If the asset was purchased or acquired before 1981, you can value it according to the inflation index of 1981. If it is acquired after 1981, you can give an estimate or approximate value. Again the procedure used in calculating capital gains.

“The government’s primary motive is that people should not get away by non-disclosing. For instance, how can someone with an income of Rs 10 lakh, own property worth Rs 5 crore? The intent of the government is to come down heavily on the evaders. The message from the top seems to be that if you evade taxes, then you will be on our radar and can be called for scrutiny,” Maheshwari says.

Given the robust system of tracing financial transactions, the government’s fears of mis-reporting of assets may be a bit exaggerated, Kumar says. “The additional disclosure will only increase the obligation for existing high-income group tax-payers. Now such tax-payers will have to trace and/or maintain records of all assets they buy, like jewellery, etc. What is required instead is to widen the tax base,” he adds.

Another issue that requires clarification is how to avoid double disclosure of assets, points out Ghose. Currently, for residents and ordinarily residents, foreign assets have to be disclosed in a specific schedule. But in the newly introduced assets and liability schedule, if these foreign assets have to be disclosed again, it will lead to duplication in reporting. Hence, a clarification is required that the new schedule should cover only domestic assets and liabilities.

One positive consequence is that meeting the deadline of filing tax returns for financial year 2015-16 will be easier as the income tax department has already notified the various ITR forms. This will allow tax-payers to file returns from April, well in time before the July 31 deadline.

Source : PTI

Jaitley stays firm on excise duty on jewellers : 11-04-2016


He said there was no reason why luxury items should be exempted when the country was moving toward GST

Refusing to relent on excise duty levy on non-silver jewellery goods, Finance Minister Arun Jaitley on Sunday said a “luxury item” cannot remain out of tax ambit when taxes need to be paid on many essentials.

A large section of jewellers and bullion traders have been on strike for over a month seeking withdrawal of one per cent excise duty on non-silver jewellery items.

They are also opposing the  mandatory quoting of the personal account number by customers for transactions of Rs two lakh and above. “How can a luxury item remain out of tax when essential items like cement, cloth and many others have to pay manufacturing tax? If we do not bring the goods and services tax (GST) on gold, taxation on other items will have to be increased,” Jaitley said at a media interaction at the Press Club here.

He said there was no reason why luxury items should be exempted when the country was moving toward GST.

Jaitley said the Centre has given a benefit that excise would be similar to value-added tax on gold and has tried to allay fears that ‘karigars’ would be affected from the new taxation.

The Union Finance Minister in his Budget proposals on February 29 had announced levy of one per cent excise duty on non-silver jewellery.

The government had last month constituted a panel under former Chief Economic Advisor Ashok Lahiri to look into the demands of jewellers and the panel has been asked to submit its report within 60 days.

Source : The Financial Express

No.1023/2016-CX, Dated : 08-04-2016


GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
(CENTRAL BOARD OF EXCISE AND CUSTOMS)
NEW DELHI

CIRCULAR NO

1023/11/2016-CX, Dated: April 8, 2016

To,

All Principal Chief Commissioners/Chief Commissioners of Customs, Central Excise & Service Tax;
All Director Generals/Directors of Customs, Central Excise & Service Tax;
All Principal Commissioners/Commissioners of Customs, Central Excise & Service Tax holding charge of Chief Commissioners;
Webmaster, CBEC

Subject:- Adjudication of Show Cause Notices issued on the basis of CERA/CRA objection-reg.

Central Board of Excise and Customs has issued instructions from time to time regarding adjudication of show cause notices issued on the basis of audit objections of Central Excise Revenue Audit (CERA) and Customs Revenue Audit (CRA), which is receipt audit wing of the Comptroller and Auditor General of India. The pendency position of such notices in the Call-Book has been reviewed and found to be larger than the number of audit objections which have been converted into Audit Paragraphs. After due examination, it was felt that there was a need to review the past practices and issue revised consolidated guidelines to provide a clear procedure for the field officers to deal with the CERA/CRA objections. The Tax Administration Reform Commission (TARC) report, representations received form trade and inputs received from field officers also indicated that there was a need to review past instructions to improve the ease of doing business and bring certainty regarding tax liability of an assessee. Accordingly, all past circulars and instructions on the subject are hereby rescinded and following procedure is prescribed for dealing with audit objections raised by CERA/CRA.

2. An audit objection may mature into an Audit Paragraph and become part of Audit Report periodically submitted by the office of CAG to the Parliament. Various stages involved in the life cycle of an audit objection and the timeliness prescribed for replying thereto may be noted and strictly adhered to by the departmental officers. These stages and timeliness are as follows:

(i) Half Margin: Half margin/audit memo is issued to the Superintendent of the Range during the course of audit on points noticed by CERA. The half margin is to be replied to immediately and in any case before the end of the audit of Range/Division/Commissionerate concerned.

(ii) Local Audit Report (LAR): LAR containing audit paragraphs is generally issued by the headquarters of the local CAG Office to the Assistant/Deputy Commissioner generally within one month of the completion of the audit by the headquarters of the Director General or Principal Director of Audit. The Assistant/Deputy Commissioner is expected to reply to the LAR within thirty days.

(iii) Statement of Facts (SoF): SoF is issued to the jurisdictional Commissioner/Addl. Commissioner on the major audit observations which may feature in Audit Reports. It has been decided that SoF shall be replied within six weeks where the audit objection is not contested. Where the audit objection is contested and the amount of duty involved in the audit objection is rupees fifty lakhs or less, SoF shall be replied with the approval of the Commissioner and for audit objections involving higher amounts of duty, SoF shall be replied with the approval of the Chief Commissioner. Detailed reasons for contesting the audit objection should be recorded in the file quoting relevant case-laws and circulars, if any.

(iv) Draft Audit Para (DAP): Potential audit paragraphs considered fit for inclusion in the Audit Report are issued by the CAG officer to the Ministry (CBEC) as DAPs. CBEC is expected to reply to DAP within four weeks of its receipt.

(v) Audit Paragraphs: CAG’s office, after considering the reply of the CBEC may convert a DAP into Audit Paragraph. Audit Paragraphs are periodically compiled and are submitted by the office of CAG to the Parliament in the form of a report called Audit Report. CBEC is expected to furnish an Action Taken Note on each of the paragraphs in the Audit Report, The ATNs received are examined by the office of CAG and duly vetted ATNs are submitted to the PAC, The process of submission of ATN, due vetting and submission to PAC is expected to be completed within four months of submission of Audit Report. At both the DAP and Audit Para stages, it is essential that field formations concerned give a detailed reply including the present status of the objection to facilitate a meaningful reply by CBEC.

Coordination Meetings:

3. One of the reasons for pendency in adjudication of CERA/CRA objection is the lack of mechanism for periodic reconciliation of the status of audit objections. It has, therefore, been decided that a quarterly coordination meeting would be held in each of the Zones by the officers of the revenue department with the officers of CAG to ensure that the list of audit objections, replies given by revenue and final view taken by CERA/CRA can be discussed. Chief Commissioner shall identify a nodal officer, [preferably Additional Commissioner/Joint Commissioner, CCU] to coordinate and attend such meetings. An audit objection is considered settled when the views of CERA/CRA and revenue converge due to either CERA/CRA dropping the audit objection or revenue admitting the audit objection.

Issue of Show Cause Notice:

4.1 Audit objection at LAR and SoF Stage: Once an LAR or SOF is received, it should be replied by the department forthwith. Based on the reply sent by the department, they can be divided in following categories:

4.1.1 Where the department has agreed with the audit objection on merits: Audit objections where department has agreed to the merits of the objections constitute a large proportion of the audit objections. In such cases, Show Cause Notices should be issued immediately. Such cases should not be transferred to the Call-Book and should be adjudicated forthwith and revenue realized in cases of confirmed demand at the earliest.

4.1.2 Where the department has not agreed with the audit objection on merits: No show cause notice should be issued in cases where department has not agreed with the audit objection on merits. In such cases audit objection should be replied following the procedure laid in clause (iii) of paragraph 2.

4.2 Show Cause Notice at the direction of the Board: Where a contested audit objection has become DAP and on examination it is found by the Commissioner (PAC) or Joint Secretary (Customs) in CBEC that the objection should have been admitted, they may give necessary directions to the field to issue show cause notice and adjudicate the case on merits.

4.3 No transfer to call-book: It may be noted that the procedure of transferring the show cause notice arising out of CAG objection to call-book has been discontinued and in future no such show cause notice should be transferred to the call-book, Circular nos 162/73/95-CX dated 14.12.1995 and 385/18/98-CX dated 30.03.98 on transfer of cases to the call book arising out of CAG objections stands amended accordingly.

Adjudication of Show Cause Notices:

5.1 Adjudication of SoFs/LARs not converted into DAP: SoFs/LARs are replied by the Commissionerate and therefore these cases may be adjudicated after ensuring that the reply given by the Commissionerate is available on record.

5.2 Adjudication of admitted DAPs/APs: DAPs are replied by the Ministry (CBEC) and therefore adjudication of DAPs should be undertaken after ensuring that the reply given by the Ministry (CBEC) is available on record.

5.3 Adjudicating authority is a quasi-judicial authority and is legally bound to adjudicate the case independently and judiciously taking into consideration the audit objection by CERA/CRA, reply of the department as referred above, reply of the party, relevant legal provisions, case laws on the subject and relevant circulars of the Board, if any. It is expected that the factum of SCN being a consequence of CERA/CRA objection, would be incorporated in the brief facts of the case in the adjudication order.

5.4 Where an issue was under audit objection and has been subsequently either judicially settled, by say judgment of Hon’ble Supreme Court or where a circular of the Board has been issued on the subject, further correspondence with the Board on the audit objections, even if they have become DAPs, is not necessary and such cases may be adjudicated on merits taking into consideration the latest judgments and circulars.

Past Cases:

6.1 All audit objections relating to Central Excise and Service tax issued prior to 1.3.2014 shall be compared with the pending Action Taken Notes (ATNs), received from the office of CAG, enclosed as Annexure B with the Circular. For Customs, the list shall be separately issued. Show Cause Notices (SCNs) relating to audit objections figuring in the list should not be adjudicated and further action may be taken on them in consultation with the Commissioner (PAC). The rest of the objections stand finally vetted by CAG Audit with no further comments which means that the reply of the department has been accepted by the CAG office. SCNs relating to these objections may be taken up for adjudication on merit, including those in the call-book, following the procedure prescribed in paragraph 5.

6.2 For audit objections raised after 1.3.2014 and till the date of issue of this circular, where SCNs have been issued, list of pending ATNs would be issued in due course. These show cause notices pertaining to these objections may be adjudicated, mutatis-mutandis following the procedure prescribed in paragraph 6.1 read with paragraph 5.

Application:

7. All audit objections in Customs, Central Excise and Service tax received after the issue of this circular or past audit objections where no show cause notice has been issued shall be dealt as per the provisions of this circular.

8. Difficulty, if any, in implementing the circular may be brought to the notice of the Board. Hindi version would follow.

[F.No.206/02/2010-CX.6]

(Shankar Prasad Sarma)
Under Secretary to the Government of India

ANNEXURE-A

DETAILS OF THE AUDIT OBJECTION

Sl. No. Commissionerate LAR/So F.No. DAP No. Audit Para No. Amount Involved Gist of the Objection Gist of the Department’s reply Relevant Board’s Circular/Instruction/Judgment, If any

NOTE: The copy of audit objection and the reply should be enclosed with this proforma.

ANNEXURE-B

Para wise details of Status of Action Taken Notes (As on 31.01.2016) (Compliance Audit)

Pending With Ministry

Sl. No. Name of the Ministry No. of Year of Report CX/ST Para DAP No Para Title
1 Finance 12 of 2009-10 CX 2.6 148 Incorrect availing of exemption
2 Finance 28 of 2011-12 CX 1.2 82B Irregular availing of cenvat credit
3 Finance 7 of 2015 CX 6.3.1 4D Non-detection of Incorrect availing of Cenvat Credit on common input services
4 Finance 4 of 2015 ST 6.3.1 21A Service Tax under import of service
5 Finance 4 of 2015 ST 7.3.1 62D Govt. account
6 Finance 4 of 2015 ST 7.4.1.6 87D Other Cases

Pending With Audit

Sl. No. Name of the Ministry No. of Year of Report CX/ST Para No. DAP No. Para Title
1 Finance 12 of 2009-10 CX 2.2.1 98 Incorrect availing of exemption
2 Finance 7 of 2015 CX Chapter II Central Excise duty on Iron and Steel Products and articles thereof
3 Finance 7 of 2015 CX Chapter III Central Excise duty on Petroleum, Oil and Lubricant product
4 Finance 7 of 2015 CX Chapter IV Scrutiny of Central Excise returns
5 Finance 4 of 2015 ST 6.4.1 20A Irregular availing of Cenvat Credit on ineligible invoices
6 Finance 4 of 2015 ST 6.2.2 26A Works Contract Service
7 Finance 4 of 2015 ST 7.4.1.2 31D Non-payment of Service Tax
8 Finance 4 of 2015 ST 7.4.1.4 3D Non-payment of Service Tax
9 Finance 4 of 2015 ST Chapter II Service Tax Liability in Insurance Sector
10 Finance 4 of 2015 ST Chapter III Service Tax Liability in Port Sector
11 Finance 4 of 2015 ST Chapter IV Service Tax Liability on Mandap Keeper’s
12 Finance 4 of 2015 ST Chapter V Scrutiny of Service Tax return

 

Para wise details of Status of Action Taken Notes (As on 31.01.2016) (Performance Audit)

ATN not received

Sl.No. Name of the Ministry/Dept. No. of Year of Report CX/ST Title
NIL

Pending with Ministry

Sl.No.
Name of the Ministry/Dept.
No. of Year of Report
CX/ST
Title
1
Finance
11 of 2004
CX
Review on call book
2
Finance
7 of 2007
CX
Review on excise duty on plastic and articles thereof
3
Finance
PA 6 of 2008
CX
Review on refunds
4
Finance
PA 24 of 2009-10
CX
Review on Excise duty on Iron and Steel and articles of Iron and Steel
5
Finance
25 of 2011-12
CX
Review on commissionerate ranges and divisions (CDR)
6
Finance
29 of 2014
CX
Administration of Prosecution and Penalties in Central Excise and Service Tax
7
Finance
11 of 2005
ST
Review on service tax on consulting engineers services, architects services and interior decorators services
8
Finance
7 of 2007
ST
Review on service tax on management consultant’s services, scientific or technical consultancy services, technical testing and analysis & technical inspection and certification services.

Pending with audit

Sl No.
Name of the Ministry/Dept.
No of Year of Report
CX/ST
Para Title
1 Finance 11 of 2004 CX Review on Determination of assessable value under new section 4 (Transaction Value)
2 Finance 11 of 2005 CX Review on excise duty on motor vehicle for transport of persons and goods
3 Finance 6 of 2006 CX Review on excise duty on inorganic and organic chemicals
4 Finance 7 of 2007 CX Review on provisional assessment
5 Finance PA 6 of 2008 CX Review on excise duty on aluminium, copper and articles thereof
6 Finance 11 of 2010-11 CX Review on excise duty on pharmaceutical products
7 Finance 30 of 2010-11 CX review on Cenvat Credit Scheme
8 Finance 33 of 2014 CX Central Excise Administration in Automotive Sector
9 Finance 11 of 2004 ST Review on service tax on advertisement services and courier services
10 Finance 6 of 2006 ST Review on service tax on manpower recruitment agency’s services and security agency’s services
11 Finance PA 6 of 2008 ST Review on service tax on rent-a-cab scheme operators services, photography services and health club fitness centre services
12 Finance PA 24 of 2009-10 ST Review on service Tax on Business Auxiliary Services
13 Finance 25 of 2010-11 ST Review on Service Tax on Construction Services
14 Finance 9 of 2013 ST Levy and collection of service tax on import of services

Notification No: 27/2016 Dated: 7-4-2016


Notification u/s 35(1) (ii) – Approved organization – Central Power Research Institute Bengaluru – 27/2016 – Dated 7-4-2016 – Income Tax

Government of India

Ministry of Finance

(Department of Revenue)

(Central Board of Direct Taxes)

New Delhi, the 7th April, 2016

Notification No. 27/2016

S. O. -  It is hereby notified for general information that the organization Central Power Research Institute Bengaluru (PAN:- AAAAC0268P) has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income tax Act, 1961 (said Act), read with Rules 5C and 5D of the Income-tax Rules, 1962 (said Rules), from Assessment year 2003-2004 onwards in the category of `Scientific Research Association‘, subject to the following conditions, namely:-

(i) The sole objective of the approved ‘Scientific Research Association’ shall be to undertake scientific research;

(ii) The approved organization shall carry out scientific research by itself;

(iii) The approved organization shall maintain separate books of accounts in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out research, get such books audited by an accountant as defined in the explanation to sub-section (2) of section 288 of the saidAct and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (I) of section 139 of the said Act;

(iv) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research in social science and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.

2. The Central Government shall withdraw the approval if the approved organization:-

(a) fails to maintain separate books of accounts referred to in sub-paragraph (iii) of paragraph I; or

(b) fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or

(c) fails to furnish its statement of the donations received and sums applied for scientific research referred to in sub-paragraph (iv) of paragraph I; or

(d) ceases to carry on its research activities or its research activities are not found to be genuine; or

(e) ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5D of the said Rules.

(F. No. 203/32/2015/ITA-II)

 (Rohit Garg)

Deputy Secretary to Government of India

Fiscal deficit: Cabinet approves states’ targets in line with 14th Finance Commission report : 07-04-2016


The Cabinet on Wednesday approved the fiscal deficit target of three per cent of gross state domestic product (GSDP) for states for the 2015-20 period, as recommended by the Fourteenth Finance Commission.

The FFC report also suggested year-to-year flexibility for additional deficit of about 0.5 per cent, plus or minus.

In its Action Taken Report on the recommendations, the government had said it would move forward on these at a later date, which it did on Wednesday.

The Cabinet approved the target with a flexibility option, according to an official statement. There is additional headroom to a maximum of 0.5 per cent over and above the normal limit of three per cent in any given year to states with a favourable debt to GSDP ratio and interest payments-revenue receipts ratio in the previous two years.

“Since the year 2015-16 is already over, states will not get any benefit of additional borrowing for 2015-16. However, the implications for the remaining period of the FFC award would depend upon respective states’ eligibility, based on the criteria prescribed by FFC,” went the statement.

There would be no financial implications for the Centre as the borrowings are made by states within the fiscal deficit limits laid down and incorporated in their respective Fiscal Resposibility and Budget Management legislations. States will get additional space to raise borrowings which mighty result in needed government expenditure for capital projects or infrastructure.

“This decision would incentivise states to take a more holistic view of their fiscal health, rather than the current relatively narrow focus on restricting the deficit below three per cent of GSDP,” said Jayanta Roy of ratings agency ICRA.

If a state is not able to fully utilise its sanctioned fiscal deficit in any year, it may avail this unutilised amount only in the following year but within the FFC award period. Any additional borrowing beyond the entitlement would be adjusted from the net borrowing ceiling of the following year.

“The permission to carry forward any unutilised fiscal deficit amount to the following year (up to 2019-20) would impart flexibility to the states to time their borrowings in line with foreseeable expenditure spikes, for instance related to the pay commission awards. This is preferable to the current practice adopted by some states that choose to exhaust their borrowing limits each fiscal year, irrespective of the actual need, and park excess funds in lowering interest-bearing treasury bills,” Roy added.

The cabinet decision gains significance in the backdrop of the states’ issuing bonds under the UDAY scheme for power distribution companies’ financial help. The decision will allow them to take on additional debt without stretching the deficit limits.

Source : The Economic Times

Notification No. F. No. 17/62/2015-CL-V 6-4-2016


Amendment in Companies Act 2013 Schedule III – F. No. 17/62/2015-CL-V – Dated 6-4-2016 – Companies Law

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi , 6th April, 2016

G.S.R. 404(E).-In exercise of the powers conferred by sub section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following amendments to Schedule III of the said Act with effect from the date of publication of this notification in the Official Gazette, namely:-

2. In the Companies Act, 2013 (hereinafter referred to as the principal Act) in Schedule III, for the heading “General instructions for preparation of Balance Sheet and Statements of Profit and Loss of a Company” the following shall be substituted, namely:-

“Division I

Financial Statements for a company whose Financial Statements are required to comply with the Companies (Accounting Standards) Rules, 2006.

GENERAL INSTURCTIONS FOR PREPARATION OF BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS OF A COMPANY”.

3. In the principal Act, in Schedule III , at the end, the following shall be inserted, namely:-

“Division II

Financial Statements for a company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.

GENERAL INSTURCTIONS FOR PREPARATION OF FINANCIAL STATEMENTS OF A COMPANY REQUIRED TO COMPLY WITH Ind AS

1. Every company to which Indian Accounting Standards apply, shall prepare its financial statements in accordance with this Schedule or with such modification as may be required under certain circumstances.

2. Where compliance with the requirements of the Act including Indian Accounting Standards (except the option of presenting assets and liabilities in the order of liquidity as provided by the relevant Ind AS) as applicable to the companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in the head or sub-head or any changes inter se, in the financial statements or statements forming part thereof, the same shall be made and the requirements under this Schedule shall stand modified accordingly.

3. The disclosure requirements specified in this Schedule are in addition to and not in substitution of the disclosure requirements specified in the Indian Accounting Standards. Additional disclosures specified in the Indian Accounting Standards shall be made in the Notes or by way of additional statement or statements unless required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies Act, 2013 shall be made in the Notes in addition to the requirements set out in this Schedule.

4. (i) Notes shall contain information in addition to that presented in the Financial Statements and shall provide where required-

(a) narrative descriptions or disaggregations of items recognised in those statements; and

(b) information about items that do not qualify for recognition in those statements.

(ii) Each item on the face of the Balance Sheet, Statement of Changes in Equity and Statement of Profit and Loss shall be cross-referenced to any related information in the Notes. In preparing the Financial Statements including the Notes, a balance shall be maintained between providing excessive detail that may not assist users of Financial Statements and not providing important information as a result of too much aggregation.

5. Depending upon the turnover of the company, the figures appearing in the Financial Statements shall be rounded off as below:

Turnover Rounding off
(i) less than one hundred crore rupees To the nearest hundreds, thousands, lakhs or millions, or decimals thereof.
(ii) one hundred crore rupees or more To the nearest, lakhs, millions or crores, or decimals thereof.

Once a unit of measurement is used, it should be used uniformly in the Financial Statements.

6. Financial Statements shall contain the corresponding amounts (comparatives) for the immediately preceding reporting period for all items shown in the Financial Statements including Notes except in the case of first Financial Statements laid before the company after incorporation.

7. Financial Statements shall disclose all ‘material’ items, i.e., the items if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size or nature of the item or a combination of both, to be judged in the particular circumstances.

8. For the purpose of this Schedule, the terms used herein shall have the same meanings assigned to them in Indian Accounting Standards.

9. Where any Act or Regulation requires specific disclosures to be made in the standalone financial statements of a company, the said disclosures shall be made in addition to those required under this Schedule.

Note: This Schedule sets out the minimum requirements for disclosure on the face of the Financial Statements, i.e., Balance Sheet, Statement of Changes in Equity for the period, the Statement of Profit and Loss for the period (The term ‘Statement of Profit and Loss’ has the same meaning as ‘Profit and Loss Account’) and Notes. Cash flow statement shall be prepared, where applicable, in accordance with the requirements of the relevant Indian Accounting Standard.

Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial Statements when such presentation is relevant to an understanding of the company’s financial position or performance or to cater to industry or sector-specific disclosure requirements or when required for compliance with the amendments to the Companies Act, 2013 or under the Indian Accounting Standards.

PART I –BALANCE SHEET

Name of the Company…………………….

Balance Sheet as at ………………………

(Rupees in…………)

Particulars Note No. Figures as at the end of current reporting period Figures as at the end of the previous reporting period
1 2 3 4
(1) ASSETS

Non-current assets

(a) Property, Plant and Equipment

(b) Capital work-in-progress

(c) Investment Property

(d) Goodwill

(e) Other Intangible assets

(f) Intangible assets under evelopment

(g) Biological Assets other than bearer plants

(h) Financial Assets

(i) Investments

(ii) Trade receivables

(iii) Loans

(iv) Others (to be specified)

(i) Deferred tax assets (net)

(j) Other non-current assets

(2) Current assets

(a) Inventories

(b) Financial Assets

(i) Investments

(ii) Trade receivables

(iii) Cash and cash equivalents

(iv) Bank balances other than (iii) above

(v) Loans

(vi) Others (to be specified)

(c) Current Tax Assets (Net)

(d) Other current assets

Total Assets
EQUITY AND LIABILITIES

Equity

(a) Equity Share capital

(b) Other Equity

LIABILITIES

Non-current liabilities

(a) Financial Liabilities

(i) Borrowings

(ii) Trade payables

(iii) Other financial liabilities (other than those specified in item (b), to be specified)

(b) Provisions

(c) Deferred tax liabilities (Net)

(d) Other non-current liabilities

Current liabilities

(a) Financial Liabilities

(i) Borrowings

(ii) Trade payables

(iii) Other financial liabilities (other than those specified in item (c)

(b) Other current liabilities

(c) Provisions

(d) Current Tax Liabilities (Net)

Total Equity and Liabilities

See accompanying notes to the financial statements

STATEMENT OF CHANGES IN EQUITY

Name of the Company…………………….

Statement of Changes in Equity for the period ended ……………………

(Rupees in………………)

A. Equity Share Capital

Balance at the beginning of the reporting period Changes in equity share capital during the year Balance at the end of the reporting period

B. Other Equity

Share application money pending allotment

Equity component of compound financial instruments

Reserves and Surplus

Debt instruments through Other Comprehensive Income

Equity  Instruments through Other Comprehensive Income

Effective portion of Cash Flow Hedges

Revaluation Surplus

Exchange differences on translating the financial statements of a foreign operation

Other items of Other Comprehensive  Income (specify nature)

Money received against share warrants

Total

Capital Reserve Securities Premium Reserve Other Reserves (specify nature) Retained Earnings
Balance at the beginning of the reporting period
Changes in accounting policy or prior period errors
Restated balance at the beginning of the reporting period
Total Comprehensive Income for the year
Dividends
Transfer to retained earnings
Any other change (to be specified)
Balance at the end of the reporting period

Note: Remeasurment of defined benefit plans and fair value changes relating to own credit risk of financial liabilities designated at fair value through profit or loss shall be recognised as a part of retained earnings with separate disclosure of such items alongwith the relevant amounts in the Notes.

Notes:

GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET

1. An entity shall classify an asset as current when-

(a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;

(b) it holds the asset primarily for the purpose of trading;

(c) it expects to realise the asset within twelve months after the reporting period; or

(d) the asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

An entity shall classify all other assets as non-current.

2. The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be twelve months.

3. An entity shall classify a liability as current when-

(a) it expects to settle the liability in its normal operating cycle;

(b) it holds the liability primarily for the purpose of trading;

(c) the liability is due to be settled within twelve months after the reporting period; or

(d) it does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

An entity shall classify all other liabilities as non-current.

4. A receivable shall be classified as a ‘trade receivable’ if it is in respect of the amount due on account of goods sold or services rendered in the normal course of business.

5. A payable shall be classified as a ‘trade payable’ if it is in respect of the amount due on account of goods purchased or services received in the normal course of business.

6. A company shall disclose the following in the Notes:

A. Non-Current Assets

I. Property, Plant and Equipment :

(i) Classification shall be given as:

(a) Land

(b) Buildings

(c) Plant and Equipment

(d) Furniture and Fixtures

(e) Vehicles

(f) Office equipment

(g) Bearer Plants

(h) Others (specify nature)

(ii) Assets under lease shall be separately specified under each class of assets.

(iii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses or reversals shall be disclosed separately.

II. Investment Property:

A reconciliation of the gross and net carrying amounts of each class of property at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses or reversals shall be disclosed separately.

III Goodwill:

A reconciliation of the gross and net carrying amount of goodwill at the beginning and end of the reporting period showing additions, impairments, disposals and other adjustments.

IV. Other Intangible assets:

(i) Classification shall be given as:

(a) Brands or trademarks

(b) Computer software

(c) Mastheads and publishing titles

(d) Mining rights

(e) Copyrights, patents, other intellectual property rights, services and operating rights

(f) Recipes, formulae, models, designs and prototypes

(g) Licenses and franchises

(h) Others (specify nature)

(ii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments and the related amortization and impairment losses or reversals shall be disclosed separately.

V. Biological Assets other than bearer plants:

A reconciliation of the carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments shall be disclosed separately.

VI. Investments:

(i) Investments shall be classified as:

(a) Investments in Equity Instruments;

(b) Investments in Preference Shares;

(c) Investments in Government or trust securities;

(d) Investments in debentures or bonds;

(e) Investments in Mutual Funds;

(f) Investments in partnership firms; or

(g) Other investments (specify nature).

Under each classification, details shall be given of names of the bodies corporate that are-

(i) subsidiaries,

(ii) associates,

(iii) joint ventures, or

(iv) structured entities,

in whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly-paid). Investments in partnership firms alongwith names of the firms, their partners, total capital and the shares of each partner shall be disclosed separately.

(ii) The following shall also be disclosed:

(a) Aggregate amount of quoted investments and market value thereof;

(b) Aggregate amount of unquoted investments; and

(c) Aggregate amount of impairment in value of investments.

VII. Trade Receivables:

(i) Trade receivables shall be sub-classified as:

(a) Secured, considered good;

(b) Unsecured considered good; and

(c) Doubtful.

(ii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately.

(iii) Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

VIII. Loans:

(i) Loans shall be classified as-

(a) Security Deposits;

(b) Loans to related parties (giving details thereof); and

(c) Other loans (specify nature).

(ii) The above shall also be separately sub-classified as-

(a) Secured, considered good;

(b) Unsecured, considered good; and

(c) Doubtful.

(iii) Allowance for bad and doubtful loans shall be disclosed under the relevant heads separately.

(iv) Loans due by directors or other officers of the company or any of them either severally or jointly with any other persons or amounts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

IX. Bank deposits with more than 12 months maturity shall be disclosed under ‘Other financial assets’;

X. Other non-current assets: Other non-current assets shall be classified as-

(i) Capital Advances; and

(ii) Advances other than capital advances;

(1) Advances other than capital advances shall be classified as:

(a) Security Deposits;

(b) Advances to related parties (giving details thereof); and

(c) Other advances (specify nature).

(2) Advances to directors or other officers of the company or any of them either severally or jointly with any other persons or advances to firms or private companies respectively in which any director is a partner or a director or a member should be separately stated. In case advances are of the nature of a financial asset as per relevant Ind AS, these are to be disclosed under ‘other financial assets’ separately.

(iii) Others (specify nature).

B. Current Assets

I. Inventories:

(i) Inventories shall be classified as-

(a) Raw materials;

(b) Work-in-progress;

(c) Finished goods;

(d) Stock-in-trade (in respect of goods acquired for trading);

(e) Stores and spares;

(f) Loose tools; and

(g) Others (specify nature).

(ii) Goods-in-transit shall be disclosed under the relevant sub-head of inventories.

(iii) Mode of valuation shall be stated.

II. Investments:

(i) Investments shall be classified as-

(a) Investments in Equity Instruments;

(b) Investment in Preference Shares;

(c) Investments in government or trust securities;

(d) Investments in debentures or bonds;

(e) Investments in Mutual Funds;

(f) Investments in partnership firms; and

(g) Other investments (specify nature).

Under each classification, details shall be given of names of the bodies corporate that are-

(i) subsidiaries,

(ii) associates,

(iii) joint ventures, or

(iv) structured entities,

in whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly-paid).

(ii) The following shall also be disclosed-

(a) Aggregate amount of quoted investments and market value thereof;

(b) Aggregate amount of unquoted investments;

(c) Aggregate amount of impairment in value of investments.

III. Trade Receivables:

(i) Trade receivables shall be sub-classified as:

(a) Secured, considered good;

(b) Unsecured considered good; and

(c) Doubtful.

(ii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately.

(iii ) Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

IV. Cash and cash equivalents: Cash and cash equivalents shall be classified as

a. Balances with Banks (of the nature of cash and cash equivalents);

b.  Cheques, drafts on hand;

c.  Cash on hand; and

d.  Others (specify nature).

V. Loans:

(i) Loans shall be classified as:

(a) Security deposits;

(b) Loans to related parties (giving details thereof); and

(c) Others (specify nature).

(ii) The above shall also be sub-classified as-

(a) Secured, considered good;

(b) Unsecured, considered good; and

(c) Doubtful.

(iii)  Allowance for bad and doubtful loans shall be disclosed under the relevant heads separately.

(iv)  Loans due by directors or other officers of the company or any of them either severally or jointly with any other person or amounts due by firms or private companies respectively in which any director is a partner or a director or a member shall be separately stated.

VI. Other current assets (specify nature): This is an all-inclusive heading, which incorporates current assets that do not fit into any other asset categories. Other current assets shall be classified as-

(i) Advances other than capital advances

(1) Advances other than capital advances shall be classified as:

(a) Security Deposits;

(b) Advances to related parties (giving details thereof);

(c) Other advances (specify nature).

(2) Advances to directors or other officers of the company or any of them either severally or jointly with any other persons or advances to firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

(ii) Others (specify nature)

C. Cash and Bank balances: The following disclosures with regard to cash and bank balances shall be made:

(a) Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated.

(b) Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments shall be disclosed separately.

(c) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated.

D. Equity

I. Equity Share Capital: For each class of equity share capital:

(a) the number and amount of shares authorised;

(b) the number of shares issued, subscribed and fully paid, and subscribed but not fully paid;

(c) par value per share;

(d) a reconciliation of the number of shares outstanding at the beginning and at the end of the period;

(e) the rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital;

(f) shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by subsidiaries or associates of the holding company or the ultimate holding company in aggregate;

(g) shares in the company held by each shareholder holding more than five per cent. shares specifying the number of shares held;

(h) shares reserved for issue under options and contracts or commitments for the sale of shares or disinvestment, including the terms and amounts;

(i) for the period of five years immediately preceding the date at which the Balance Sheet is prepared-

aggregate number and class of shares allotted as fully paid up pursuant to contract without payment being received in cash;

aggregate number and class of shares allotted as fully paid up by way of bonus shares; and

aggregate number and class of shares bought back;

(j) terms of any securities convertible into equity shares issued along with the earliest date of conversion in descending order starting from the farthest such date;

(k) calls unpaid (showing aggregate value of calls unpaid by directors and officers);

(l) forfeited shares (amount originally paid up).

II. Other Equity:

(i) ‘Other Reserves’ shall be classified in the notes as-

(a) Capital Redemption Reserve;

(b) Debenture Redemption Reserve;

(c) Share Options Outstanding Account; and

(d) Others– (specify the nature and purpose of each reserve and the amount in respect thereof);

(Additions and deductions since last balance sheet to be shown under each of the specified heads)

(ii) Retained Earnings represents surplus i.e. balance of the relevant column in the Statement of Changes in Equity;

(iii) A reserve specifically represented by earmarked investments shall disclose the fact that it is so represented;

(iv) Debit balance of Statement of Profit and Loss shall be shown as a negative figure under the head ‘retained earnings’. Similarly, the balance of ‘Other Equity’, after adjusting negative balance of retained earnings, if any, shall be shown under the head ‘Other Equity’ even if the resulting figure is in the negative; and

(v) Under the sub-head ‘Other Equity’, disclosure shall be made for the nature and amount of each item.

E. Non-Current Liabilities

I. Borrowings:

(i) borrowings shall be classified as-

(a) Bonds or debentures

(b) Term loans

(I) from banks

(II) from other parties

(c) Deferred payment liabilities

(d) Deposits

(e) Loans from related parties

(f) Long term maturities of finance lease obligations

(g) Liability component of compound financial instruments

(h) Other loans (specify nature);

(ii) borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case.

(iii) where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed;

(iv) bonds or debentures (along with the rate of interest, and particulars of redemption or conversion, as the case may be) shall be stated in descending order of maturity or conversion, starting from farthest redemption or conversion date, as the case may be. Where bonds/debentures are redeemable by installments, the date of maturity for this purpose must be reckoned as the date on which the first installment becomes due;

(v) particulars of any redeemed bonds or debentures which the company has power to reissue shall be disclosed;

(vi) terms of repayment of term loans and other loans shall be stated; and

(vii) period and amount of default as on the balance sheet date in repayment of borrowings and interest shall be specified separately in each case.

III. Provisions: The amounts shall be classified as-

(a) Provision for employee benefits; and

(b) Others (specify nature).

IV. Other non-current liabilities;

(a) Advances; and

(b) Others (specify nature).

F. Current Liabilities

I. Borrowings:

(i) Borrowings shall be classified as-

(a) Loans repayable on demand

(I) from banks

(II) from other parties

(b) Loans from related parties

(c) Deposits

(d) Other loans (specify nature);

(ii) borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case;

(iii) where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed;

(iv) period and amount of default as on the balance sheet date in repayment of borrowings and interest, shall be specified separately in each case.

II. Other Financial Liabilities: Other Financial liabilities shall be classified as-

(a) Current maturities of long-term debt;

(b) Current maturities of finance lease obligations;

(c) Interest accrued;

(d) Unpaid dividends;

(e) Application money received for allotment of securities to the extent refundable and interest accrued thereon;

(f) Unpaid matured deposits and interest accrued thereon;

(g) Unpaid matured debentures and interest accrued thereon; and

(h) Others (specify nature).

‘Long term debt’ is a borrowing having a period of more than twelve months at the time of origination

III. Other current liabilities:

The amounts shall be classified as-

(a) revenue received in advance;

(b) other advances (specify nature); and

(c) others (specify nature);

IV. Provisions: The amounts shall be classified as-

(i) provision for employee benefits; and

(ii) others (specify nature).

G. The presentation of liabilities associated with group of assets classified as held for sale and non-current assets classified as held for sale shall be in accordance with the relevant Indian Accounting Standards (Ind ASs).

H. Contingent Liabilities and Commitments:

(to the extent not provided for)

(i) Contingent Liabilities shall be classified as-

(a) claims against the company not acknowledged as debt;

(b) guarantees excluding financial guarantees; and

(c) other money for which the company is contingently liable.

(ii) Commitments shall be classified as-

(a) estimated amount of contracts remaining to be executed on capital account and not provided for;

(b) uncalled liability on shares and other investments partly paid; and

(c) other commitments (specify nature).

I. The amount of dividends proposed to be distributed to equity and preference shareholders for the period and the related amount per share shall be disclosed separately. Arrears of fixed cumulative dividends on irredeemable preference shares shall also be disclosed separately.

J. Where in respect of an issue of securities made for a specific purpose the whole or part of amount has not been used for the specific purpose at the Balance Sheet date, there shall be indicated by way of note how such unutilised amounts have been used or invested.

7. When a company applies an accounting policy retrospectively or makes a restatement of items in the financial statements or when it reclassifies items in its financial statements, the company shall attach to the Balance Sheet, a “Balance Sheet” as at the beginning of the earliest comparative period presented.

8. Share application money pending allotment shall be classified into equity or liability in accordance with relevant Indian Accounting Standards. Share application money to the extent not refundable shall be shown under the head Equity and share application money to the extent refundable shall be separately shown under ‘Other financial liabilities’.

9. Preference shares including premium received on issue, shall be classified and presented as ‘Equity’ or ‘Liability’ in accordance with the requirements of the relevant Indian Accounting Standards. Accordingly, the disclosure and presentation requirements in this regard applicable to the relevant class of equity or liability shall be applicable mutatis mutandis to the preference shares. For instance, redeemable preference shares shall be classified and presented under ‘non-current liabilities’ as ‘borrowings’ and the disclosure requirements in this regard applicable to such borrowings shall be applicable mutatis mutandis to redeemable preference shares.

10. Compound financial instruments such as convertible debentures, where split into equity and liability components, as per the requirements of the relevant Indian Accounting Standards, shall be classified and presented under the relevant heads in ‘Equity’ and ‘Liabilities’

11. Regulatory Deferral Account Balances shall be presented in the Balance Sheet in accordance with the relevant Indian Accounting Standards.

PART II – STATEMENT OF PROFIT AND LOSS

Name of the Company…………………….

Statement of Profit and Loss for the period ended ………………………

(Rupees in…………)

Particulars Note No. Figures for the current reporting period Figures for the previous reporting period
I Revenue From Operations
II Other Income
III Total Income (I+II)
IV EXPENSES

Cost of materials consumed

Purchases of Stock-in-Trade
Changes in inventories of finished goods, Stock-in -Trade and work-in-progress
Employee benefits expense
Finance costs
Depreciation and amortization expense
Other expenses
Total expenses (IV)
V Profit/(loss) before exceptional items and tax (I- IV)
VI Exceptional Items
VII Profit/(loss) before tax (V-VI)
VIII Tax expense:

(1) Current tax

(2) Deferred tax

IX Profit (Loss) for the period from continuing operations (VII-VIII)
X Profit/(loss) from discontinued operations
XI Tax expense of discontinued operations
XII Profit/(loss) from Discontinued operations (after tax) (X-XI)
XIII Profit/(loss) for the period (IX+XII)
XIV Other Comprehensive Income

A (i) Items that will not be reclassified to profit or loss

(ii) Income tax relating to items that will not be reclassified to profit or loss

B (i) Items that will be reclassified to profit or loss

(ii) Income tax relating to items that will be reclassified to profit or loss

XV Total Comprehensive Income for the period (XIII+XIV)(Comprising Profit (Loss) and Other Comprehensive Income for the period)
XVI Earnings per equity share (for continuing operation):

(1) Basic

(2) Diluted

XVII Earnings per equity share (for discontinued operation):

(1) Basic

(2) Diluted

XVIII Earnings per equity share(for discontinued & continuing operations)

(1) Basic

(2) Diluted

See accompanying notes to the financial statements

Notes:

GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF PROFIT AND LOSS

1. The provisions of this Part shall apply to the income and expenditure account, in like manner as they apply to a Statement of Profit and Loss.

2. The Statement of Profit and Loss shall include:

(1) Profit or loss for the period;

(2) Other Comprehensive Income for the period.

The sum of (1) and (2) above is ‘Total Comprehensive Income’.

3. Revenue from operations shall disclose separately in the notes

(a) sale of products (including Excise Duty);

(b) sale of services; and

(c) other operating revenues.

4. Finance Costs: Finance costs shall be classified as-

(a) interest;

(b) dividend on redeemable preference shares;

(c) exchange differences regarded as an adjustment to borrowing costs; and

(d) other borrowing costs (specify nature).

5 Other income: Other income shall be classified as-

(a) interest Income ;

(b) dividend Income; and

(c) other non-operating income (net of expenses directly attributable to such income).

6. Other Comprehensive Income shall be classified into-

(A) Items that will not be reclassified to profit or loss

(i) Changes in revaluation surplus;

(ii) Remeasurements of the defined benefit plans;

(iii) Equity Instruments through Other Comprehensive Income;

(iv) Fair value changes relating to own credit risk of financial liabilities designated at fair value through profit or loss;

(v) Share of Other Comprehensive Income in Associates and Joint Ventures, to the extent not to be classified into profit or loss; and

(vi) Others (specify nature).

(B) Items that will be reclassified to profit or loss;

(i) Exchange differences in translating the financial statements of a foreign operation;

(ii) Debt Instruments through Other Comprehensive Income;

(iii) The effective portion of gains and loss on hedging instruments in a cash flow hedge;

(iv) Share of Other Comprehensive Income in Associates and Joint Ventures, to the extent to be classified into profit or loss; and

(v) Others (specify nature).

7. Additional Information: A Company shall disclose by way of notes, additional information regarding aggregate expenditure and income on the following items:

(a) employee Benefits expense [showing separately (i) salaries and wages, (ii) contribution to provident and other funds, (iii) share based payments to employees, (iv) staff welfare expenses].

(b) depreciation and amortisation expense;

(c) any item of income or expenditure which exceeds one per cent of the revenue from operations or ₹ 10,00,000, whichever is higher, in addition to the consideration of ‘materiality’ as specified in clause 7 of the General Instructions for Preparation of Financial Statements of a Company;

(d) interest Income;

(e) interest Expense;

(f) dividend income;

(g) net gain or loss on sale of investments;

(h) net gain or loss on foreign currency transaction and translation (other than considered as finance cost);

(i) payments to the auditor as (a) auditor, (b) for taxation matters, (c) for company law matters, (d) for other services, (e) for reimbursement of expenses;

(j) in case of companies covered under section 135, amount of expenditure incurred on corporate social responsibility activities; and

(k) details of items of exceptional nature;

8. Changes in Regulatory Deferral Account Balances shall be presented in the Statement of Profit and Loss in accordance with the relevant Indian Accounting Standards.

PART III- GENERAL INSTRUCTIONS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

1. Where a company is required to prepare Consolidated Financial Statements, i.e., consolidated balance sheet, consolidated statement of changes in equity and consolidated statement of profit and loss, the company shall mutatis mutandis follow the requirements of this Schedule as applicable to a company in the preparation of balance sheet, statement of changes in equity and statement of profit and loss. In addition, the consolidated financial statements shall disclose the information as per the requirements specified in the applicable Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules 2015, including the following, namely:-

(i) Profit or loss attributable to ‘non-controlling interest’ and to ‘owners of the parent’ in the statement of profit and loss shall be presented as allocation for the period. Further, ‘total comprehensive income’ for the period attributable to ‘non-controlling interest’ and to ‘owners of the parent’ shall be presented in the statement of profit and loss as allocation for the period. The aforesaid disclosures for ‘total comprehensive income’ shall also be made in the statement of changes in equity. In addition to the disclosure requirements in the Indian Accounting Standards, the aforesaid disclosures shall also be made in respect of ‘other comprehensive income’.

(ii) ‘Non-controlling interests’ in the Balance Sheet and in the Statement of Changes in Equity, within equity, shall be presented separately from the equity of the ‘owners of the parent’.

(iii) Investments accounted for using the equity method.

2. In Consolidated Financial Statements, the following shall be disclosed by way of additional information:

Name of the entity in the Group Net Assets, i.e., total assets minus total liabilities Share in profit or loss Share in other comprehensive income Share in total comprehensive income
As % of consolidated net assets Amount As % of consolidated profit or loss Amount As % of consolidated other comprehensive income Amount As % of total comprehensive income Amount
Parent Subsidiaries Indian

1.

2.

3.

.

.

Foreign

1.

2.

3.

.

.

Non-controlling Interests in all subsidiaries Associates (Investment as per the equity method) Indian

1.

2.

3. .

Foreign

1.

2.

3.

.

.

Joint Ventures(investment as per the equity method)Indian

1.

2.

3.

.

.

Foreign

1.

2.

3.

.

.

Total

3. All subsidiaries, associates and joint ventures (whether Indian or foreign) will be covered under consolidated financial statements.

4. An entity shall disclose the list of subsidiaries or associates or joint ventures which have not been consolidated in the consolidated financial statements along with the reasons of not consolidating.

[F. No. 17/62/2015-CL-V]

AMARDEEP S. BHATIA, Jt. Secy.

Note: Schedule III of the Companies Act, 2013 came into force with effect from the 1st April, 2014 vide Notification S.O. 902(E), dated 26-3-2014.

No.1022/2016-CX, Dated : 06-04-2016


GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
NEW DELHI

CIRCULAR NO

1022/10/2016-CX, Dated: April 6, 2016

To,

Principal Chief Commissioner of Central Excise/Service Tax (All),
Chief Commissioner of Central Excise/Service Tax (All),
Principal Commissioner of Central Excise/Service Tax (All),
Webmaster, CBEC

Sub: Classification of Micronutrients, Multi-micronutrients, Plant Growth Regulators and Fertilizers – reg.

The issue of classification of micronutrients, multi-micronutrients, plant growth regulators and fertilizers has remained a disputed area in Central Excise. To bring clarity to the issue of classification thereof, it was decided to take opinion of Indian Agricultural Research Institute (IARI) on various issues relating to micronutrients such as – what constitutes micronutrients, its usage, distinction from plant growth regulator, if any, etc. In light of the opinion received from IARI, Central Excise Tariff and explanatory notes of HSN, nature, usage and classification of micronutrients, multi-micronutrients, plant growth regulators and fertilizers is explained in the following paragraphs.

2.1 Micronutrients are essential nutrients that are required in small quantities for the normal growth and development of plants. As on today, iron (Fe), manganese (Mn), zinc (Zn), copper (Cu), boron (B), molybdenum (Mo), nickel (Ni) and chlorine (Cl) are included in this category. These elements are also called minor or trace elements, but this does not mean that they are less important than macronutrients. Reply received from IARI on the subject, enclosed with the circular, may please be referred for further details. Inputs received from the trade indicates that these micronutrients are sold in the market as ‘micronutrient fertilizer’ supplying one or more of the eight essential nutrients listed above, namely iron to chlorine. However, in the trade parlance sale of micronutrients as ‘micronutrient fertilizers’ would not lead to classification thereof under chapter 31 as fertilizers for the purposes of Central Excise Tariff. For classification under chapter 31, at least one of the elements, namely- nitrogen, phosphorus or potassium should be an essential constituent of the fertilizer as per chapter note 6 of chapter 31.

2.2 There is no specific heading in the tariff for classification of micronutrients. However, where the micronutrient is a separate chemically defined compound, it will be classifiable under the heading for that chemically defined compound under chapter 28 or chapter 29. For example, some of the sulphates of micronutrients are specifically covered under CETH 2833.

2.3 Vide Notification no. 12/2016 – C.E dated 1.3.2016, Notification no. 12/2012 – C.E dated 17.3.2012 has been amended and a new serial no 109A has been inserted to exempt duty of excise in excess of 6%, payable on micronutrients classifiable under chapter 28, 29 or 38 and covered under serial number 1(f) of Schedule 1, Part (A) of the Fertilizer Control Order, 1985 and manufactured by the manufacturers registered under the Fertilizer Control Order, 1985.

3.1 Plant Growth Regulators are defined as organic compounds other than nutrients that affect the physiological processes of growth and development in plants when applied in low concentration. Plant growth regulators are active at low concentrations in promoting, inhibiting or modifying growth and development. They are either natural or synthetic compounds that are applied directly to a target plant to alter its life processes and its structure to improve quality, increase yields, or facilitate harvesting etc. These are in the nature of plant hormones and classical of them are auxins, cytokinins, gibberellins (all three promoters) and abscisic acid, ethylene (both inhibitors). PGRs in the list are not exhaustive and more growth substances are being discovered in this category. PGRs are naturally produced by plants and they act by controlling or modifying, plant growth processes such as formation of leaves and flowers, elongation of stems, development and ripening of fruits etc. Synthetic organic chemicals are also used as PGRs and are industrially produced and marketed. A list of some of the PGRs industrially produced in India is enclosed with the reply of IARI.

3.2 It would thus be noted that PGRs are different from nutrients, be it micronutrient or micronutrient. The difference between PGR and micronutrient has been clearly brought out in the reply from ICAR. PGR as a substance is specifically covered under CETH 3808. More specifically, Gibberellic acid and Plant Growth regulators are respectively covered under tariff item 3808 9330 and 3808 9340.

4. Fertilizers are classified under chapter 31 of the Central Excise Tariff and for this purpose they may interalia be minerals or chemical fertilizers – nitrogenous (CETH 3102), phosphatic (CETH 3103), potassic (CETH 3104) or fertilizers consisting of two or three of the fertilizing elements namely nitrogen, phosphorous and potassium; other fertilizers (CETH 3105). For the purpose of classification of any product as “other fertilizers”, chapter note 6 of Chapter 31 is relevant which provides that the term “other fertilizers” applies only to products of a kind used as fertilizers and contain, as an essential constituent, at least one of the elements nitrogen, phosphorus or potassium. It is quite clear that for any product to merit classification under CETH 3105 as other fertilizers, the product must have nitrogen or phosphorus or potassium or their combination as an essential constituent providing the essential character to the product. The chemical elements – nitrogen, phosphorus and potassium are also referred as macronutrients or primary fertilizer elements and are required in higher quantity by the plants.

4.2 Any product where the essential elements are not nitrogen or phosphorus or potassium or their mixture would not merit classification under CETH 3105. Further, the specific exclusion of separate chemically defined compounds as laid down in chapter note 1(b) and in the HSN Explanatory Notes to the heading 3105.90, reinforce the above conclusion. It may also be noted that notifications issued under Fertilizer Control Order are not relevant for deciding classification under the Central Excise Tariff.

5. Mixtures of micronutrients/multi-micronutrients with fertilisers are also manufactured and sold. They shall be classified according to their essential characters and general rules for interpretation of the schedule to the tariff. Where the essential constituent giving character to the mixture is one or more of the three elements namely Nitrogen, Phosphorous or Potassium, the mixture shall be classified under any of the heading of Chapter 31, depending upon its composition. On the other hand, where the essential character of the product is that of mixture of micronutrients/multi-micronutrients having predominately trace elements, it shall be classified under CETH 3824 as chemical products not elsewhere specified or included.

6. Past circulars of the Board on the subject namely 79/79/94-CX dt 21-11-94 and 392/25/98 – CX dt 19-5-1998 stand rescinded. Classification of Micronutrients, Multi-micronutrients, Plant Growth Regulators and Fertilizers shall be governed by the clarification contained in this circular to the extent the product under consideration is covered by the circular.

7. Difficulty experienced, if any, in implementing the circular should be brought to the notice of the Board. Hindi version would follow.

F.No.106/03/2013-CX.3

(Shankar Prasad Sarma)
Under Secretary to the Government of India

ICAR-Indian Agricultural Research Institute
New Delhi

Classification of Micro-nutrients

S.No Points Comments
i) What are Plant Micro-nutrients’.’ What are their functions in the plant? Micronutrients are essential nutrients that are required in small quantities for the normal growth and development of plants, As on today, iron (Fe), manganese (Mn). zinc (Zn), copper (Cu), boron (B), molybdenum (Mo), nickel (Ni) and chlorine (Cl) are included in this category. The concentration of these nutrients in plants is found often within 100 mg kg-1(on dry weight basis), except Fe and Mn. which can go normally up to about 500 mg kg-1. These elements are also known as minor or trace elements, but this does not mean that they are less important than macronutrients.

Functions

Iron

• Iron is a constituent of two groups of proteins, viz. (a) Heme proteins containing Fe porphyrin complex as a prosthetic group: Cytochrome oxidase, catalase, peroxidase, leghemoglobin, and (b) Fe-S proteins in which Fe is coordinated to the thiol group of cysteine or to inorganic S: Ferrodoxin

• It activates a number of enzymes, including aminolevolinic acid synthetase and coproporphyrinogen oxidase.

• It plays an essential role in the nucleic acid metabolism.

• It is necessary for synthesis and maintenance of chlorophyll in plants.

Manganese

• Manganese is an integral component of the water-splitting enzyme associated with photosystem II. Because of this role. Mn-deficiency is associated with adverse effects on photosynthesis and O2evolution.

• It is a constituent of superoxide dismutase (Mn-SOD). Role of Mn assumes criticality because Mn-SOD (present in mitochondria, peroxisomes, and glyoxysomes) protects cells against the deleterious effects of superoxide free radicals.

• Manganese has a role in tricarboxylic acid cycle (TCA) in oxidative and non-oxidative decarboxylation reactions.

Zinc

• Zinc is involved in many enzymatic activities such as dehydrogenase, proteinase, peptidase etc.

• Zinc is involved in the synthesis of indole acetic acid. metabolism of gibberellic acid and synthesis of RNA .

• Because of its preferential binding to sulphydryl group. Zn plays an important role in the stabilization and structural orientation of the membrane proteins.

• Zinc influences translocation and transport of P in plants. Under Zn-deficiency. excessive translocation of P occurs resulting in P-toxicity.

Copper

• Copper is a constituent of number of enzymes.

• Copper is important in imparting disease resistance to the plants.

• It enhances the fertility of male flowers.

Molybdenum

• Molybdenum is a component of nitrate reductase, nitrogenase, xanthine oxidase/dehydrogenase and sulphite oxidase.

• Biological nitrogen fixation (BNF) is catalysed by the Mo-containing enzyme, nitrogenase (essentially comprising of Mo-Fe-S protein and a Fe-S cluster protein) which directly transfers electrons to N2. Because of its involvement in BNF, Mo requirement of nodulated legumes is particularly high.

• Nitrate is reduced by nitrate reductase (NR) enzyme in cytoplasm by transfer of electrons from Mo to NO3. Owing to close relationship between Mo supply, nitrate reductase activity (NRA) and plant growth, NRA has been used as an indicator of status of Mo in plants.

• Molybdenum is involved in protein biosynthesis through its effect on ribonuclease and alanine aminotransferase activity.

• Molybdenum affects the formation and viability of pollens and development of anthers.

Boron

• It is responsible for the cell wall formation and stabilization, lignification and xylem differentiation. As a consequence. B-deficiency causes changes in chemical composition and ultrastructure of cell wall, accumulation of toxic phenols, inhibition of lignin synthesis and a decrease in the production of indole acetic acid (IAA)(Figure 2). Decrease in IAA is responsible for the induction of Ca-deficiency.

• It imparts drought tolerance to the crops. Regular boric acid sprays help in mitigating harmful effects of drought.

• Boron plays a role in pollen germination and pollen tube growth.

• It facilitates ion uptake by way of increasing the activities of plasma-membrane bound H+-ATPase (H+-adenosine triphosphatase).

• It facilitates transport of K in guard cells as well as stomatal opening.

Nickel

• Nickel is associated with nitrogen metabolism by way of influencing urease activity. In systems where urea is used as the sole N fertilizer for foliar spray and Ni supply is poor, lower urease activity causes urea toxicity to the foliage and leads to severe necrosis of the root tips.

• In free-living Rhizobia, adequate Ni supply ensures optimum hydrogenase activity.

• It facilitates transport of nutrients to the seeds or grains.

Chlorine

• It plays a major role in osmoregulation (cell elongation, stomatal opening) and charge compensation in higher plants.

• It acts as a cofactor in Mn-containing water splitting enzyme of photosystem II.

• Chlorine in abundance suppresses the plant diseases, viz. grey leaf spot in coconut palms, take-all and common root rot in wheat, common root rot and Fusarium root rot in barley, stalk rot in corn, stem rot and sheath blight in rice, hollow ‘heart and brown centre in potatoes, Fusarium yellows in celery, and downy mildew in millet.

• Chlorine supply improves the nutritional quality of vegetables by preferentially lowering the NO3- -N concentration in tissues.

(ii) What are single Micro-nutrients & Mixture of Micro-nutrients? There is no standard definition of single micronutrients and mixture of micronutrients.
(iii) What are Plant Growth regulators (PGRs)? What are their functions in the plant?

• PGRs: Plant growth regulators defined as organic compounds other than nutrients that affect the physiological processes of growth and development in plants when applied in low concentrations. Plant growth regulators are active at low concentrations (1-10 ng / nl) in promoting, inhibiting or modifying growth and development.

• They are either natural or synthetic compounds that are applied directly to a target plant to alter its life processes or its structure to improve quality, increase yields, or facilitate harvesting. In modem agriculture, people have established the benefits of extending the use of plant hormones to regulate growth of other plants. When natural or synthetic substances used in this manner, they are called Plant Growth Regulators.

Role:

• Plant hormones are produced naturally by plants and are essential for regulating their own growth. They act by controlling or modifying plant growth processes, such as formation of leaves and flowers, elongation of stems, development and ripening of fruit etc.

• Plant hormones rarely act alone, and for most processes- at least those that are observed at the organ level-many of these regulators have interacted in order to produce the final effect. Examples:

• (a) Classical plant hormones (auxins, cytokinins, gibberellins, abscisic acid, ethylene) and growth regulatory substances with similar biological effects.

• (b) More recently discovered natural growth substances that have phytohormonal-like regulatory roles (polyamines, oligosaccharins, salicylates, jasmonates, sterols, brassinosteroids, dehydrodiconiferyl alcohol glucosides, turgorins, systemin, unrelated natural stimulators and inhibitors), as well as myoinositol. Many of these growth active substances have not yet been examined in relation to growth and organized development in vitro.

(iv) Kindly give examples of Plant Micro Nutrients and Plant Growth Regulators naturally found. Kindly also give examples of Plant Growth Regulators and Plant Growth Hormones which are produced industrially and sold in the market. Micro Nutrients:

Iron (Fe), manganese (Mn), zinc (Zn), copper (Cu), boron (B), molybdenum (Mo), nickel (Ni) and chlorine (Cl) are classified as plant micronutrients.

Plant Growth Regulators Naturally Found:

• The plant hormones are identified as promoters (auxins, gibberellin and cytokinin), inhibitors (abscissic acid and ethylene) and other hypothetical growth substance (florigen, flowering hormone, etc.,)

• More recently discovered natural growth substances that have phytohormonal-like regulatory roles (polyamines, oligosaccharins, salicylates, jasmonates, sterols, brassinosteroids, dehydrodiconiferyl alcohol glucosides, turgorins, systemin, unrelated natural stimulators and inhibitors), as well as myoinositol.

Plant Growth Regulators which are produced industrially are listed in Table 1.

(v) Are Micro-nutrients and Plant Growth Regulators (PGRs) one and the same? These are different.

Table 1: LIST OF MARKETED PLANT GROWTH REGULANTS WITH ACTIVE INGREDIENTS

Active ingredient/Formulation/Concentrate
Product Name
Company Name
Crops
AUXINS
2-(1naphthyl)acetic acid
SL
45 g/l
Planofix
Apple Pear Pineapple
4-Indol-3-ylbutyric acid
DP
1 g/kg
Seradix B No 1
Ornamentals
4-Indol-3-ylbutyric acid
DP
3 g/kg
Seradix B No 2
Ornamentals
4-Indol-3-ylbutyric acid
SL
8 g/kg
Seradix B No 3
Ornamentals
GIBBERELLINS
Gibberellins
SL
32 g/l
ProGibb 4%
Grape, Pear, Citrus, Potato, Mango, Hops, Grape-seedless
CYTOKININS
6-benzyl adenine/gibberellins
SL
19/19 g/l
Promalin
Apple, Plum, Flowers, Ornamentals
ETHYLENE
Ethephon
SL
480 g/l
Ethrel
Apple, Cherry, Citrus, Cotton, Grape, Maize, Peach, Pineapple, Plum, Prune and Sugarcane Tobacco
GROWTH RETARDANTS
Paclobutrazol
SC
250 g/l
Cultar
Litchi Mango Peach Plum
Daminozide
SP
850 g/kg
B-Nine SP
Flowers Ornamentals
Glyphosate-isopropylamine
SL
360 g/l
Glyphosate 360 Acid
Sugarcane and Grasses (chemical mowing)
Glyphosate-isopropylamine
SL
360 g/l
Mamba 360 SL
Sugarcane Grasses (chemical mowing)
Glyphosate-isopropylamine
SL
360 g/l
Roundup
Grasses (chemical mowing) Sugarcane
Glyphosate-isopropylamine
SL
360 g/l
Roundup Ultra
Sugarcane Grasses (chemical mowing)
GROWTH INHIBITORS
Mepiquat chloride
SL
50 g/l
Pix
Cotton
Chlormequat chloride
SL
750 g/l
CeCeCe 750
Pear, Wheat
Chlormequat chloride/ethephon
SL
300/150 g/l
Uprite
Wheat
DEFOLIANTS
Thidiazuron/diuron
SC
120/60 g/l
Dropp Ultra
Cotton
GROWTH STIMULATORS
Brassinolide
SL
0.1%
Double
Agril, and Hortil, crops

*SL – Liquid Suspension; WP – Wettable Powder; EC – Emulsifiable Concentrate; DP – Powder Dust

Notification No. S.O. 1463(E) 6-4-2016


Corrigundum – Notification bearing number S.O. 514(E), dated 19th February, 2009 – S.O. 1463(E) – Dated 6-4-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 6th April, 2016

S.O. 1463(E).- In the Notification bearing number S.O. 514(E), dated 19th February, 2009 of Sector Specific SEZ for services sector at villages Talegaon and Panshil, Taluka-Khalapur and Village-Bhokarpada, Taluka-Panvel in the District Raigad in the State of Maharashtra by M/s. Sunny Vista Realtors Private Limited, the name of the developer may be read as, “M/s. Persipina Developers Pvt. Ltd” instead of “M/s. Sunny Vista Realtors Private Limited”.

[F. No. F.2/284/2006-SEZ]

DR. GURUPRASAD MOHAPATRA, Jt. Secy.

Bankruptcy Bill likely in coming Parliament session, says FM Arun Jaitley : 06-04-2016


Arun Jaitley said the country needs investments, and efforts are being made to ease the business environment so that people feel attracted to do business in this country.

Emphasising that the government is committed to reforms, Finance Minister Arun Jaitley today said things appear to be in the final round as far as GST is concerned while the bankruptcy Bill is expected to be taken up in the upcoming Parliament session.

Jaitley said the country needs investments, and efforts are being made to ease the business environment so that people feel attracted to do business in this country.

Speaking at a conference here, he said the government wants to reform the country’s taxation system with respect to direct and indirect taxes.

“We will look to bring down the direct taxes to the global levels and on indirect taxes, we appear to be in the final round as far as the Goods and Services Tax (GST) is concerned,” he said.

The GST Bill was passed by the Lok Sabha in May last year and is pending ratification by the Rajya Sabha, where the ruling NDA does not have a majority. TheCongress is opposing the Bill in the current form and demanding that a cap on GST rate be included in the Constitution Amendment Bill.

According to Jaitley, the bankruptcy Bill is in the final stages and is before the Parliamentary Committee. “Hopefully in the coming session, it should come up for positive consideration,” he added.

About the country’s capital market, Jaitley said, “I would believe that there is a lot of distance to be covered” and that the dependence on foreign institutional investors is still quite large.

“I think Indian investors are savers and therefore, to persuade them to get into low-risk investment options in the capital market and creating adequate instruments for that purpose, I think we need to incentivise,” he added.

Meanwhile, he also said the government is trying to introduce fairness in the decision making process as well as ensure decision-making is quick.

Source : The Economic Times

Notification No. S.O. 1462(E) 6-4-2016


Additional Area notified to a sector specific Special Economic Zone for information technology and information technology enabled services at SIPCOT IT Park, Siruseri and Kazhipattur Villages, Chennai, Tamil Nadu – S.O. 1462(E) – Dated 6-4-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 6th April, 2016

S.O. 1462(E).-WHEREAS, M/s. Cognizant Technology Solutions India Pvt. Ltd., a fully private organization in the State of Tamil Nadu, had proposed under Section 3 of the Special Economic Zones Act, 2005 (28 of 2005),(hereinafter referred to as the said Act), to set up a sector specific Special Economic Zone for Information Technology and Information Technology Enabled Services at SIPCOT IT Park, Siruseri and Kazhipattur Villages, Chennai, in the State of Tamil Nadu;

And, whereas, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 10.85.0 hectares at SIPCOT IT Park, Siruseri and Kazhipattur Villages, Chennai, in the State of Tamil Nadu as Special Economic Zone vide Ministry of Commerce and Industry Notification Number S.O. 2140 (E) dated 17th December, 2007;

And whereas, M/s. Cognizant Technology Solutions India Pvt. Ltd, has now proposed to include an area of 5.667 hectares as a part of above Special Economic Zone and the Central Government has granted letter of approval for notification of above area on 27th June, 2013;

Now, therefore, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby notifies an additional area of 5.667 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 16.517 hectares, comprising the plot number and the area given below in the table namely:-

TABLE

S. No.

Village Survey No. Area in hectares

1.

Egattur 76 Part 1.80.5

2.

Kazhipattur 117 Part 3.86.2

Total

5.66.7

Grant total area of SEZ after above addition

16.517

[F. No. F.2/77/2005-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

India is on the verge of astounding itself and the world: US : 06-04-2016


India is on the verge of “astounding” itself and the world as it is passionate about innovation and entrepreneurship and is experiencing a “growing vibrancy”, a top American diplomat has said.

“India is on the verge of astounding itself and the world. And the United States is ready to be a stakeholder and partner in that future,” Assistant Secretary of State for Economic and Business Affairs Charles H Rivkin said here yesterday.

Rivkin had recently led a high-powered US delegation that included representations from corporate sector to India on the American Innovation Roadshow to promote economic growth.

The road show was on four Indian cities New Delhi, Gurgaon, Hyderabad and Ahmedabad.

“I was so impressed by what I saw,” Rivkin said in his remarks to Center for Strategic and International Studies (CSIS), a top American think-tank.

“In every incubator we visited, members of our delegation, especially the solar companies, identified tangible commercial and investment opportunities,” Rivkin said.

Special US Representative for Commercial and Business Affairs at the State Department Ziad Haider was also part of the delegation.

“In every meeting, I experienced in a very refreshing way exactly what binds our two countries together: a shared passion for innovation and entrepreneurship. In fact, Americans and Indian entrepreneurs have become part of a shared culture that reveres innovation,” Rivkin said.

“It’s critical that we continue to support these people-to-people ties between our countries, and this growing vibrancy, not only in the clean energy space but across all sectors,” Rivkin said adding that the Modi government has set a target to reach 175-gigawatts of renewable energy by 2022.

With 80 per cent of the required infrastructure yet to be built, this is a significant opportunity for American companies and research institutions to showcase innovative technological solutions to environmental challenges, Rivkin said.

Sharing his experience of meetings with the Chief Ministers of Gujarat and Andhra Pradesh as well as the Telangana Minister for Information Technology, Rivkin said that they were all eager for private investment.

Referring to the recent decisions of Prime Minister Narendra Modi to increasingly devolve federal funding to the States and encouraging them to actively compete with one another in a “race to the top” for foreign investment, Rivkin said this new dynamic was evident in their conversations with State leaders.

“They stressed their commitment to protecting intellectual property rights for investors and entrepreneurs. And they made it clear that they were eager to help steer India away from carbon fuels to a cleaner, sustainable future,” he said, adding that the stakes for these States were enormous.

Many of these States have populations that outnumber major countries and the large scale needs that go with that. They not only have the motivation, they have the autonomy to do something about it, Rivkin said.

Source : PTI

Notification No : 5/2016 Dated: 6-4-2016


Electronic Verification Code (EVC) for electronically filed Form of Appeal to Commissioner (Appeals) – 5/2016 – Dated 6-4-2016 – Income Tax

Government of India

Ministry of Finance

Central Board of Direct Taxes

Directorate of Income Tax (Systems)

Notification No. 5/2016

New Delhi, 6th of April 2016

Subject:  Electronic Verification Code (EVC) for electronically filed Form of Appeal to Commissioner (Appeals)

In exercise of the powers conferred by sub-section (1) of section 249 read with section 295 of the Income-tax Act, 1961 (43 of 1961),(the Act) the Central Board of Direct Taxes (CBDT) substituted rule 45 of the Income-tax Rules, 1962 vide Notification No. 11/2016 dated the 1st  March, 2016. In the said rules, in Appendix-II, for Form No. 35 a new Form No. 35 has been substituted. The manner of furnishing the new Form No. 35 has been prescribed bysub-rule (2) of rule 45. Sub-rule (5) of rule 45 empowers the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) to (i) specify the procedure for electronic filing of Form No. 35 and documents; (ii) specify the data structure, standard and manner of generation of electronic verification code referred to in sub-rule (2) of rule 45 for the purpose of verification of person furnishing the said form; and (iii) be responsible for formulating and implementing appropriate security, archival and retrieval of policies in relation to the said form so furnished.

2. In exercise of the powers delegated by the CBDT vide said Notification the Principal Director General of Income-tax (Systems) lays down the procedures, data structure and standard of Electronic Verification Code (EVC) as under:

3.  The Electronic Verification Code (EVC) would verify the identity of the person furnishing  the form  (hereinafter called ‘Verifier’) and would be generated on the e-Filing website  https://incometaxindiaefiling.gov.in or as otherwise indicated. As specified in sub-rule (3) of  rule 45 the Verifier shall be the person who is authorized to verify the return of income under section 140 of the Act as applicable to the assessee. Where the Verifier represents an entity  (i.e. HUF/ Firm/ AOP etc.) then the Verifier should be registered in the e-Filing website as a  Principal Contact of the entity.

4.  The EVC generation process may vary based on the risk category of the assessee (the  term ‘assessee’ is as defined in clause (7) of section 2 of the Act), the method of accessing the e-Filing website or interface with third party authenticating entity. The EVC would be unique for an Assessee-PAN or Assessee-TAN and will not be valid for any other PAN or TAN, as the case  may be, at the time of furnishing of the form. One EVC can be used to validate one form of the assessee irrespective of the assessment year. The EVC will be stored against the Assessee-PAN  along with other verification details. The EVC will be valid for 72 hours or as otherwise specified. The Verifier may use more than one mode to obtain EVC and can generate the EVC  multiple times.

5.  The mode of generation of EVC, Validation of EVC and Data Structure of EVC shall be  same as specified by theNotification No. 2/2015 dated 13th July, 2015 and the Notification No. 1/2016  dated  19th  January,  2016  issued  by the Principal Director General of Income-tax (Systems).

6. The mode and process for generation and validation of EVC and its use may be modified, deleted or added by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) as and when it is expedient to do so.

(Gopal Mukherjee)

Pr. DGIT (Systems), CBDT

Notification No : 4/2016 Dated: 6-4-2016


Procedure for registration and submission of statement as per clause (k) of sub section (1) of section 285BA of Income-tax Act, 1961 read with Sub rule (7) of Rule 114G of Income-tax Rules, 1962 – 4/2016 – Dated 6-4-2016 – Income Tax

DGIT(S)-ADG(S)-2/e-filing notification/106/2016

Government of India

Ministry of Finance

Central Board of Direct Taxes

Directorate of Income Tax (Systems)

Notification No 4/2016

New Delhi, 6 April, 2016

Procedure for registration and submission of statement as per clause (k) of sub section (1) of section 285BA of Income-tax Act, 1961 read with Sub rule (7) of Rule 114G of Income-tax Rules, 1962

As per Sub rule (10)(a) of Rule 114G of the Income Tax Rules, 1962 (hereunder referred as the Rules), every reporting financial institution shall communicate to the Principal Director General of Income-tax (Systems) the name, designation and communication details of the Designated Director and the Principal Officer. As per Sub rule (9)(a) of Rule 114G, the statement referred to in sub-rule (7) of Rule 114G shall be furnished through online transmission of electronic data to a server designated for this purpose under the digital signature in accordance with the data structure specified in this regard by the Principal Director General of Income-tax (Systems). Further as per sub rule (9)(b) of Rule 114G Principal Director General of Income Tax  (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.

2.  In exercise of the powers delegated by Central Board of Direct Taxes (‘Board’) under Sub rule (9)(a) and 9(b) of Rule 114G of the Income tax Rules 1962, the Principal Director General of Income-tax (Systems) hereby lays down the following procedures:

a)  Generation of ITDREIN: The reporting financial institution is required to get registered with the Income Tax Department by logging in to the e-filing website (http://incometaxindiaefiling.gov.in/) with the log in ID used for the purpose of filing the Income Tax Return of the reporting financial institution. A link to register   reporting   financial   institution   has  been   provided   under  “My Account>Manage ITDREIN”. The reporting financial institution is required to apply for different ITDREIN for different reporting entity categories. Once ITDREIN is generated, the reporting entity will receive a confirmation e-mail on the registered e-mail ID and SMS at registered mobile number. There will be no option to de-activate ITDREIN, once ITDREIN is created.

b)  Submission of details of reporting entity: After generation of ITDREIN, the reporting financial institution will be required to submit details of the reporting entity on the screen. Once registered, the reporting entity will have an option to edit the details.

c)  Registration of designated director and principal officer: After submission of reporting entity details, the reporting financial institution will be required to submit the details of designated director and principal officer. The designated director and principal officer will receive a confirmation e-mail with an activation link. An SMS along with OTP (One time Password) will also be sent to the registered Mobile Number. For completion of registration, the designated director and principal officer should click on the Activation link, enter the Mobile PIN(OTP), Password and Confirm Password and click on Activate Button. On success, the registration will be complete.

d)  Submission of Form 61 B: Every reporting financial institution is required to submit the Statement of Reportable Account in Form 61 B or submit Nil statement. The prescribed schema for Form 61 B and a utility to prepare XML file can be downloaded from the e-filing website home page under forms (other than ITR) tab. The designated director is required to login to the e-filing website with the ITDREIN, PAN (of the designated director) and password The form is required to be submitted using a Digital Signature Certificate of the designated director.

e) Submission of Nil statement: In case nil statement is to be submitted, the option to submit Nil statement is required to be selected. The designated director will then be required to submit a declaration with respect to pre-existing accounts (As defined in Rule 114H(2)(h) of Income Tax Rules, 1962) and new accounts (As defined in Rule 114H(2)(d) of Income Tax Rules, 1962). The declaration is required to be submitted using a Digital Signature Certificate.

f) Existing registered entities: The reporting financial institutions that are already registered as an reporting entity for Form 61 B with the Income tax Department will be able to view the ITDREIN details after logging in to the e-filing under “My Account>Manage ITDREIN”. E-mail will be sent to the designated director for the activation of its access. Once activated, it will be able to view the existing form  61 B/nil statement and will be able to upload 61 B/nil statement.

3. In view of the changes mentioned above, the procedures prescribed in Notification 3 dated 25th  August, 2015and Notification No 4 dated 4th  September, 2015 stands withdrawn forthwith.

(Gopal Mukherjee)

Pr. DGIT (Systems), CBDT

Insertion of sub-section (2) in Section 67A of FA, 1994 vis-a-vis POTR – confusions galore – 05-04-2016


APRIL 05, 2016

By S Sivakumar, LL.B., FCA, FCS, ACSI, MBA, Advocate and R Vaidyanathan, M.Com, M.Phil, Consultant

AS students of law, we know that any taxing statute has to specifically deal with the three aspects, viz. the taxable event, the rate of tax and the point in time when the tax liability is to be discharged. It would seem that there are certain critical issues arising out of the proposed incorporation of sub-section (2) in Section 67A of the Finance Act, 1994 read with the Point of Taxation Rules, 2011 (‘POTR’).

Clause 148 of the Finance Bill, 2016 has proposed the following amendment to section 67A, viz.

148. In the 1994 Act, in section 67A, the existing section shall be numbered as sub-section (1) thereof, and after sub-section (1) as so renumbered, the following sub-section shall be inserted, namely:-

“(2) The time or the point in time with respect to the rate of service tax shall be such as may be prescribed”.

The existing Section 67A reads as under:

Date of determination of rate of tax, value of taxable service and rate of exchange.

67A. The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided.

Explanation.- For the purposes of this section, “rate of exchange” means the rate of exchange determined in accordance with such rules as may be prescribed.

We should read these developments in the light of the amendment to Notification No. 18/2011-ST dated 1-3-2011 [notifying the Point of Taxation Rules, 2011] by notification 10/2016-ST dated 01.03.2016 wherein, the word ‘sub-section (2) of Section 67A and’ have been inserted, to take effect from the date of the Presidential assent.

We should also keep Para 12 of the TRU circular No. D.O.F. No. 334/8/2016-TRU dated February 29, 2016 which reads as under:

Quote:

12. The Point of Taxation Rules (POTR).

The Point of Taxation Rules, 2011 have been framed under provisions of clause (a) and (hhh) of sub-section (1) of section 94, now specific powers is also being obtained under section 67A to make rules regarding point in time of rate of service tax. Thus, any doubt about the applicability of service tax rate or apparent contradiction between section 67A and POTR would be taken care of. Therefore, consequent modifications have been done in POTR.

(a) Rule 5 of POTR applies when a new service comes into the service tax net. Although in the case of new levy, provisions of Chapter V of the Finance Act, 1994, and rules made thereunder, are invariably made applicable in relation to the levy and collection of the new levy. However, doubts have been raised regarding its applicability in case of new levy. Therefore, an Explanation is being inserted in Rule 5 stating that the same is applicable in case of new levy on services.

(b) Further, in rule 5 of POTR, it is provided that in two specified situations the new levy would not apply. Another Explanation is being inserted therein stating that in situations other than those specified where new levy or tax is not payable, the new levy or tax shall be payable.

The above changes shall come into effect from 1st March, 2016.

Unquote

A combined reading of the existing Section 67A of the Finance Act, 1994 [which, in effect is the sub-section (1) of the section, post amendment] with the un-amended POTR would clearly indicate that, while the POTR is to be referred to, to determine as to when (i.e at what point in time) service tax is payable, Section 67A is to be referred to, to determine the rate of service tax based on when the service has been provided or to be provided. POTR never had the statutory backing, to determine the point of time when service has been provided, which is sought to be made through the insertion of sub-section (2).

While on the subject, there are three aspects connected to the subject involving levy of service tax, viz. (i) power conferred under the Finance Act for levy of tax [under Section 67A], (ii) power conferred to make Rules [under Section 94(2)(hhh)], and (iii) the actual Rule deriving its legal validity from the statutory provisions in the Act.

Apart from inserting sub-section (2) to Section 67A, the Government should also have amended Section 94(2) (hhh) to incorporate reference to Section 67A(2) apart from the existing reference to Section 66C. In the absence of this amendment, it would seem that the POTR, which derives its statutory backing from Section 67A(2) and Section 94(hhh) [which, as aforesaid, does not refer to Section 67A(2)] can still be challenged as being ultra vires the Finance Act, 1994.

Be that as it may, by going in for these amendments, the Government would seem to have scored a major self-goal, inasmuch as, it can now be held that, the Point of Taxation Rules, 2011, sans the insertion of sub-section(2), did not have the statutory backing to determine the rate of tax.All show-cause notices issued under the current version of the POT Rules can now be treated to be invalid and illegal, as the Government itself has conceded that it derived the power to determine the time or the point in time with respect to the rate of service tax in the POTR only from the proposed sub-section (2) of Section 67A. And, being an insertion and not a substitution, the effect of the insertion of sub-section(2) to Section 67A can validate the POTR, if at all, only from the date of the Presidential assent. This position is fairly conceded in Para 12 of the above mentioned TRU Circular.

Taking this discussion further…

A simple reading of the existing sub-section (1) as proposed to be renumbered and the proposed sub-section(2) would indicate that, these two are mutually contradictory. While sub-section (1) makes an absolute statement that the rate, value and rate of exchange vis-à-vis the taxable service would be as the one as is applicable when the taxable service has been provided or agreed to be provided. Now, the sub-section (2) as proposed, states that the time or the point in time with respect to the rate of service tax shall be such as may be prescribed. One can see that the sub-section (2) as proposed to be inserted is in contrast to the sub-section (1), inasmuch as, the rate of service tax would be the one applicable as per the time or point in time to be prescribed (under the POTR), which is against the wordings used in sub-section (1), which states that the rate of service tax would be the one that is prevalent on the date of rendering the service or on the date on which the agreement to render the service has been entered into.

The least that the Government of the day could have done is to add a non-obstante clause, which would have resulted in sub-section (2) overriding sub-section (1).

The net impact of all of these amendments/insertions is that, the POTR, insofar as the determination of the rate of tax is concerned, would seem to lack the legislative backing during the period prior to the grant of the Presidential assent which would legalize sub-section (2) of Section 67A of the Finance Act, 1994. Even after Section 67A in its expanded version is enforced, the very fact that the two sub-sections are seemingly contradictory to each other, is bound to create a lot of litigation even in the future, as the assessee would be entitled to rely on sub-section (1) while the Government would seek to rely on the POTR which has been issued under sub-section (2) and only the Courts can solve this issue.

Before concluding…

One is reminded of the issues involving levy of service tax on reverse charge mechanism under the then prevailing Section 66A of the Finance Act, 1994. The Courts had struck down the levy of service tax under the RCM for the period prior to 18.04.2006 on the basis that the power to levy such tax came to the Government only with the introduction of Section 66A. In our view, a similar fate awaits the POTR, for the period prior to the date of the Presidential assent.

Ease of doing business: Government weighs making PAN a unique ID for companies : 05-04-2016


Government is working on a proposal to make PAN a unique identity for business entities with a view to improving ease of doing business and ensuring a company is incorporated in a day using an integrated e-biz portal.

“We are working towards making PAN a unique ID for any business entity that is recognised by all departments… This would facilitate incorporation of a new company in a single day through an integrated e-biz portal and this is going to be soon a reality,” Cabinet Secretary PK Sinha said today.

He was speaking at a session on ‘Ease of Doing: The Next Steps’ organised by CII.

Asserting that the government is committed to making things easy for doing business, Sinha said it means not only minimising or quickening the industry’s interface with the government and its agencies, but unveiling policy measures to create more business opportunities and an environment that makes investments less risky and more attractive.

Sinha also said dedicated commercial courts have been set up for disposal of commercial disputes and the Insolvency and Bankruptcy law is in the pipeline.

According to the World Bank’s Doing Business report, India’s rank improved to 130 in 2016, from the earlier 142, out of 189 economies.

“However, we must remember that the report evaluates only Delhi and Mumbai and does not capture the good work that many of the states are doing. Besides, the policy and process reforms that are being  introduced in Delhi and Mumbai in order to improve our ranking needs to be replicated in other states and cities also,” he emphasised.

The Cabinet Secretary highlighted several challenges faced by the government in 2014-15 in sectors such as road, power and coal.

“One by one as a result of the policy interventions made, these issues have been resolved and projects are back on track. Path-breaking reforms have been launched in the infrastructure and transport sector particularly he said.

“Whether it is NELP in the oil sector, new tariff policy in power, hybrid annuity model in the road sector or the ship-building subsidy, all these will pave the way for renewed private sector participation in development.”

He pointed to several steps being taken to make things simple to do business.

“Transformative actions have been taken to simplify the processes of obtaining various clearnesses from the government and its agencies such as environment and for orest clearances for projects, the Airport Authority of India and the Archaeological Survey of India (ASI) clearances for building constructions etc,” he said.

Source : PTI

Rate cut expected, with RBI seen staying ‘accommodative’ : 05-04-2016


The Reserve Bank of India is expected to cut its policy interest rate by a quarter per centage point on Tuesday, lowering it to a more than five-year low while dangling the prospect of another cut later this year if inflation trends stay benign.

Controlling inflation is the central bank’s priority, but Prime Minister Narendra Modi’s government would welcome any move to improve business conditions for industrialists who remain hesitant to invest, despite data depicting India  as one of the world’s fastest growing economies.

Most analysts polled by Reuters expect the RBI to cut the repo rate to 6.50 per cent – the lowest since January 2011.

The RBI is also expected to say that it is retaining its “accommodative” stance, raising the prospect of another 25 bps rate cut later this year.

“We expect the RBI to cut the policy rate by 25 basis points and then wait, keeping the door open for more rate cuts,” A. Prasanna, an economist at ICICI Securities Primary Dealership Ltd, said.

Inflation easing to 5.18 per cent in February, and a government budget that kept borrowing and spending in check, has given the RBI room to make its first cut since September, resuming an easing cycle that was in full swing last year.

Bonds have rallied on these expectations.
The 10-year bond yield slumped 16 basis points in March following the government’s pledge in February to stick to a fiscal deficit target of 3.5 per cent of gross domestic product, and data last month showing inflation easing for the first time in seven months. Chances for further rate cuts could rest on trends in global oil prices and the impact of the monsoon rainy season on food prices after back-to-back droughts in the two previous years.

The RBI is focussed on attaining inflation targets – aiming for around 5 per cent by March 2017, and 4 per cent in the medium term.

BRIGHTER BUSINESS SURVEY In all, the RBI reduced by repo rate by 125 bps in 2015, but it has been frustrated by commercial banks failure to pass on the full benefits to the wider economy.

Complaining of tight liquidity in the financial system, banks only passed on about half of the RBI’s rate reductions to borrowers so far.

And, despite the RBI easing  last year more aggressively than at any time since the 2008-2009 global financial crisis, annual economic growth slowed to 7.3 per cent in the October-December quarter from 7.7 in the previous quarter.

The slowdown left the economy further adrift of the government’s 8.0 per cent growth target, a rate needed to generate jobs for the millions of Indians joining the workforce each year.

More positively, a business survey released on Monday showed Indian manufacturing activity expanded for the third straight month in March and at the fastest pace since July, driven by stronger demand which allowed companies to raise prices at the fastest pace in 16 months.

The latest Nikkei/Markit Manufacturing Purchasing Managers’ Index showed the new orders sub-index, a proxy for domestic demand, also rose to an eight-month high, encouraging firms to increase output. Foreign demand also rose though at a slightly more moderate pace.

Source : The Economic Times

 

Notification No. F. No. 1/19/2013-CL-V 4-4-2016


Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Amendment Rules, 2016 – F. No. 1/19/2013-CL-V – Dated 4-4-2016 – Companies Law

GOVERNMENT OF INDIA

Ministry of Corporate Affairs

Notification

New Delhi, 04th April, 2016

G.S.R. 397(E) -  In exercise of the powers conferred by sub-sections (1) and (2) of section 469 read with section 398 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, namely:-

1.     Short title and Commencement:-

(1) These rules may be called the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Amendment Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2.     In the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, in rule 3, for the proviso, the following proviso shall be substituted, namely:-

“Provided that the companies in banking, insurance, power sector, non-banking financial companies and housing finance companies need not file financial statements under this rule.”.

[F. No. 1/19/2013-CL-V]

(Amardeep Singh Bhatia)

Joint Secretary

Notification No : 26/2016 Dated: 4-4-2016


Section 10(46) of the Income-tax Act, 1961 Central Government notifies Sikkim State Electricity Regulatory Commission for dealing with specified income – 26/2016 – Dated 4-4-2016 – Income Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

[CENTRAL BOARD OF DIRECT TAXES]

NOTIFICATION NO. 26/2016

New Delhi, the 04th April, 2016

S.O. 1308 (E) – In exercise of the powers conferred by clause (46) of section 10 of the Income-tax  Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the Sikkim State Electricity Regulatory Commission, constituted under the Electricity Act, 2003 (39 of 2003), in respect of the following specified income arising to that Commission, namely : -

(a) grants and aid received from Government :

(b) amount received in the form of the Petition fees;

(c)  amount received in the form of the Licence fees; and

(d)  interest earned on investment or deposit.

2.  This notification shall be subject to the following conditions, namely : -

(a) the Sikkim State Electricity Regulatory Commission shall not engage in any commercial activity;

(b) the activities and nature of the specified income remain unchanged throughout the financial years;

and

(c)  the return of income shall be filed in accordance with the provision of clause (g) of sub-section (4C) section 139 of the Income-tax Act, 1961 (43 of 1961).

3. This notification shall be applicable with respect to the specified income of the said Commission for the Financial Years 2015-2016, 2016-2017, 2017-2018, 2018-2019 and 2019-2020.

[F. No. 196/40/2015-ITA-I]

DEEPSHIKHA SHARMA, Director

Notification No : 25/2016 Dated: 4-4-2016


Section 10(46) of the Income-tax Act, 1961 Central Government notifies West Bengal Pollution Control Board for dealing with specified income – 25/2016 – Dated 4-4-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 25/2016

New Delhi, the 4th April, 2016

S.O. 1309(E).-In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the West Bengal Pollution Control Board, a body constituted by the Government of West Bengal, in respect of the following specified income arising to the Board, namely:-

(a) consent fees or no objection certificate fees;

(b) analysis fees on air quality and water quality or noise level survey fees;

(c) authorisation fees;

(d) cess re-imbursement and cess appeal fees;

(e) reimbursement of the expenses received from the Central Pollution Control Board towards National Air Monitoring Program, the Monitoring of Indian National Aquatic resources and like schemes;

(f) sale of books relating to environmental law, regulations, important judicial orders and environmental issues where no profit element is involved and the activity is not commercial in nature;

(g) interest on deposits;

(h) public hearing fees;

(i) vehicle emission monitoring test fees;

(j) fees received for processing by State Environmental Impact Assessment Authority;

(k) fees collected for training conducted by the Environmental Training Institute of the Board where no profit element is involved and the activity is not commercial in nature;

(l) fees received under the Right to Information Act, 2005 (22 of 2005) and appeal fees;

(m) interest on loans and advances given to staff of the Board;

(n) pollution cost or forfeiture of bank guarantee due to non-compliance; and

(o) miscellaneous income including sale of old or scrap items, tender fees and other matters relating thereto, where no profit element is involved.

2. This notification shall be subject to the conditions, namely:-

(a) the West Bengal Pollution Control Board shall not engage in any commercial activity;

(b) the activities and the nature of the specified income remain unchanged throughout the financial years; and

(c) the return of income shall be filed in accordance with the provisions of clause (g) of sub-section (4C) section 139 of the Income-tax Act, 1961 (43 of 1961).

3. This notification shall be applicable with respect to the specified income of the West Bengal Pollution Control Board in the Financial Years 2015-2016, 2016-2017, 2017-2018, 2018-2019 and 2019-2020.

[F. No.196/11/2015-ITA-I]

DEEPSHIKHA SHARMA, Director

Notification No : 25/2016 Dated: 4-4-2016


Section 10(46) of the Income-tax Act, 1961 Central Government notifies West Bengal Pollution Control Board for dealing with specified income – 25/2016 – Dated 4-4-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 25/2016

New Delhi, the 4th April, 2016

S.O. 1309(E).-In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the West Bengal Pollution Control Board, a body constituted by the Government of West Bengal, in respect of the following specified income arising to the Board, namely:-

(a) consent fees or no objection certificate fees;

(b) analysis fees on air quality and water quality or noise level survey fees;

(c) authorisation fees;

(d) cess re-imbursement and cess appeal fees;

(e) reimbursement of the expenses received from the Central Pollution Control Board towards National Air Monitoring Program, the Monitoring of Indian National Aquatic resources and like schemes;

(f) sale of books relating to environmental law, regulations, important judicial orders and environmental issues where no profit element is involved and the activity is not commercial in nature;

(g) interest on deposits;

(h) public hearing fees;

(i) vehicle emission monitoring test fees;

(j) fees received for processing by State Environmental Impact Assessment Authority;

(k) fees collected for training conducted by the Environmental Training Institute of the Board where no profit element is involved and the activity is not commercial in nature;

(l) fees received under the Right to Information Act, 2005 (22 of 2005) and appeal fees;

(m) interest on loans and advances given to staff of the Board;

(n) pollution cost or forfeiture of bank guarantee due to non-compliance; and

(o) miscellaneous income including sale of old or scrap items, tender fees and other matters relating thereto, where no profit element is involved.

2. This notification shall be subject to the conditions, namely:-

(a) the West Bengal Pollution Control Board shall not engage in any commercial activity;

(b) the activities and the nature of the specified income remain unchanged throughout the financial years; and

(c) the return of income shall be filed in accordance with the provisions of clause (g) of sub-section (4C) section 139 of the Income-tax Act, 1961 (43 of 1961).

3. This notification shall be applicable with respect to the specified income of the West Bengal Pollution Control Board in the Financial Years 2015-2016, 2016-2017, 2017-2018, 2018-2019 and 2019-2020.

[F. No.196/11/2015-ITA-I]

DEEPSHIKHA SHARMA, Director

No. PRESS RELEASE Dated: 4-4-2016


Release of E-filing of Income Tax Returns (ITR) and other forms – Circular – Dated 4-4-2016 – Income Tax

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

PRESS RELEASE

New Delhi, 4th April, 2016

Sub: Release of E-filing of Income Tax Returns (ITR) and other forms –reg

In pursuance of the Notification of the Income Tax Returns (ITR) for AY 2016-17 on March 31st, 2016, Central Board of Direct Taxes announces the release of electronic filing of ITRs 1 and 4S on its website https://incometaxindiaefiling.gov.in. Other ITRs will be e-enabled shortly.

Online filing of Appeal before Commissioner (Appeal) using newly notified Form 35 has been enabled for taxpayers mandated to E-file their returns using Digital Signature Certificate. Electronic Verification Code (EVC) option will be available shortly for other category of taxpayers. Reference may be made to Notification 11/2016 dated 1 March 2016 for the various categories of taxpayers required to file appeal online.

In pursuance of Notification No 93/2016 dated 16th Dec 2015, effective from 1 April 2016, the following forms have been substituted by new forms and are now available for E-filing:

i. Form 15CA -payments to a non-resident not being a company, or to a foreign company,

ii. Form 15CB-Certificate of an accountant,

iii. Form 15CC -Quarterly statement

Vide Notification No 3/2016 dated 14th Jan 2016, CBDT had substituted with effect from 1 April 2016, Forms 9A(Application for exercise of option under clause (2) of the Explanation to sub-section (1) of section 11 of the Income tax Act, 1961) and Form 10 (Statement to be furnished to the Assessing Officer/Prescribed Authority under sub-section (2) of section 11 of the Income tax Act, 1961). These forms can be filed online using Digital Signature Certificate on the Income Tax Department’s e-filing website. EVC option will be available shortly.

(Shefali Shah)

Pr. Commissioner of Income Tax

(Media and Technical Policy)

and Official Spokesperson, CBDT

No. F. No. Dir(Hq.)/Ch(DT)/39(2)/2015 Dated: 4-4-2016


Review of Grievances by Senior Officers – PRAGATI meetings of 27.01.2016 and 23.03.2016 – Circular – Dated 4-4-2016 – Income Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF DIRECT TAXES

New Delhi, Dated: April 4, 2016

OFFICE MEMORANDUM

Subject: Review of Grievances by Senior Officers – PRAGATI meetings of 27.01.2016 and 23.03.2016-reg.

During the PRAGATI meeting on 27.01.2016, the Hon’ble Prime Minister reviewed the disposal of grievances relating to the Central Board of Excise & Customs. During the interaction, the Hon’ble PM, inter alia, desired that:

‘Secretaries of all Departments having substantial public dealing should personally examine 10 grievances every week and Addl. Secretary/CMD rank and Joint Secretary level officers should examine 20 and 30 grievances respectively every week’

2. During the recent PRAGATI interaction on 23.03.2016 also, the Hon’ble PM reiterated that for timely and proper resolution of public grievances, higher level monitoring of public grievances is necessary.

3. Accordingly it has been decided that all the Members of CBDT and all the Pr.CCsIT/Pr.DGsIT will personally examine 10 CPGRAMS grievances every week. Similarly, all the CCsIT and Pr.CsIT/CsIT will personally examine 20 and 30 CPGRAMS grievances respectively every week. A monthly report about such monitoring of grievances will be forwarded to the Zonal Members by the Pr.CsIT/Pr.DGsIT by 5th of succeeding month. All the Members of the Board will, in turn, forward a consolidated report to Chairman for submission to the Secretary, Revenue for onward transmission to the PMO/DARPG.

4. For the purpose of such examination and monitoring, CIT(C&S) will share the user id and password of CPGRAMS with all the Members of CBDT so that they can directly monitor grievances in their respective zones.

This issues with the approval of Chairman, CBDT.

[F. No. Dir(Hq.)/Ch(DT)/39(2)/2015]

(Dr. B.K. Sinha)

CIT(C&S), CBDT

GST about to happen; retro tax thing of past: PM Narendra Modi : 04-04-2016


Promising easier business environment for global investors, Prime Minister Narendra Modi today said retrospective taxation has been relegated to history, but he is “not able to do anything” on two pending cases from the previous government as “they are sub-judice”.

Wooing investors with promise of an easier business environment and stable tax regime, Prime Minister Narendra Modi today said retrospective taxation has been made a thing of the past but he is “not able to do anything” on two cases inherited from the previous government as they are “sub-judice”.

Inviting Saudi businesses to come and invest in India’s defence, energy, railway, health and agriculture sectors, Modi also said that a common indirect taxation regime in form of GST (Goods and Services Tax) was “about to happen”. He, however, refrained from giving any specific timeframe.

Addressing a select group of Saudi and Indian business leaders on the last day of his two-day visit to Saudi Arabia, Modi said his government has opened up many sectors to foreign investment and India stands out as a “beacon of hope” amidst global economic slowdown.

Prime Minister further said his government was trying to strengthen the banking network in India by freeing them from non-performing assets (NPAs) of state-run electricity companies whose liabilities had gone up significantly.

Modi said India has taken major policy initiatives to create favourable environment for investors besides removing administrative bottlenecks. In this regard he said the World Bank has placed India on 12th position in the list of countries that had ensured ease of doing business.

“Today, the world is facing a very deep economic crisis and in this situation, India is a beacon of hope. Whether it is World Bank, IMF or credit rating agencies, all of them consider India one of the fastest growing economies,” he said.

On roll out of the much-delayed GST, Prime Minister said, “GST will happen. I cannot give a timeframe, but it will happen. It was our commitment, and it is about to happen.”

To a question on retrospective tax, Modi said it will never be brought back again. He said two cases were ‘sub- judice’ and it would not be proper for him to comment further.

“As far as retrospective tax is concerned, it is a thing of the past. We have repeatedly said this in Parliament and I am repeating here again today.

“There were two incidents that took place under the last government. These are sub-judice. So, I am not being able to do anything on them. In one of the cases, positive outcome has come. Retrospective tax does not exist in India anymore. It has become a thing of the past. It won’t come,” he said.

Although Prime Minister did not specifically name the pending cases, the major retrospective tax disputes include those involving Vodafone and Cairn.

“I think in international relations, the taxation system should be predictable. If somebody wants to come (to India) after 10 years, he should know India’s tax structure is like this. That’s why we are working on a long-term tax system and we are implementing and I do not think there will be any problem in that,” Modi said.

A Saudi businessman had asked Modi about retrospective tax regime, GST, banking system and some other issues and wondered whether Modi will be able to address their concerns.

Incidentally, Cairn Energy CEO Simon Thomson told PTI in an interview in London today that international investors want the Modi government to walk the talk on resolving retrospective tax issues and send a clear signal that things are changing under the new dispensation.

Cairn, which gave India its biggest onland oil discovery that now accounts for a fifth of the country’s oil production, will press ahead with the arbitration challenging use of a legislation to tax internal business reorganisation with retrospective effect and will seek $ 1 billion in damages, he further said.

Eyeing billions of dollars of investment from Saudi Arabia, which is setting up a $ 2 trillion public investment fund, Modi invited top CEOs to invest in defence, energy, railway, health and agriculture sectors in India.

Holding that there was huge opportunity to ramp up trade ties, he said time has come to move from ‘buyer-seller relationship’ to chart a new path of growth and development which will benefit people of both the countries.

“We have to look beyond the buyer-seller relationship, because that will be an obstacle in the path of progress,” he said at the interaction organised by the Council of Saudi Chambers.

Saudi Arabia’s Minister for Commerce and Industry Tawfig Fawzan Al Rabiah and Minister of Economic and Planning Adel Faqih were also present on the occasion.

Prime Minister also sought joint ventures and transfer of technology in the fields of defence, deep sea oil exploration and railway.

He said Saudi investors can invest in building cold storage network in India as well as in manufacturing of equipment for generation of solar energy.

He said Saudi investment in fertilizers, warehousing, cold chain facilities and agriculture, would be a win-win partnership, as it would ensure good quality food products for Saudi Arabia.

He also said India and Saudi Arabia should look at working together in the field of cyber-security as it has emerged as a major area of concern.

Saudi Arabia is India’s fourth largest partner with bilateral trade exceeding $ 39 billion in 2014-15. It is also India’s largest crude oil supplier and accounts forabout one-fifth of total imports.

Describing India and Saudi Arabia as “old friends”, Prime Minister said both the countries should take bold new steps to a “golden future”.

Emphasizing the strength of ties between the two countries, he recalled King Salman bin Abdulaziz Al Saud mentioning that he was taught by an Indian teacher.

Modi said India had a unique combination of democracy, demography and demand, and several policy initiatives had been taken over the last two years to spur growth and progress.

Speaking about health sector, he said there was tremendous scope for investment in the manufacturing of medical devices.

He said India’s health sector which is globally extremely cost competitive, offers immense scope for health tourism. He added that Indian nurses, present in large numbers in the Gulf, are a testament to India’s well-trained manpower.

“We import everything for defence sector. Why can we not manufacture defence equipment in India? You investors can play a big role in that. Whatever will be manufactured, India is a very big buyer,” Modi said.

Inviting investments in petroleum sector, Modi said investors can partner India in energy sector as the country offers “transparent” policies.

He said in one year, India has already achieved 5,500 MW of renewable energy production.

“When I first time said 175 GW renewable energy people were surprised…. And I am confident that we will do it within the time period. I want investment in solar equipment manufacturing and we are ready to produce 175 GW renewable energy, which will be a strange thing for the world,” Modi said.

Later, Ministry of External Affairs spokesperson Vikas Swarup tweeted that Prime Minister met Chairman of Saudi Aramco, Khalid A al-Falih and discussed issues related to energy and healthcare sectors.

Al-Falih, who is also the Minister of Health said Aramco looks at India as its number one target for investment, read Swarup’s tweet.

Saudi Minister of Foreign Affairs Adel al-Jubeir also met Narendra Modi before the ceremonial welcome.

While interacting with 30 Saudi CEOs and Indian business leaders here, Prime Minister said the Centre along with state governments have worked to take over the distressed power sector loans from banks. “Now we are working with private companies. On that also we have progressed fast. So NPAs will not be an issue in the near future.”

Modi said a lot of foreign banks are functioning in India and going forward, whatever is needed, the government will do.

Modi said India had a unique combination of democracy, demography and demand, and several policy initiatives have been taken over the last two years to spur growth.

He said there was tremendous scope for investment in the manufacturing of medical devices.

Source : The Financial Express

Provisional anti-dumping duty on vitrified/porcelain tiles from China : 04-04-2016


The Finance Ministry has imposed provisional anti-dumping duty on certain vitrified/porcelain tiles from China.

Vitrified/porcelain tiles can be glazed or unglazed and are primarily used for coverings for floors as well as on walls.

These tiles are used in buildings, homes, restaurants, cinema halls, airports, swimming pools, railway stations etc.

The revenue department has imposed provisional anti dumping duty of $ 1.37 per square metre on “glazed/unglazed porcelain/vitrified tiles in polished or unpolished finish with less than 3 percent water absorption”.

The provisional anti dumping duty will be valid for six months.

Gujarat Granito Manufacturers’ Association and Sabarkantha District Ceramic Association had filed the petition seeking levy of anti-dumping duty on such vitrified tiles imports from China.

Vitrified/ceramic tiles are a kind of ceramic tiles, but are made with slightly different elements. These tiles are made after vitrification process.

Source : The Hindu

Notification No. 5(R)/2016-RB 1-4-2016


RESERVE BANK OF INDIA
(Foreign Exchange Department)
(CENTRAL OFFICE)
MUMBAI

FEMA NOTIFICATION NO

 05 (R)/2016-RB, Dated: April 1, 2016

Foreign Exchange Management (Deposit) Regulations, 2016

G.S.R. 389(E). - In exercise of the powers conferred by clause (f) of sub-section (3) of section 6, sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in supersession of Notification No. FEMA 5/2000-RB dated May 3, 2000, as amended from time to time, the Reserve Bank makes the following regulations relating to deposits between a person resident in India and a person resident outside India, namely:-

1. Short title and commencement:-

i) These regulations may be called the Foreign Exchange Management (Deposit) Regulations, 2016.

ii) These regulations shall come into force from the date of their publication in the Official Gazette except subregulation (2) of Regulation 7. Sub-regulation (2) of Regulation 7 is deemed to have come into force with effect from 21st January, 2016.

2. Definitions:-

In these Regulations, unless the context otherwise requires, -

i) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);

ii) ‘Authorised bank’ means a bank including a co-operative bank (other than an authorised dealer) authorised by the Reserve Bank to maintain an account of a person resident outside India;

iii) ‘Authorised dealer’ means a person authorised as an authorised dealer under subsection (1) of section 10 of the Act; iv) ‘Deposit’ includes deposit of money with a bank, company, proprietary concern, partnership firm, corporate body, trust or any other person;

v) ‘FCNR (B) account’ means a Foreign Currency Non-Resident (Bank) account referred to in clause (ii) of subregulation

(1) of Regulation 5;

vi) ‘Non-Resident Indian (NRI)’ means a person resident outside India who is a citizen of India.

vii) ‘NRE account’ means a Non-Resident External account referred to in clause (i) of sub-regulation (1) of Regulation 5;

viii) ‘NRO account’ means a Non-Resident Ordinary account referred to in clause (iii) of sub-regulation (1) of Regulation 5;

ix) ‘Permissible currency’ means a foreign currency which is freely convertible;

x) ‘Person of Indian Origin (PIO)’ means a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:

a) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or

b) Who belonged to a territory that became part of India after the 15th day of August, 1947; or

c) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or

d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)

Explanation: for the purpose of this sub-regulation, the expression ‘Person of Indian Origin’ includes an ‘Overseas Citizen of India’ cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955.

xi) ‘Schedule’ means schedule to these Regulations;

xii) ‘SNRR account’ means a Special Non-Resident Rupee account referred to in sub-regulation (4) of Regulation 5;

xiii) The words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act.

3. Restrictions on deposits between a person resident in India and a person resident outside India:-

Save as otherwise provided in the Act or Regulations or in rules, directions and orders made or issued under the Act, no person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India: Provided that the Reserve Bank may, on an application made to it and on being satisfied that it is necessary so to do, allow a person resident in India to accept or make deposit from or with a person resident outside India.

4. Exemptions:-

Nothing contained in these Regulations shall apply to the following:

1) Deposits held in rupee accounts maintained by foreign diplomatic missions and diplomatic personnel and their family members in India with an authorised dealer.

2) Deposits held by diplomatic missions and diplomatic personnel in special rupee accounts namely Diplomatic Bond Stores Account to facilitate purchases of bonded stocks from firms and companies who have been granted special facilities by customs authorities for import of stores into bond, subject to following conditions:

a) Credits to the account shall be only by way of proceeds of inward remittances received from outside India through banking channels or by a transfer from a foreign currency account in India of the account holder maintained with an authorised dealer in accordance with clause 3 of this Regulation ;

b) All cheque leaves issued to the account holder shall be superscribed as “Diplomatic Bond Stores Account No.”;

c) Debits to the accounts shall be for local disbursements, or for payments for purchases of bonded stocks to firms and companies who have been granted special facilities by customs authorities for import of stores into bond;

d) The funds in the account may be repatriated outside India without the approval of Reserve Bank.

3) Deposits held in accounts maintained in foreign currency by diplomatic missions, diplomatic personnel and nondiplomatic staff, who are the nationals of the concerned foreign countries and hold official passport of foreign embassies in India subject to the following conditions:

a) Credits to the account shall be only by way of:-

(i) proceeds of inward remittances received from outside India through banking channels; and

(ii) transfer of funds, from the rupee account of the diplomatic mission in India, which are collected in India as visa fees and credited to such account;

b) Funds held in such account if converted in rupees shall not be converted back into foreign currency;

c) The account may be held in the form of current or term deposit account, and in the case of diplomatic personnel and non-diplomatic staff, may also be held in the form of savings account;

d) The rate of interest on savings or term deposits shall be such as may be determined by the authorised dealer maintaining the account;

e) The funds in the account may be repatriated outside India without the approval of Reserve Bank.

4) Deposits held in accounts maintained in rupees with an authorised dealer by persons resident in Nepal and Bhutan.

5) Deposits held in accounts maintained with an authorised dealer by any multilateral organization and its subsidiary/ affiliate bodies and officials in India of such multilateral organisations, of which India is a member nation.

5. Acceptance of deposits by an authorised dealer/ authorised bank from persons resident outside India:-

1) An authorised dealer in India may accept deposit

i) under the Non-Resident (External) Account Scheme (NRE account), specified in Schedule 1, from a nonresident Indian;

ii) under the Foreign Currency (Non-Resident) Account Banks Scheme, (FCNR(B) account), specified in Schedule 2, from a non-resident Indian;

iii) under the Non-Resident (Ordinary) Account Scheme, (NRO account), specified in Schedule 3, from any person resident outside India;

2) Without prejudice to sub-regulation (1), deposits under NRE and NRO Account Schemes referred to in clauses (i) and (iii) of that sub-regulation, may also be accepted by an authorised bank, in accordance with the provisions contained in the respective Schedules, subject to the conditions prescribed by Reserve Bank in this regard.

3) Without prejudice to sub-regulation (1), deposits under FCNR(B) Account Schemes referred to in clause (ii) of that sub-regulation, may also be accepted by a Regional Rural Bank, in accordance with the provisions contained in the Schedule, subject to the conditions prescribed by Reserve Bank in this regard.

4) Any person resident outside India having a business interest in India may open, hold and maintain with an authorised dealer in India, a Special Non-Resident Rupee Account (SNRR account), specified in Schedule 4.

5) Resident or non-resident acquirers may, subject to the terms and conditions specified in Schedule 5, open, hold and maintain Escrow Account with Authorised Dealers in India

6. Acceptance of deposits by persons other than authorised dealer/ authorised bank:-

1) A company registered under Companies Act, 2013 or a body corporate created under an Act of Parliament or State Legislature shall not accept deposits on repatriation basis from a non-resident Indian or a person of Indian origin. The company may, however, renew the deposits which had been accepted on repatriation basis from an NRI or a PIO subject to terms and conditions mentioned in Schedule 6.

2) A company registered under Companies Act, 2013 or a body corporate, a proprietary concern or a firm in India may accept deposits from a non-resident Indian or a person of Indian origin on non-repatriation basis, subject to the terms and conditions mentioned in Schedule 7.

3) An Indian company may accept deposits by issue of Commercial Paper to a non-resident Indian or a person of Indian origin or a foreign portfolio investor registered with the Securities and Exchange Board of India subject to the following conditions, namely:

a) the issue is in due compliance with the Non-Banking Companies (Acceptance of Deposits through Commercial Paper) Directions, 1989 issued by the Reserve Bank as also any other law, rule, directions, orders issued by the Government or any other regulatory authority, in regard to acceptance of deposits by issue of Commercial Paper;

b) payment for issue of Commercial Paper is received by the issuing company by inward remittance from outside India through banking channels or out of funds held in a deposit account maintained by a Non- Resident Indian or a Person of Indian Origin in accordance with the Regulations made by Reserve Bank in that regard;

c) the amount invested in Commercial Paper shall not be eligible for repatriation outside India; and

d) the Commercial Paper shall not be transferable.

7. Other deposits made or held by authorised dealer:-

1) A deposit made by an authorised dealer with its branch, head office or correspondent outside India, and a deposit made by a branch or correspondent outside India of an authorised dealer, and held in its books in India, shall be governed by the directions issued by the Reserve Bank in this regard from time to time.

2) A shipping or airline company incorporated outside India, may open, hold and maintain a Foreign Currency Account with an authorized dealer for meeting the local expenses in India of such airline or shipping company: Provided that the credits to such accounts are only by way of freight or passage fare collections in India or by inward remittances through banking channels from its office outside India.

3) An authorised dealer in India, may subject to the directions issued by the Reserve Bank, allow unincorporated joint ventures (UJV) of foreign companies/ entities, with Indian entities, executing a contract in India, to open and maintain non-interest bearing foreign currency account and a SNRR account as specified in schedule 4 for the purpose of undertaking transactions in the ordinary course of its business. The debits and credits in these accounts shall be incidental to the business requirement of the UJV.

Provided that the tenure of the account is concurrent to the tenure of the contract/ period of operation of the UJV. Provided further that all operations in the account shall be in accordance with the provisions of the Act or the rules or regulations made or the directions issued thereunder.

Note: Opening of accounts by companies/ entities of Pakistan/ Bangladesh ownership/ nationality would require the prior approval of the Reserve Bank

4) An authorised dealer in India, with the prior approval of Reserve Bank, may open an account expressed in foreign currency in the name of a person resident outside India for the purpose of adjustment of value of goods imported into India against the value of goods exported from India in terms of an arrangement voluntarily entered into by such person with a person resident in India.

8. Nomination:-

Authorised dealers may provide nomination facility in respect of the deposits/ accounts in these regulations maintained by individual account holders.

SCHEDULE 1

[See Regulation 5(1) (i)]

Non-Resident (External) Rupee Account Scheme – NRE Account

1. Eligibility:

Non-resident Indians (NRIs) and Person of Indian Origin (PIOs) are permitted to open and maintain these accounts with authorised dealers and with banks (including cooperative banks) authorised by the Reserve Bank to maintain such accounts.

The account should be opened by the non-resident account holder himself and not by the holder of the power of attorney in India.

2. Types of accounts:

The accounts may be maintained in any form, e.g. savings, current, recurring or fixed deposit account etc.

3. Permitted Credits:

a) Proceeds of remittances to India in any permitted currency.

b) Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency, deposited by the account holder in person during his temporary visit to India, provided the authorised dealer/ bank is satisfied that the account holder is still resident outside India, the travellers’ cheques/ drafts are standing/ endorsed in the name of the account holder and in the case of travellers’ cheques, they were issued outside India.

c) Proceeds of foreign currency/ bank notes tendered by account holder during his temporary visit to India, provided (i) the amount was declared on a Currency Declaration Form (CDF), where applicable, and (ii) the notes are tendered to the authorised dealer in person by the account holder himself and the authorised dealer is satisfied that account holder is a person resident outside India.

d) Transfers from other NRE/ FCNR (B) accounts.

e) Interest accruing on the funds held in the account.

f) Current income in India due to the account holder, subject to payment of applicable taxes in India

g) Maturity or sale proceeds of any permissible investment in India which was originally made by debit to the account holder’s NRE/ FCNR (B) account or out of remittances received from outside India through banking channels. Provided that the investment was made in accordance with the foreign exchange regulations in force at the time of making such investment.

h) Refund of share/ debenture subscriptions to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from other NRE/ FCNR (B) account of the account holder or by remittance from outside India through banking channels.

i) Refund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings / deals for purchase of residential/ commercial property, together with interest, if any (net of income tax payable thereon), provided the original payment was made out of NRE/ FCNR(B) account of the account holder or remittance from outside India through banking channels and the authorised dealer is satisfied about the genuineness of the transaction.

j) Any other credit if covered under general or special permission granted by Reserve Bank.

4. Permitted Debits:

a) Local disbursements.

b) Remittances outside India.

c) Transfer to NRE/ FCNR (B) accounts of the account holder or any other person eligible to maintain such account.

d) Investment in shares/ securities/ commercial paper of an Indian company or for purchase of immovable property in India provided such investment/ purchase is covered by the regulations made, or the general/ special permission granted by the Reserve Bank.

e) Any other transaction if covered under general or special permission granted by the Reserve Bank.

5. Rate of Interest:

Rate of interest applicable to these accounts shall be in accordance with the directions/ instructions issued by Reserve Bank from time to time

6. Loans against security of funds held in the account:

(1) To account holder: Authorised dealers and authorised banks maintaining such accounts are permitted to grant loans in India to the account holder subject to the following conditions:

(a) The loan shall be used for:

i) personal purposes or for carrying on business activities except for the purpose of relending or carrying on agricultural/ plantation activities or for investment in real estate business.

ii) making direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms/ companies subject to the provisions of the relevant Regulations made under the Act

iii) acquiring flat/ house in India for his own residential use subject to the provisions of the relevant Regulations made under the Act

(b) Repayment shall be made either by adjustment of the deposit or by fresh inward remittances from outside India through banking channels or out of local rupee resources in the NRO account of the borrower.

(2) To third parties: Authorised dealers and authorised banks may grant loans to resident individuals/ firms/ companies in India against the collateral of fixed deposits held in NRE account subject to the following conditions:

i) The loan should be utilised for personal purposes or for carrying on business activities except for the purpose of relending or carrying on agricultural/ plantation activities or for investment in real estate business.

ii) There should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the resident individual/ firm/ company to obtain such facilities.

iii) The usual norms and considerations as applicable in the case of advances to trade/ industry shall be applicable to such credit facilities.

(3) Loans outside India – Authorised dealers may allow their branches/ correspondents outside India to grant loans to or in favour of non-resident depositor or to third parties at the request of depositor for bona fide purpose except for the purpose of relending or carrying on agricultural/ plantation activities or for investment in real estate business, against the security of funds held in the NRE accounts in India and also agree for remittance of the funds from India, if necessary, for liquidation of the outstanding.

(4) The authorised dealer/ bank should ensure that the advances are fully secured by the fixed deposits and regulations relating to normal margin, interest rate, etc. are complied with.

(5) The loans granted under this paragraph shall be subject to such directions as may be issued by the Reserve Bank from time to time.

(6) The term “loan” shall include all types of fund based/ non-fund based facilities.

7. Change of residential status of the account holder:

NRE accounts should be re-designated as resident accounts or the funds held in these accounts may be transferred to the RFC accounts (if the account holder is eligible for maintaining RFC account) at the option of the account holder immediately upon the return of the account holder to India for taking up employment or for carrying on business or vocation or for any other purpose indicating intention to stay in India for an uncertain period. Where the account holder is only on a short visit to India, the account may continue to be treated as NRE account even during his stay in India.

8. Repatriation of funds to non-resident nominee:

Authorised dealers/ authorised banks may allow remittance of funds lying in the NRE account of the deceased account holder to his non-resident nominee.

9. Miscellaneous:

(a) Joint accounts – Joint accounts may be permitted to be opened in the following cases:

i) In the names of two or more NRIs and/or PIOs

ii) With resident relative(s) on ‘former or survivor’ basis. However, the said resident relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the life time of the account holder.

Explanation – For the purpose of this regulation, ‘relative’ means relative as defined in section 2(77) of the Companies Act, 2013.

b) Opening of account during temporary visit: An account may be opened in the name of an eligible NRI or PIO during his temporary visit to India against tender of foreign currency travellers cheques or foreign currency notes and coins tendered, provided the authorised dealer is satisfied that the person has not ceased to be a non-resident.

c) Operations by Power of Attorney: Authorised dealers/ authorised banks may allow operations on an NRE account in terms of Power of Attorney or other authority granted in favour of a resident by the non-resident account holder, provided such operations are restricted to withdrawals for local payments or remittance to the account holder himself through banking channels. In cases where the account holder or a bank designated by him is eligible to make investments in India, the Power of Attorney holder may be permitted by the authorised dealers/ banks to operate the account to facilitate such investment. The resident Power of Attorney holder shall not, however, be allowed to repatriate outside India funds held in the account under any circumstances other than to the account holder himself, nor to make payment by way of gift to a resident on behalf of the account holder nor to transfer funds from the account to another NRE account.

d) Special Series of Cheques: For easy identification and quicker processing of cheques drawn on NRE accounts, authorised dealers/ banks shall issue cheque books containing a special series of cheques to their constituents holding NRE accounts.

e) Temporary overdrawings: Authorised dealers/ authorised banks may at their discretion/ commercial judgement allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/ repaid within the said period of two weeks, out of inward remittances through banking channels or by transfer of funds from other NRE/ FCNR(B) accounts.

f) Remittances abroad by Resident nominee: Application from a resident nominee for remittance of funds outside India for meeting the liabilities, if any, of the deceased account holder or for similar other purposes, should be forwarded to the Reserve Bank for consideration.

g) Tax Exemption: Income from interest on balances standing to the credit of NRE Accounts is exempt from Income Tax. Likewise balances held in such accounts are exempt from wealth tax.

h) Reporting: The transactions in these accounts shall be reported to the Reserve Bank in accordance with the directions issued by it from time to time.

SCHEDULE 2

[See Regulation 5(1) (ii)]

FOREIGN CURRENCY (NON-RESIDENT) ACCOUNT (BANKS) SCHEME – FCNR (B) Account

1. Eligibility:

(a) NRIs and PIOs are eligible to open and maintain these accounts with an authorised dealer.

(b) These accounts may be opened with funds remitted from outside India through banking channels or funds received in rupees by debit to the account of a non-resident bank maintained with an authorised dealer in India or funds which are of repatriable nature in terms of the regulations made by Reserve Bank. Accounts may also be opened by transfer of funds from existing NRE/ FCNR (B) accounts.

(c) Remittances from outside India for opening of or crediting to these accounts should be made in the designated currency in which the account is desired to be opened/ maintained. Without prejudice to this, if the remittance is received in a currency other than the designated currency (including funds received in rupees by debit to the account of a non-resident bank), it should be converted into the latter currency by the authorised dealer at the risk and cost of the remitter and account should be opened/ credited in only the designated currency.

(d) In case the depositor with any currency other than designated currency desires to place a deposit in these accounts, authorised dealers may undertake with the depositor a fully covered swap in that currency against the desired designated currency. Such a swap may also be done between two designated currencies.

2. Designated Currencies: Deposit of funds in the account may be accepted in such permissible currencies as may be designated by the Reserve Bank from time to time.

3. Type of account:

These accounts may be opened only in the form of term deposit with maturity of such period as may be specified by the Reserve Bank from time to time.

4. Rate of Interest:

The rate of interest on funds held in these deposit accounts will be in accordance with the directives issued by the Reserve Bank from time to time.

5. Permissible Debits/ Credits:

All debits/ credits permissible in respect of NRE accounts as specified in Schedule 1 shall be permissible in respect of these accounts also.

6. Rate for Conversion of Rupees into Designated Currencies and vice versa:

i) Remittances received in Indian rupees for opening these accounts shall be converted by the authorised dealer into the designated foreign currency at the clean T.T. selling rate for that currency ruling on the date of conversion.

ii) For the purpose of payment in rupees, funds held in these accounts shall be converted into rupees at the authorised dealer’s clean T.T. buying rate for the concerned currency ruling on the date of withdrawal.

7. Inland Movement of Funds:

Any inland movement of funds for the purpose of opening these accounts as well as for repatriation outside India of balances held in these accounts will be free of inland exchange or commission for the non-resident depositors. The Authorised dealer receiving foreign currency remittances in these accounts will also, on request, pass on the foreign currency to another authorised dealer if the account has to be opened with the latter, at no extra cost to the remitter.

8. Manner of Payment of Interest:

(i) Interest on balances held in these accounts may be paid half-yearly or on an annual basis as desired by the depositor.

(ii) Interest may be credited to a new FCNR (B) account or an existing/ new NRE/ NRO account in the name of the account holder, at his option.

9. Loans/ overdrafts against security of funds held in the account:

(1) The terms and conditions as applicable to NRE deposits (cf. Schedule 1) in respect of loans and overdrafts in India to depositor and to third parties as also loans outside India against security of deposits, shall apply mutatis mutandis to FCNR(B) deposits.

(2) The margin requirement shall be notionally calculated on the rupee equivalent of the deposits.

10. Change of residential status of the account holder:

When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him. However, except the provisions relating to rate of interest and reserve requirements as applicable to FCNR (B) deposits, for all other purposes such deposits shall be treated as resident deposits from the date of return of the accountholder to India. Authorised dealers should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC account (if the depositor is eligible to open RFC account), at the option of the accountholder and interest on the new deposit (rupee account or RFC account) shall be payable at the relevant rates applicable for such deposits.

11. Joint account, repatriation of balances, etc.:

(1) Terms and conditions as applicable to NRE accounts (cf. Schedule 1) in respect of joint accounts, repatriation of funds, opening account during temporary visit, operation by power of attorney, loans/ overdrafts against security of funds held in accounts, shall apply mutatis mutandis to FCNR (B) accounts.

(2) Authorised dealer may permit remittance of the maturity proceeds of FCNR (B) deposits to third parties outside India, provided the transaction is specifically authorised by the account holder and the authorised dealer is satisfied about the bona fides of the transaction.

12. Reporting:

The transactions in these accounts shall be reported to Reserve Bank in accordance with the directions issued by it from time to time.

13. Other features:

(a) Reserve Bank will not provide exchange rate guarantee to authorised dealers for deposits of any maturity in these accounts.

(b) Lending of resources mobilised by authorised dealers under these accounts are not subject to any interest rate stipulations.

SCHEDULE 3

[See Regulation 5(1) (iii)]

NON-RESIDENT ORDINARY RUPEE ACCOUNT SCHEME – NRO Account

1. Eligibility

(a) Any person resident outside India may open NRO account with an authorised dealer or an authorised bank for the purpose of putting through bona fide transactions in rupees not involving any violation of the provisions of the Act, rules and regulations made thereunder.

(b) The operations on the accounts should not result in the account holder making available foreign exchange to any person resident in India against reimbursement in rupees or in any other manner.

(c) At the time of opening of the account, the account holder should furnish an undertaking to the authorised dealer/ authorised bank with whom the account is maintained that in cases of debits to the account for the purpose of investment in India and credits representing sale proceeds of investments, he will ensure that such investments/ disinvestments will be in accordance with the regulations made by Reserve Bank in this regard.

NOTES:

A. Opening of accounts by individuals/ entities of Pakistan nationality/ ownership requires approval of Reserve Bank.

B. Opening of accounts by entities of Bangladesh ownership requires approval of Reserve Bank.

C. Opening of accounts by individual/s of Bangladesh nationality may be allowed by authorised dealer or authorised bank, subject to satisfying itself that the individual/s hold a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned;

D. Post Offices in India may maintain savings bank accounts in the names of persons resident outside India and allow operations on these accounts subject to the same terms and conditions as are applicable to NRO accounts maintained with an authorised dealer/ authorised bank.

2. Types of Accounts

NRO accounts may be opened/ maintained in the form of current, savings, recurring or fixed deposit accounts. The requirements laid down in the directives issued by Reserve Bank in regard to resident accounts shall apply to NRO accounts.

3. Permissible Credits/ Debits

(A) Credits

(i) Proceeds of remittances received in any permitted currency from outside India through banking channels or any permitted currency tendered by the account-holder during his temporary visit to India or transfers from rupee accounts of non-resident banks.

(ii) Legitimate dues in India of the account holder.

(iii) Transfers from other NRO accounts.

(iv) Any amount received by the account holder in accordance with the rules or regulations made under the Act.

(B) Debits

(i) All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve Bank.

(ii) Remittance outside India of current income in India of the account holder net of applicable taxes.

(iii) Transfers to other NRO accounts.

(iv) Settlement of charges on International Credit Cards issued by authorised dealer banks in India to NRIs or PIOs, subject to the limits for repatriation of balances held in NRO accounts specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets) Regulations, 2016.

4. Remittance of funds held in NRO accounts

Balances in NRO accounts are not eligible for remittance outside India without the general or specific approval of Reserve Bank. Funds received by way of remittances from outside India in foreign exchange which have not lost their identity as remittable funds will only be considered by Reserve Bank for remittance outside India. Where an account (current/ savings) is opened by a foreign tourist visiting India, with funds remitted from outside India in a specified manner or by sale of foreign exchange brought by him to India, authorised dealers may convert the balance in the account at the time of departure of the tourist from India to foreign currency for payment to the account holder provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon.

5. Grant of Loans/ Overdrafts

A. To Account holders

(i) Loans to non-resident account holders may be granted in rupees against the security of fixed deposits subject to usual norms as are applicable to resident accounts, for personal purposes or for carrying on business activities except for the purpose of relending or carrying on agricultural/ plantation activity or for investment in real estate business.

(ii) Authorised dealer/ bank may permit overdraft in the account of the account holder subject to its commercial judgement and compliance with the interest rate etc. directives.

B. To Third parties

Loans/ overdrafts to resident individuals/ firms/ companies in India may be granted against the security of deposits held in NRO accounts, subject to the following terms and conditions.

(i) The loans shall be utilised only for meeting borrower’s personal requirements and/ or business purpose and not for carrying on agricultural/ plantation activities or real estate business, or for relending.

(ii) Regulations relating to margin and rate of interest as stipulated by Reserve Bank from time to time shall be complied with. (iii) The usual norms and considerations as applicable in the case of advances to trade/ industry shall be applicable for such loans/ facilities.

6. Treatment of Loans/ Overdrafts in the event of change in the resident status of the borrower

In case of person who had availed of loan or overdraft facilities while resident in India and who subsequently becomes a person resident outside India, the authorised dealer may at their discretion and commercial judgement allow continuance of the loan/ overdraft facilities. In such cases, payment of interest and repayment of loan may be made by inward remittance or out of legitimate resources in India of the person concerned.

7. Joint Accounts

The accounts may be held jointly with residents on ‘former or survivor’ basis. NRIs and/or PIOs may hold NRO account jointly with other NRIs and/or PIOs.

8. Operations by Power of Attorney

Authorised dealers/ authorized banks may allow operations on an NRO account in terms of a Power of Attorney, provided such operations are restricted to (i) all local payments in rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Bank; and (ii) remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes. The resident Power of Attorney holder shall not repatriate outside India funds held in the account under any circumstances other than to the nonresident individual account holder himself nor shall make payment by way of gift to a resident on behalf of the nonresident account holder nor transfer funds from the account to another NRO account.

Any remittance outside India shall be within the ceiling as may be prescribed by the Bank from time to time and subject to tax compliance.

9. Change of Resident Status of Account holder

(a) From Resident to Non-resident

When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment, or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as a Non-Resident (Ordinary) account.

(b) From Non-resident to Resident

NRO accounts may be designated as resident rupee accounts on the return of the account holder to India for taking up employment, or for carrying on business or vocation or for any other purpose indicating his intention to stay in India for an uncertain period. Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such visit.

10. Payment of funds to Non-resident Nominee

The amount due/ payable to non-resident nominee from the account of a deceased account holder, shall be credited to NRO account of the nominee with an authorised dealer/ authorised bank in India.

11. Reporting of transactions

(i) The transaction in the account which may appear to represent reimbursement in rupees against foreign exchange made available to a person resident in India other than authorised dealer, as well as any other transaction of suspicious nature, should be reported to Reserve Bank.

(ii) The transactions in these accounts shall be reported to the Reserve Bank in accordance with the directions issued by it from time to time.

(iii) The accounts opened by an authorised dealer or an authorised bank in respect of individual/s of Bangladesh nationality shall be reported by the authorised dealer/ authorised bank branch to its Head Office and the Head Office of such authorised dealer/ authorised bank shall forward a quarterly report containing details of Name of the Individual(s), Passport Number, Issuing Country/State, Name of the FRO/ FRRO, Date of issue of Residential Permit and validity thereof, to the Ministry of Home Affairs (Foreigners Division) on Quarterly basis”.

Explanation: ‘Quarterly basis’ means, quarter as at end of March/ June/ September and December of every year.

SCHEDULE 4

[See Regulation 5(4)]

Special Non-Resident Rupee Account – SNRR account

1. Any person resident outside India, having a business interest in India, may open Special Non-Resident Rupee Account (SNRR account) with an authorised dealer for the purpose of putting through bona fide transactions in rupees, not involving any violation of the provisions of the Act, rules and regulations made thereunder.

2. The SNRR account should carry the nomenclature of the specific business for which it is in operation.

3. The operations in the SNRR account should not result in the account holder making available foreign exchange to any person resident in India against reimbursement in rupees or in any other manner.

4. The SNRR account shall not bear any interest.

5. The debits and credits in the SNRR account should be specific/incidental to the business proposed to be done by the account holder.

6. Authorised dealers should ensure that the balances are commensurate with the business operations of the account holder.

7. All the operations in the SNRR account should be in accordance with the provisions of the Act, rules and regulations made thereunder.

8. The tenure of the SNRR account should be concurrent to the tenure of the contract/ period of operation/the business of the account holder and in no case should exceed seven years. No operations are permissible in the account after seven years from the date of opening of the account.

9. The balances in the SNRR account shall be eligible for repatriation.

10. Transfers from any NRO account to the SNRR account are prohibited.

11. All transactions in the SNRR account will be subject to payment of applicable taxes in India.

12. SNRR account may be designated as resident rupee account on the account holder becoming a resident.

13. The amount due/payable to non-resident nominee from the account of a deceased account holder, shall be credited to NRO account of the nominee with an authorised dealer/authorised bank in India.

14. The transactions in the SNRR accounts shall be reported to the Reserve Bank in accordance with the directions issued by it from time to time.

15. Opening of SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh requires prior approval of Reserve Bank.

SCHEDULE 5

(See Regulation 5(5))

Terms and conditions for opening of Escrow Account

An Escrow account in INR can be opened jointly and severally with an Authorised Dealer in India as an Escrow Agent in the following cases subject to the terms and conditions specified in this schedule.

1. By non-resident corporates for acquisition/transfer of shares/convertible debentures through open offers/delisting/exit offers.

a. Permitted Credits in the Escrow account are:

i. Foreign Inward remittance through banking channels

b. Permitted debits in the Escrow account are:

i. As per SEBI (SAST) Regulations or any other regulations issued by the Security Exchange Board of India (SEBI).

c. The resident mandatee empowered by the overseas acquirer for this purpose, may operate the Escrow account in accordance with SEBI (SAST) Regulations or any other regulations issued by the SEBI.

d. The Escrow account shall be closed immediately after completing the requirements as outlined above.

2. By resident and non-resident acquirers for acquisition/ transfer of shares

a. Permitted Credits in the Escrow account are:

i. Foreign Inward remittance through banking channels;

ii. Receipt of rupee consideration through banking channels by the resident acquirer of shares who proposes to acquire from non-resident holders by way of transfer.

b. Permitted debits in the Escrow account are:

i. Remittance of consideration for issue/transfer of shares directly into the bank account of the beneficiary (issuer in India or transferor of shares in India or abroad);

ii. Remittance of consideration for refund to the initial remitter of funds in case of failure/non-materialisation of FDI transaction for which the Escrow account was opened.

c. The securities kept/ linked with the Escrow account may be linked with demat account maintained with SEBI authorised Depositary Participants as Escrow agents.

d. The Escrow account shall remain operational for a maximum period of six months only and the account shall be closed immediately after completing the requirements as outlined above or on completion of six months from the date of opening of such account, whichever is earlier. In case the Escrow account is required to be maintained beyond six months, specific permission from the Reserve Bank has to be sought.

e. Notwithstanding what has been stated in paragraph d. above, in case of transfer of shares between a resident buyer and a non-resident seller or vice-versa, if so agreed between the buyer and the seller, an escrow arrangement may be made between the buyer and the seller for an amount not more than twenty five per cent of the total consideration for a period not exceeding eighteen months from the date of the transfer agreement.

3. Acquisition/transfer shall be in accordance with the provisions of Foreign Exchange Management (Transfer or Issue of Security by a person resident Outside India) Regulation 2000, as amended from time to time and Security Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 [SEBI (SAST) Regulations] or any other regulations issued by the SEBI.

4. The Escrow account shall be non-interest bearing.

5. No fund or non-fund based facilities would be permitted against the balances in the Escrow account.

6. Requirement of compliance with KYC guidelines issued by the Reserve Bank shall rest with the Authorised Dealer.

7. Balance in the Escrow account, if any, may be repatriated at the then prevailing exchange rate (i.e., the exchange rate risk will be borne by the person resident outside India acquiring the shares), after all the formalities in respect of the said acquisition are completed.

8. In cases, where proposed acquisition/transfer does not materialise, the authorised dealer may allow repatriation/refund of the entire amount lying to the credit of the Escrow account on being satisfied with the bonafides of such remittances.

9. For the purpose of FDI reporting, date of transfer of funds into the bank account of the issuer or transferor of shares, as the case may be, shall be the relevant date of remittance.

SCHEDULE 6

[See Regulation 6(1)]

Acceptance of deposits by a company incorporated in India (including a non-banking finance company registered with Reserve Bank) on repatriation basis from a Non-resident Indian (NRI) or a Person of Indian origin (PIO)

A company incorporated in India (including a non-banking finance company registered with the Reserve Bank) may accept deposits from NRIs or PIOs, on repatriation basis subject to the following conditions.

i) The deposits are received under a public deposit scheme.

ii) If the deposit accepting company is a non-banking finance company, it should be registered with the Reserve Bank and should have obtained the required credit rating as stipulated under the guidelines issued by Reserve Bank for such companies.

iii) The amount representing the deposit is received by inward remittance from outside India through banking channels or by debit to the NRE or FCNR (B) Account maintained with an authorised dealer/authorised bank in India.

iv) If the deposit accepting company is a non-banking finance company, the rate of interest payable on deposits shall be in conformity with the guidelines/directions issued by Reserve Bank for such companies. In other cases the rate of interest payable on deposits shall not exceed the ceiling rate prescribed from time to time under the Companies (Acceptance of Deposit) Rules, 2014.

v) The maturity period of deposits shall not exceed 3 years.

vi) The company accepting the deposits shall comply with the provisions of any other law, rules, regulations, orders issued by the Government of India or any other competent authority, as are applicable to it in regard to acceptance of deposits.

vii) The amount of aggregate deposits accepted by the company shall not exceed 35% of its net owned funds. viii) The payment of interest net of taxes may be made by the company to the depositor by remittance through an authorised dealer or by credit to the depositor’s NRE/FCNR(B)/NRO/account as desired by him.

ix) The amount of deposits so collected shall not be utilised by the company for re-lending (not applicable to a Non- Banking Finance Company) or for undertaking agricultural/plantation activities or real estate business or for investing in any other concern, firm or a company engaged in or proposing to engage in agricultural/plantation activities or real estate business.

x) The repayment of the deposit may be made by the company to the depositor by remittance from India through an authorised dealer or by credit to the depositor’s NRE/FCNR(B) account maintained with an authorised dealer in India, provided the depositor continues to be a non resident at the time of repayment. While applying to the authorised dealer for remittance of maturity proceeds of deposit or credit thereof to NRE/FCNR(B) account, the company should certify that the amount of deposit was received either by inward remittance from outside India through banking channels or by debit to the depositor’s NRE/FCNR(B) account, as the case may be.

xi) The amount representing repayment of deposit may also be credited to the depositor’s NRO account, at the depositor’s option.

SCHEDULE 7

[See Regulation 6(2)]

Acceptance of deposits by Indian proprietorship concern/firm or company (including non-banking finance company registered with Reserve Bank) on non-repatriation basis from Non-resident Indian (NRI) or a Person of Indian Origin (PIO)

A proprietorship concern or a firm in India and a company incorporated in India (including a non-banking finance company registered with Reserve Bank) may accept deposits on non-repatriation basis from NRIs or PIOs subject to the following conditions:

i) In the case of a company, the deposits may be accepted either under private arrangement or under a public deposit scheme.

ii) If the deposit accepting company is a non-banking finance company, it should be registered with the Reserve Bank and should have obtained the required credit rating as stipulated under the guidelines issued by Reserve Bank for such companies.

iii) The maturity period of deposit shall not exceed 3 years. iv) If the deposit accepting company is a non-banking finance company the rate of interest payable on deposits shall be in conformity with the guidelines/directions issued by Reserve Bank for such companies. In other cases the rate of interest payable on deposits shall not exceed the ceiling rate prescribed from time to time under the Companies (Acceptance of Deposit) Rules, 2014.

v) The amount of deposit shall be received by debit to NRO account only, provided that the amount of the deposit shall not represent inward remittances or transfer of funds from NRE/FCNR (B) accounts into the NRO account.

vi) The proprietorship concern/firm/company accepting the deposit should comply with the provisions of any other law, rules, regulations or orders made by Government or any other competent authority, as are applicable to it in regard to acceptance of deposits.

vii) The proprietorship concern, firm or company accepting the deposit shall not utilise the amount of deposits for relending (not applicable to a Non-Banking Finance Company) or for undertaking agricultural/plantation activities or real estate business or for investing in any other concern or firm or company engaged in or proposing to engage in agricultural/plantation activities or real estate business.

viii) The amount of deposits accepted shall not be allowed to be repatriated outside India.

[F.No.1/31/EM/2015]

(Shekhar Bhatnagar)
Chief General Manager-in-charge

Notification No. 13 (R)/2016-RB 1-4-2016


RESERVE BANK OF INDIA
(FOREIGN EXCHANGE DEPARTMENT)
(CENTRAL OFFICE)
MUMBAI

FEMA NOTIFICATION NO

FEMA 13 (R)/2016-RB, Dated: April 1, 2016

Foreign Exchange Management (Remittance of Assets) Regulations, 2016

G.S.R. 388(E). - In exercise of the powers conferred by Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in supersession of Notification No. FEMA 13/2000-RB dated May 3, 2000, as amended from time to time, the Reserve Bank makes the following regulations in respect of remittance outside India by a person whether resident in India or not, of assets in India, namely:

1. Short title and commencement:-

i) These Regulations may be called the Foreign Exchange Management (Remittance of Assets) Regulations, 2016.

ii) They shall come into force from the date of their publication in the official Gazette.

2. Definitions:-

In these Regulations, unless the context requires otherwise, -

(i) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);

(ii) ‘Authorised Dealer’ means a person authorised as an authorised dealer under subsection (1) of section 10 of the Act;

(iii) ‘Non-Resident Indian’ (NRI) shall have the same meaning assigned under the Foreign Exchange Management (Deposit) Regulations, 2016;

(iv) ‘Person of Indian Origin’ (PIO) shall have the same meaning assigned under the Foreign Exchange Management (Deposit) Regulations, 2016;

(v) ‘Remittance of asset’ means remittance outside India of funds representing a deposit with a bank or a firm or a company, provident fund balance or superannuation benefits, amount of claim or maturity proceeds of Insurance policy, sale proceeds of shares, securities, immovable property or any other asset held in India in accordance with the provisions of the Act or rules or regulations made there under;

(vi) the words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act.

3. Prohibition on Remittance outside India of assets held in India:-

Save as otherwise provided in the Act or rules or regulations made or issued thereunder, no person, whether resident in India or not, shall make remittance of any asset held in India by him or by any other person:

Provided that the Reserve Bank may, for sufficient reasons, permit any person to make remittance of any asset held in India by him or by any other person.

4. Permission for remittance of assets in certain cases:-

(1) A citizen of foreign state, not being a Person of Indian origin (PIO) or a citizen of Nepal or Bhutan, who

(i) has retired from an employment in India, or

(ii) has inherited the assets from a person referred to in sub-section (5) of section 6 of the Act; or

(iii) is a widow/widower resident outside India and has inherited assets of the deceased spouse who was an Indian citizen resident in India, may remit through an authorised dealer an amount, not exceeding USD 1,000,000 (US Dollar One million only) per financial year on production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter

Provided that for the purpose of arriving at annual ceiling of remittance, the funds representing sale proceeds of shares and immovable property owned or held by the citizen of foreign state on repatriation basis in accordance with the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2016 and Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 made under the Act, shall not be included.

Provided further that where the remittance is made in more than one instalment, the remittance of all instalments shall be made through the same authorised dealer.

(iv) had come to India for studies/training and has completed his studies/training, may remit the balance available in his account, provided such balance represents funds derived out of remittances received from abroad through normal banking channels or rupee proceeds of foreign exchange brought by such person and sold to an authorised dealer or out of stipend/ scholarship received from the Government or any Organisation in India.

(2) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) may remit through an authorised dealer an amount, not exceeding USD 1,000,000 (US Dollar One million only) per financial year,

(i) out of the balances held in the Non-Resident (Ordinary) Accounts (NRO accounts) opened in terms of Foreign Exchange Management (Deposit) Regulations, 2016/sale proceeds of assets/the assets acquired by him by way of inheritance/legacy on production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter;

(ii) Under a deed of settlement made by either of his parents or a relative (relative as defined in Section 2(77) of the Companies Act, 2013) and the settlement taking effect on the death of the settler, on production of the original deed of settlement;

Provided that where the remittance under Clause (i) and (ii) is made in more than one instalment, the remittance of all instalments shall be made through the same Authorised Dealer.

Provided further that where the remittance is to be made from the balances held in the NRO account, the account holder shall furnish an undertaking to the Authorised Dealer that “the said remittance is sought to be made out of the remitter’s balances held in the account arising from his/her legitimate receivables in India and not by borrowing from any other person or a transfer from any other NRO account and if such is found to be the case, the account holder will render himself/herself liable for penal action under FEMA.”

(3) An authorised dealer in India may, also allow remittance out of the assets of Indian companies under liquidation under the provisions of the Companies Act, 2013, subject to the following conditions:

(i) Authorised Dealer shall ensure that the remittance is in compliance with the order issued by a court in India/order issued by the official liquidator or the liquidator in the case of voluntary winding up; and

(ii) no remittance shall be allowed unless the applicant submits:-

(a) Auditor’s certificate confirming that all liabilities in India have been either fully paid or adequately provided for.

(b) Auditor’s certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, 2013.

(c) In case of winding up otherwise than by a court, an auditor’s certificate to the effect that there is no legal proceedings pending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance.

5. Permission to an Indian entity to remit funds in certain cases:-

(1) An entity in India may remit the amount being its contribution towards the provident fund/superannuation/pension fund in respect of the expatriate staff in its employment who are resident in India but not permanently resident therein.

Explanation:

For the purpose of this Regulation, -

(a) ‘expatriate staff’ means a person whose provident/superannuation/pension fund is maintained outside India by his principal employer outside India;

(b) ‘not permanently resident’ means a person resident in India for employment of a specified duration (irrespective of length thereof) or for a specific job or assignment, the duration of which does not exceed three years.

6. Permission for remittance of assets on closure or remittance of winding up proceeds of branch office/liaison office (other than project office)

(1) A branch or office established in India by a person resident outside India may, for making remittance of assets on closure or remittance of its winding up proceeds, apply to the Authorised Dealer concerned supported by the following documents, namely:

(A) A copy of the Reserve Bank’s permission for establishing the branch/ office in India, wherever applicable;

(B) Auditor’s certificate:

(i) indicating the manner in which the remittable amount has been arrived and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets;

(ii) confirming that all liabilities in India including arrears of gratuity and other benefits to the employees etc., of the branch/office have been either fully met or adequately provided for;

(iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India; and

(iv) confirming that the branch/office has complied with all regulatory requirements stipulated by the Reserve Bank of India from time to time regarding functioning of such offices in India.

(C) A confirmation from the applicant that no legal proceedings are pending in any Court in India and there is no legal impediment to the remittance; and

(D) A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the office in India.

(2) On consideration of the application made under sub-regulation (1), the authorized dealer concerned may permit the remittance subject to the directions issued by the Reserve Bank in this regard, from time to time.

7. Reserve Bank’s prior permission in certain cases:-

(1) A person who desires to make a remittance of assets in the following cases, may apply to the Reserve Bank, namely:

(i) Remittance exceeding USD 1,000,000 (US Dollar One million only) per financial year –

(a) on account of legacy, bequest or inheritance to a citizen of foreign state, resident outside India; and

(b) by a Non-Resident Indian (NRI) or Person of Indian Origin (PIO), out of the balances held in NRO accounts/sale proceeds of assets/the assets acquired by way of inheritance/legacy.

(ii) Remittance to a person resident outside India on the ground that hardship will be caused to such a person if remittance from India is not made;

(2) On consideration of the application made under sub-regulation (1), the Reserve Bank may permit the remittance, subject to such terms and conditions as it deem necessary.

8. Payment of taxes:-

Any transaction involving remittance of assets under these regulations shall be subject to the applicable tax laws in India.

[F.No.1/31/EM/2015]

(Shekhar Bhatnagar)
Chief General Manager-in-charge

F.NO.DGIT(S)/DIT(S)-3/AST/PIL MATTER/AGRICULTURAL INCOME/97/2015-16/624 – 1-4-2016


Verification of Genuineness of Agricultural Income Shown in ITR Filed By Assessees for Assessment Years 2007-08 to 2015-16 – Circular – Dated 1-4-2016 – Income Tax

LETTER F.NO.DGIT(S)/DIT(S)-3/AST/PIL MATTER/AGRICULTURAL INCOME/97/2015-16/624         

DATED 1-4-2016

Ref:         (1) Letter F.No. DGIT(S)/DIT(S)-3/AST/PIL Matter/Agriculture Income/97/2015-16 dated 10-3-2016issued by this Directorate on the above captioned subject

(2) Letter dated 18-3-2016 issued on the same subject by this Directorate.

(3) Letter dated 23-3-2016 issued on the same subject by this Directorate.

Kindly refer to the above

2. Vide letters mentioned under reference above, a feedback report was requested to be sent in respect of high agricultural income reported by certain taxpayers in the Income Tax Returns filed for the AY 2007-08 to AY 2015-16. Till date, the requisite consolidated report has not been received or has been only partially received from the following regions i.e. Delhi, Mumbai, Hyderabad, Chennai, Jaipur, Pune, Kanpur, Lucknow, Guwahati and Bhopal.

3. In view of the urgency of the matter, the Directorate of Systems had identified a list of 444 cases with a high probability of data entry error, and out of this confirmation has been received from the field for 155 cases. On verification it is seen that there is a high percentage of data entry errors in these cases and therefore the rest of the cases in this list i.e. 289 cases needs to be verified at the earliest. This list is placed on i-taxnet at the following path.

Resources→Downloads→Systems→Agricultural Income→289_Priority Cases

3. It is therefore requested that feedback report in these 289 probable data entry error cases may be sent on a priority basis to this Directorate latest by 4-4-2016, so that correct figures of Agricultural Income can be reported to Hon’ble Patna High Court, which is hearing the PIL on this issue. Soft copy of the consolidated, region-wise report (in xls or xlsx format) may be sent by e-mail to prasanthvk@incometax.gov.in.

4. This issues with the approval of Pr.DGIT(S), New Delhi.

F.NO.1/04/2016-NS.II – 1-4-2016


Discontinuation of physical mode of National Savings Certificate KVP and NSC shall stand discontinued w.e.f. 1-4-2016 – Order-Instruction – Dated 1-4-2016 – Income Tax

OFFICE MEMORANDUM F.NO.1/04/2016-NS.II], DATED 1-4-2016

The undersigned is directed to refer to this Department’s OM of even number dated 23rd March, 2016, through which guidelines regarding discontinuation of physical mode of National Savings Certificate and Kisan Vikas Patra certificate and introduction of e-mode were communicated. It was decided that the currently existing system of physical pre-printed certificates for KVP and NSC shall stand discontinued w.e.f. 1-4-2016 and shall be replaced by ‘National Savings Certificate/Kisan Vikas Patra Certificate on electronic – mode (e-mode). Till the CBS system transits to that e-mode, banks and post offices may choose to issue a physical certificate recorded on a passbook.

2. The serial numbers based on the new pattern allotted to the banks and the Department of Posts (DoP) with respect to KVP and NSC were detailed in the said OM. It is intimated that while issuing the certificate from 1-4-2016, Banks and Post Offices may use notification having G.S.R. No. 353(E), dated 29-3-2016 for Kisan Vikas Patra and notification having G.S.R. No. 354(E), dated 29-3-2016 for National Savings Certificate. It is intimated that these notifications are available on egazette.nic.in.

E-commerce funding down, not out : 01-04-2016


While e-commerce valuations saw sharp mark-downs in the last six months, private equity and venture capital funds continue to invest reasonably large sums, reports Hita Gupta in New Delhi. In Q1CY16, investments in the space rose to $1.2 billion from $1.02 billion in the December quarter, according to Jefferies Equity Research.

While e-commerce valuations saw sharp mark-downs in the last six months, private equity and venture capital funds continue to invest reasonably large sums, reports Hita Gupta in New Delhi. In Q1CY16, investments in the space rose to $1.2 billion from $1.02 billion in the December quarter, according to Jefferies Equity Research. However, this was way lower than the $2.65 billion seen in the September quarter.

The funding in the March quarter was across 26 deals with e-tail getting almost half the amount. Ibibo Group, a competitor to MakeMyTrip, was the top beneficiary, raising $250 million from Naspers and Tencent. Ibibo Group,Snapdeal, BigBasket, CarTrade and ShopClues all raised over $100 million in funding during the quarter.

However, the $1.2 billion funding in Q1 of CY16 was considerable lower than $2.6 billion funding in Q3 of CY15.

The government on Tuesday allowed 100% foreign direct investment via the automatic route in e-commerce marketplaces, although it barred a platform from influencing the price of products directly or indirectly. Players such as Flipkartand Amazon that have vendors who supply more than 25% of the total sales may need to make changes to their models. The policy appears to be supportive of in-house logistics arms of e-retailers. Given FDI in inventory-led e-commerce models is not allowed, this could affect players such as BigBasket, which recently picked up $150 million from Abraaj Group, Ascent Capital and others. E-commerce companies such as Jabong and Myntra, which operate on a hybrid model, would need to shift to the marketplace model to be compliant with the norms.

Fiscal deficit at end-Feb exceeds revised estimate : 01-04-2016


The central government’s fiscal deficit for the first 11 months of FY16 has surpassed the Revised Estimates (RE) of the 2015-16 Union Budget by seven per cent, showed official data issued on Thursday.

This was after the target was reduced, so that as a proportion of gross domestic product (GDP), it came to the same 3.9 per cent as pegged in the original Budget Estimates (BE) due to falling nominal GDP growth rates. Against a 11 per cent earlier growth estimate, nominal GDP is officially pegged to grow 8.6 per cent.

By this time, the deficit had surpassed the RE by a little over 17 per cent a year before. The deficit touched Rs 5.7 lakh crore by the end of February 2015-16, constituting 107.1 per cent of the RE at Rs 5.3 lakh crore. This means the government must have ensured a fiscal surplus of Rs 40,000 crore in March to meet the financial year’s target. The government met the target in 2014-15 despite the deficit overshooting the RE by 17-plus per cent by February.

However, the government might have had to squeeze expenditure, too. It has to be seen whether capital expenditure (capex) or revenue expenditure became a victim of this pressing need. The government’s capex rose 36.2 per cent to Rs 2.2 lakh crore till February, against Rs 1.6 lakh crore in the corresponding period of 2014-15. However, revenue expenditure was up only 3.5 per cent at Rs 13.4 lakh crore till February of 2015-16, compared to Rs 12.9 lakh crore a year before.

Total receipts at Rs 9.8 lakh crore accounted for 78.6 per cent of the RE at Rs 12.5 lakh crore. This was closer to that in the corresponding period of last year, when these had constituted 87.2 per cent of RE. This was despite the government’s tax kitty swelling to Rs 7.3 lakh crore till February, 77.7 per cent of the RE at  Rs 9.5 lakh crore. At this time a year before, taxes were 71.7 per cent of RE. As the government almost halved the target of non-debt capital receipts, mostly divestment proceeds, to Rs 44,217 crore in the RE against Rs 80,253 crore pegged in the BE, the realisation at Rs 35,951 crore till February represented 81.3 per cent of the RE. However, this was also lower than the 96.5 per cent of RE realised till February of last year.

Non-tax revenue was Rs 2.1 lakh crore or 81.7 per cent of the RE amount of Rs 2.6 lakh crore. This was higher than the 75.7 per cent of RE during the first 11 months of FY15.

Source : PTI

58 – 31-3-2016


A P (DIR Series)

CIRCULAR NO

58/RBI., Dated: March 31, 2016

Foreign Direct Investment (FDI) in India – Review of FDI policy -Insurance sector

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to the 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 3rd May 2000, as amended from time to time.

2. The extant FDI policy for Insurance sector has since been reviewed by the Government of India and accordingly it has been decided to enhance the limit of foreign investment in insurance sector from 26 to 49 percent under the automatic route subject to certain terms and conditions which have been notified through Notification No. FEMA. 366/2016-RB dated March 30, 2016

3. Authorised Dealer 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 section 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.

RBI/2015-16/350

(Shekhar Bhatnagar)
Chief General Manager-in- Charge

57 – 31-3-2016


A P (DIR Series)

CIRCULAR NO

57/RBI., Dated: March 31, 2016

Import of Rough, Cut and Polished Diamonds

Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the A.P.(DIR Series) Circular No.2 dated July 7, 2014 and para no C.12.1(a) of Master Direction no. 17 dated January 01, 2016 on Import of Goods and Services, in terms of which AD Category – I banks were permitted to approve Clean Credit i.e. credit given by a foreign supplier to its Indian customer / buyer, without any Letter of Credit (Suppliers’ Credit) / Letter of Undertaking (Buyers’ Credit) / Fixed Deposits from any Indian financial institution for import of Rough, Cut and Polished Diamonds, for a period not exceeding 180 days from the date of shipment.

2. To ease the operational difficulties faced by the importers, it has been decided, in consultation with the Government of India, to delegate the powers for permitting such clean credit for a period exceeding 180 days from the date of shipment to the AD banks, subject to the following conditions:

i) AD banks being satisfied of the genuineness of the reason and bonafides of the transaction and also that no payment of interest is involved for the additional period

ii) The reasons for such extension are due to financial difficulties and/or quality disputes, as in the case of normal imports (for which such extension of time period for delayed payments has already been delegated to the AD banks)

iii) The importer requesting for such extension is not under investigation/no investigation is pending against the importer

iv) The importer seeking extension is not a frequent offender. Since there is a possibility that the importer may have dealings with more than one AD bank, the AD bank allowing extension may devise a mechanism based on their commercial judgement, to ensure this.

v) AD banks may allow such extension of time up to a maximum period of 180 days beyond the prescribed period/due date, beyond which they may refer the cases to respective Regional Office of the Reserve Bank

3. AD banks may submit a half yearly report of such extensions allowed customer-wise, to the respective Regional Office of the Reserve Bank.

4. The revised directions will come into force with immediate effect.

5. AD Category – I banks should ensure that due diligence is undertaken and Know-Your-Customer (KYC) Norms and Anti-Money Laundering (AML) Standards, issued by the Reserve Bank are adhered to while undertaking the import transactions. Further, any large or abnormal increase in the volume of business should be closely examined to ensure that the transactions are bonafide. All other instructions relating to import of Rough, Cut and Polished Diamonds shall continue.

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

7. The directions contained in this circular have been issued under section 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.

RBI/2015-16/351

(A K Pandey)
Chief General Manager

Notification No. FEMA 22(R) /RB-2016] 31-3-2016


RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
CENTRAL OFFICE
MUMBAI

FEMA NOTIFICATION NO

22(R)/2016-RB, Dated: March 31, 2016

Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations’ 2016.

G.S.R.384. - In exercise of the powers conferred by sub-section (6) of Section 6 of the Foreign Exchange Management Act’ 1999 (42 of 1999)’ and in supersession of Notification No. FEMA 22/2000-RB dated May 3′ 2000′ as amended from time to time’ the Reserve Bank of India makes the following regulations to prohibit’ restrict and regulate establishment in India of a branch office or a liaison office or a project office or any other place of business by a person resident outside India:-

1. Short title and commencement.-

a. These Regulations may be called the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations’ 2016.

b. They shall come into force from the date of their publication in the Official Gazette.

2. Definitions In these regulations’ unless the context otherwise requires–

a. ‘Act’ means the Foreign Exchange Management Act’ 1999 (42 of 1999).

b. ‘Authorised Dealer’ means a person authorised as an authorised dealer under sub-section (1) of Section 10 ofthe Act.

c. ‘Foreign company’ means a body corporate incorporated outside India and includes a firm or other association of individuals.

d. ‘Branch Office’ in relation to a company’ means any establishment described as such by the company.

e. ‘Liaison Office’ means a place of business to act as a channel of communication between the principal place of business or Head Office or by whatever name called and entities in India but which does not undertake any commercial/trading/industrial activity’ directly or indirectly’ and maintains itself out of inward remittances received from abroad through normal banking channel.

f. ‘Project Office’ means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a Liaison Office.

g. ‘Site Office’ means a sub-office of the Project Office established at the site of a project but does not include a Liaison Office.

h. ‘Stand-alone basis’ means such branch offices would be isolated and restricted to the Special Economic Zone alone and no business activity/transaction will be allowed outside the Special Economic Zones in India which includes branches/subsidiaries of its parent office in India.

i. The words and expressions used but not defined in these Regulations’ shall have the same meanings respectively assigned to them in the Act.

3. Prohibition against opening a branch office or a liaison office or a project office or any other place of business in India

No person resident outside India shall without prior approval of the Reserve Bank open in India a branch office or a liaison office or a project office or any other place of business by whatever name called except as laid down in these Regulations.

Provided that

a. A banking company resident outside India shall not require any approval under these Regulations for establishing any office in India if such company has obtained necessary approval under the provisions of the Banking Regulation Act’ 1949.

b. An insurance company resident outside India shall not require any approval under these Regulations for establishing any office in India if such company has obtained approval from the Insurance Regulatory and Development Authority established under section 3 of the Insurance Regulatory and Development Authority Act’ 1999.

c. A company resident outside India shall not require any approval under these Regulations to establish a branch office in the Special Economic Zones (SEZs) to undertake manufacturing and service activities’ subject to the conditions that:

i) such branch offices are functioning in those sectors where 100% FDI is permitted;

ii) such branch offices comply with Chapter XXII of the Companies Act’ 2013; and

iii) such branch offices function on a stand-alone basis.

4. Approval for opening a branch office or a liaison office or a project office or any other place of business in India

a. Eligibility

A person resident outside India can establish a branch office or a liaison office in India provided it meets the following criterion:

i. For Branch Office – a profit making track record during the immediately preceding five financial years in the home country and net worth of not less than USD 100’000 or its equivalent.

ii. For Liaison Office – a profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50’000 or its equivalent.

Provided that a person resident outside India that is not financially sound and are subsidiaries of other companies may submit a Letter of Comfort (Annex A) from their parent company subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit.

b. Permissible activities

A person resident outside India permitted by the Reserve Bank under these Regulations to establish a branch or liaison office in India may undertake or carry on any activity specified in Schedule I or II (Annex B)’ as the case may be’ but shall not undertake or carry on any other activity unless otherwise specifically permitted by the Reserve Bank.

c. Application form

A person resident outside India desiring to establish a branch office or a liaison office or a project office or any other place of business in India shall submit an application in Form FNC (Annex C) to an Authorised Dealer Category-I bank who may’ subject to the provisions of Regulation 5′ grant approval as per the directions and/or guidelines issued by the Reserve Bank in this regard. In case no office is opened by the person resident outside India within six months from the date of approval letter’ the approval for establishing the office in India shall be cancelled. In cases where the person resident outside India is not able to open the office within the stipulated time frame due to reasons beyond their control’ the Authorised Dealer Category-I bank may consider granting extension of time for setting up the office by a further period of six months. Any further extension of time shall require the prior approval of the Reserve Bank in this regard.

d. Extension of the validity period for liaison office

I. A person resident outside India may establish in India under these Regulations a liaison office for a period of three years subject to the provisions of Regulation 4 d (III). The non-resident entity may apply to the Authorised Dealer Category-I bank concerned for extension of the validity period of approval’ and upon receipt of such an application’ the Authorised Dealer Category-I bank concerned may extend the validity period of approval for a period of three years from the date of expiry of the original approval/extension granted’ subject to such directions issued by the Reserve Bank in this regard.

II. The application for extension of the validity period of the liaison office of banks and entities engaged in insurance business has to be directly submitted to the Department of Banking Regulation (DBR)’ Reserve Bank and the Insurance Regulatory and Development Authority (IRDA) respectively.

III. Entities engaged in construction and development sectors and which are Non-Banking Finance Companies are permitted to open a Liaison Office for two years only. No further extension would be considered for liaison offices of entities which are Non-Banking Finance Companies and those engaged in construction and development sectors (excluding infrastructure development companies). Upon expiry of the validity period’ the offices shall have to either close down or be converted into a Joint Venture / Wholly Owned Subsidiary in conformity with the extant Foreign Direct Investment policy.

e. Additional offices

A person resident outside India desiring to establish additional branch office or liaison office may submit to the Authorised Dealer Category-I bank a fresh FNC Form along with the justification for the need for additional office/s.

f. Project office

I. A foreign company may open project office/s in India provided it has secured from an Indian company’ a contract to execute a project in India’ and

i. the project is funded directly by inward remittance from abroad; or

ii. the project is funded by a bilateral or multilateral International Financing Agency; or

iii. the project has been cleared by an appropriate authority; or

iv. a company or entity in India awarding the contract has been granted term loan by a Public Financial Institution or a Bank in India for the Project.

Explanation:

For the purpose of this Regulation’

i. ‘a bilateral or multilateral International Financing Agency’ means the World Bank or the International Monetary Fund or similar other body.

ii. “Public Financial Institution” is a public financial institution as defined in Section 4A of the Companies Act’ 1956.

II. A person from any country other than Pakistan who has been awarded a contract for a project by a Government Authority/ Public Sector Undertaking may open a bank account with an Authorised Dealer Category-I bank without any prior approval from the Reserve Bank.

g. Registration with State Police Authorities

A person from Bangladesh’ Sri Lanka’ Afghanistan’ Iran’ China’ Hong Kong or Macau opening a branch office or a liaison office or a project office or any other place of business in India shall have to register with the concerned State Police Authorities. Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs’ Internal Security Division-I’ Government of India’ New Delhi.

h. Fund/non-fund based facilities

Authorised Dealer Category-I bank may extend fund and/or non-fund based facilities to branch office and project offices based on the guidelines issued by the Reserve Bank in this regard.

i. Remittance of profit or surplus

I. Branch office may remit outside India profit of the branch net of applicable Indian taxes’ on production of the following documents to the satisfaction of the Authorised Dealer Category-I bank through whom the remittance is effected:

i. A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year.

ii. A Chartered Accountant’s certificate certifying

1. the manner of arriving at the remittable profit;

2. that the entire remittable profit has been earned by undertaking the permitted activities and

3. that the profit does not include any profit on revaluation of the assets of the branch.

II. Authorised Dealer Category – I bank may permit intermittent remittances by project offices pending winding up / completion of the project subject to submission of the following:

i. certified copy of the final audited project accounts;

ii. the statutory auditor’s certificate showing the manner of arriving at the remittable surplus and confirming that sufficient provisions have been made to meet the liabilities in India including Income Tax’ etc.; and

iii. An undertaking from the project office that the remittance will not’ in any way’ affect the completion of the project in India and that any shortfall of funds for meeting any liability in India will be met by inward remittance from abroad.

j. Acquisition of property

Acquisition of property by branch office/project office shall be governed by the guidelines issued under Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations.

k. Transfer of assets

A person resident outside India permitted under these Regulations to establish a branch office or liaison office or project office may apply to the concerned Authorised Dealer Category-I bank for transfer of its assets to a Joint Venture/Wholly Owned Subsidiary or any other entity in India. Authorised Dealer Category-I bank shall be guided by the instructions laid down by Reserve Bank in this regard.

l. Annual Activity Certificate (AAC)

The branch office/liaison office may submit the Annual Activity Certificate (Annex D) as at the end of March 31 along with the audited financial statements including receipt and payment account on or before September 30 of that year. In case the annual accounts of the office are finalized with reference to a date other than March 31′ the AAC along with the audited financial statements may be submitted within six months from the due date of the Balance Sheets to the Authorised Dealer Category-bank and the Director General of Income Tax (International Taxation)’ Drum Shape Building’ I.P. Estate’ New Delhi 110002.

AAC from a Chartered Accountant showing the project status and certifying that the accounts of the project office have been audited and the activities undertaken are in conformity with the general/ specific permission given by the Reserve Bank may be submitted by the project office to the designated Authorised Dealer Category-I bank.

m. Closure of office and remittance of winding up proceeds

I. Requests for closure of the branch office/liaison office may be submitted to the Authorised Dealer Category – I bank along with the following documents:

i. Copy of the Reserve Bank’s/Authorised Dealer Category-I bank’s approval for establishing the office. ii. Auditor’s certificate :

1. indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant’ and indicating the manner of disposal of assets;

2. confirming that all liabilities in India including arrears of gratuity and other benefits to employees’ etc. of the office have been either fully met or adequately provided for;

3. confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India.

iii. Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the office and there is no legal impediment to the remittance.

iv. A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act’ 2013′ in case of winding up of the branch office/liaison in India.

v. Any other document/s’ specified by the Reserve Bank/Authorised Dealer Category-I bank while granting approval.

II. Remittance of winding up proceeds of branch or liaison office established in India shall be governed by the guidelines issued under Foreign Exchange Management (Remittance of assets) Regulations.

5. Approval of the Reserve Bank in certain cases for establishment of branch office’ liaison office or project office or any other place of business in India

Any application from a person resident outside for opening of a branch office or a liaison office or a project office or any other place of business in India shall require prior approval of Reserve Bank in the following cases where

a. the applicant is a citizen of or is registered/incorporated in Pakistan;

b. the applicant is a citizen of or is registered/incorporated in Bangladesh’ Sri Lanka’ Afghanistan’ Iran’ China’ Hong Kong or Macau and the application is for opening a liaison’ branch or project office in Jammu and Kashmir’ North East region and Andaman and Nicobar Islands;

c. the principal business of the applicant falls in the four sectors namely Defence’ Telecom’ Private Security and Information and Broadcasting:

Provided that in the case of proposal for opening a project office relating to defence sector’ no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with the Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings.

d. The applicant is a Non-Government Organisation’ Non-Profit Organisation’ Body/ Agency/ Department of a foreign Government.

Such applications shall be forwarded to the Reserve Bank’ Foreign Exchange Department’ Central Office Cell’ New Delhi by the Authorised Dealer Category-I bank and be considered in consultation with the Government of India.

(Indira Nanu)
Chief General Manager 
Annex A

Format of the Letter of Comfort

[See Regulation 4 (a)]

The Authorised Signatory’

(Address of the Authorised Dealer Category-I bank)

Dear Sir’

Sub: Application for establishment of branch / liaison office in India by our subsidiary / group company’ M/s_________________________

You may kindly refer to the application made by our subsidiary / group company’ M/s_____________________________to your office for establishing branch / liaison office in India.

2. In this connection’ we’ ______________________(the parent company/group company) undertake to provide the necessary financial support for our subsidiary/group company’s operations as a branch / liaison office in India. Any liability that may arise due to the functioning of the branch/liaison office in India will be met by us (the parent company/group company)’ in case of inability on part of the branch/liaison office to do so.

3. We are also enclosing the financial background of our company in the form of our latest Audited Balance Sheet/Account Statement certified by a Certified Public Accountant.

Yours faithfully’

(       )

Authorised Representative of the parent company

Annex B

Schedule I

[See Regulation 4 (b)]

Permitted activities for a branch office in India of a person resident outside India

i. Export/import of goods.

ii. Rendering professional or consultancy services.

iii. Carrying out research work in which the parent company is engaged.

iv. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.

v. Representing the parent company in India and acting as buying/ selling agent in India.

vi. Rendering services in Information Technology and development of software in India.

vii. Rendering technical support to the products supplied by parent/group companies.

viii. Representing a foreign airline/shipping company.

Schedule II

[See Regulation 4 (b)]

Permitted activities for a liaison office in India of a person resident outside India

i. Representing the parent company/group companies in India.

ii. Promoting export/import from/to India.

iii. Promoting technical/financial collaborations between parent/group companies and companiesin India.

iv. Acting as a communication channel between the parent company and Indian companies.

Annex C

Form FNC

[See Regulation 4 (c)]

[This application form shall be completed and submitted to the AD Category-I bank designated by the applicant alongwith the documents mentioned in item (viii) of the Declaration.]

Part I

No.
Details
Particulars
1.

i. Full name and address of the applicant

ii. Date and Place of incorporation/registration

iii. Telephone Number(s)

iv. Fax Number(s)

v. E-mail ID

2.

i. Details of capital

ii. Paid-up capital

iii. Free Reserves/Retained earnings as per last audited Balance
Sheet/Financial Statement

iv. Intangible assets’ if any

3.
Brief description of the activities of the applicant
4.

i. Value of goods imported from and/or exported to India by the applicant during each of the last three years:

a. Imports from India

b. Exports to India

ii. Particulars of existing arrangements if any’ for representing the company in India.

iii. Particulars of the proposed liaison/ branch office:

a. Details of the activities/ services proposed to be undertaken/ rendered by the office

b. Place where the office will be located

c. Phone number

d. E-mail ID

e. Expected number of employees (with number of
foreigners)

5.

i. Name and address of the banker of the applicant in the home country

ii. Telephone & Fax Number

iii. E-mail ID

6.

For Non-profit / Non-Government Organisations:

i. Details of activities carried out in the host country and other
countries by the applicant organisation

ii. Expected level of funding for operations in India

iii. Copies of the bye-laws’ Articles of Association of the
organization

7.

For project offices:

i. Reference no. and date of letter awarding the contract

ii. Particulars of authority awarding the project/contract

iii. Total amount of contract

iv. Address/e-mail/telephone number/fax number of the project office

v. Tenure of project office

vi. Nature of project undertaken

8.
Any other information which the applicant company wishes to furnish in
support of this application.

Part II- Additional information to be submitted by applicants where Reserve Bank’s approval is necessary under Regulation 5 of Notification No. FEMA 22 (R)/2016-RB dated March 31′ 2016

I. Details in respect of Company/Firm

Sr. No. Full name of the company Date of registration of the company  Address of Head Office’ Regional Office and Registered Office

Previous name of the company if any  Details of earlier approvals or rejections’ if any’ (ref. no. and date) Enclosed application for branch office/liaison office/project office prescribed by DEA

II. Details in respect of Directors/Key Executives

Sr.
No.
Full name of
Board of
Directors and
Key
Executives
(wherever
applicable)
Present
position
held with
date (since
when)
Date of
Birth
Parentage Present and
permanent
address
Nationality Passport
Nos. and
issue date
Contact
address
and
telephone
number

III. Details of shareholders of applicant company (all firms/companies/entities/individuals havingshareholding more than 10 %)

Sr.
No.
Full
name
Parentage
Father/
Mother
Date of
birth
Permanent
address
Present
address
Present
position
held
Nationality (if
holding dual
nationality’ both
must be clearly
mentioned)
% of shares
held in the
company

IV. Details of criminal cases’ if any’ against the company/Director (s) for which security clearance is sought

a. Name’ address and registration number of the company :

b. Name and address of owners’ promoters and directors of the company :

1. _______________________________________

2. _______________________________________

3. _______________________________________

4. _______________________________________

c. Are the company owners’ promoters or directors listed above’ the subject of any

1. Preventive detention proceedings : Yes/No

2. Criminal proceedings : Yes/No

d. If’ Yes’ please provide the following details

1. Detention/case/FIR/warrant number:

2. Police station/District/Agency :

3. Section of law :

4. Name and place of the court :

e. The above mentioned details are in respect of both India and any foreign country.

DECLARATION We hereby declare that:

i. The particulars given above are true and correct to the best of our knowledge and belief.

ii. Our activities in India would be confined to the activities indicated in column 4(iii)(a)/7 (vi) above.

iii. If we shift the office to another place within the city’ we shall intimate the designated AD Category – I bank. In theevent of shifting the office to any other city in India’ prior approval of the AD Category-I bank will be obtained.

iv. We will abide by the terms and conditions that may be stipulated by the Government of India/Reserve Bank/designated AD Category – I bank from time to time.

v. We’ hereby commit that we are agreeable to a report/opinion sought from our bankers abroad by the Government of India/Reserve Bank.

vi. We understand that the approval’ if granted’ is from FEMA angle only. Any other approvals/clearances’ statutory or otherwise’ required from any other Government Authority/Department/Ministry will be obtained before commencement of operations in India.

vii. We have no objection to the Reserve Bank placing the details of approval in public domain.

viii. We enclose the following documents:

a. Copy of the Certificate of Incorporation/Registration; Memorandum of Association and Articles of Association attested by the Notary Public in the country of registration.

[If the original Certificate is in a language other than in English' the same may be translated into English and notarized as above and cross verified/attested by the Indian Embassy/ Consulate in the home country].

b. Audited Balance sheet of the applicant company for the last three/ five years in case of branch office/liaison office respectively.

[If the applicants’ home country laws/regulations do not insist on auditing of accounts' an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name' clearly showing the net worth may be submitted]

c. Bankers’ Report from the applicant’s banker in the host country / country of registration showing the number of years the applicant has had banking relations with that bank.

d. Power of Attorney in favour of signatory of Form FNC in case the Head of the overseas entity is not signing the Form FNC.

(Signature of Authorised Official
of the Applicant Company)

Name:

Designation:

Place:

Date:

Annex D

Annual Activity Certificate

(See Regulation 4(l)]

To whomsoever it may concern This is to certify and confirm that during the period from __________________ to ________________’ the branch office/liaison office/ project office/s with PAN No. ———————- (wherever applicable) of M/s__________________’ UIN-_______________ (wherever applicable) has/have undertaken only those activities that have been specifically permitted by the Reserve Bank/Authorised Dealer Category-I bank vide its approval letter/s No/s. ______________________________dated ______________and has/have complied with the terms and conditions specified in the above mentioned letter/s. If there is any change in address and other contact details’ the same has been brought to the notice of the Authorised Dealer Category-I bank.

For Project Office only

2. Project status: ________________________________________

3. This is to certify that during the period from _______________ to ______________’ no inter-project funds transfer has been carried out without prior approval of the Reserve Bank. ___________________________

(Signature of the Statutory Auditor/s)

(Name of the Chartered Accountant)

ICAI Membership No.:

Address:

Place:

Notification No. S.O. 1324(E) 31-3-2016


De-notification and addition of certain areas to the sector specific Special Economic Zone for biotechnology sector at Genome Valley, Village lalgadi Malakpet, Mandal Shameerpet, District Ranga Reddy, in the State of Andhra Pradesh – S.O. 1324(E) – Dated 31-3-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 31st March, 2016

S.O. 1324(E).-Whereas, M/s. Andhra Pradesh Industrial Infrastructure Corporation Limited (now Telangana State Industrial Infrastructure Corporation Limited), a State Government Organization, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for biotechnology sector at Genome Valley, Village lalgadi Malakpet, Mandal Shameerpet, District Ranga Reddy, in the State of Andhra Pradesh;

And, whereas, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 20.44 hectares at above Special Economic Zone vide Ministry of Commerce and Industry Notification Number S.O. 2636 (E) dated 20th October, 2009;

And, whereas, M/s. Telangana State Industrial Infrastructure Corporation Limited, has now proposed to include an area of 2.136 hectares and decrease an area of 12.35 hectares from the above Special Economic Zone;

And whereas, the Central Government has granted letter of approval on 15th March, 2016 for inclusion of additional area of 2.136 ha to the above SEZ;

And, whereas, the State Government of Telangana has given its “No Objection” to the proposal of above developer for decrease in area of 12.35 ha vide their letter No. 6820/ IP&INF/A2/2014 dated 01st June, 2015;

And, whereas, the Development Commissioner, Visakhapatnam Special Economic Zone has recommended the proposal for de-notification of an area of 12.35 hectares of the Special Economic Zone;

Now, whereas, the Central Government is satisfied that the requirements under sub-section (8) of section 3 of the said Act and other related requirements are fulfilled;

Now, therefore, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby notifies an area of 2.136 hectares and de-notifies an area of 12.35 hectares, thereby making total area of the Special Economic Zone as 10.2263 hectares, comprising the survey numbers and the area given below in the table, namely:-

TABLE FOR ADDITIONAL AREA

S. No.

Name of the Village

Khasra No.

Area (in Hectares)

1

Lalgadi Malakpet

101P

2.136

Total

2.136 hectares

TABLE FOR DE NOTIFICATION

S. No.

Name of the Village

Khasra No.

Area (in Hectares)

1

Lalgadi Malakpet

101P

3.24

2

119

3.31

3

120

5.00

4

121P

0.80

Total

12.35 hectares

Grant total of the SEZ area after addition and de-notification

10.2263 hectares

[F. No. F.1/23/2009-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

Notification No. S.O. 1323(E) 31-3-2016


Set up a Sector Specific Special Economic Zone for information technology and information technology enabled services at Ranga Reddy, Telangana – S.O. 1323(E) – Dated 31-3-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 31st March, 2016

S.O. 1323(E).-Whereas, M/s. Aqua Space Developers Private Limited has proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a Sector Specific Special Economic Zone for information technology and information technology enabled services at Raidurg Panmaktha village, Serilingampally Mandal, Ranga Reddy District, in the State of Telangana;

And, whereas, the Central Government is satisfied that requirements under sub-section (8) of section 3 of the saidAct, and other related requirements are fulfilled and it has granted letter of approval under subsection (10) of section 3 of the said Act for development, operation and maintenance of the above sector specific Special Economic Zone on 27th January, 2016;

Now, therefore, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of theSpecial Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, hereby notifies the 1.85 hectares area at above location with survey numbers given in the table below as a Special Economic Zone, namely:

TABLE

S. No. Name of Village Survey No. Area (in hectares)
1. Raidurg Panmaktha 83/1 1.85
 

Total

1.85

And, therefore, the Central Government, in exercise of the powers conferred by sub-section (1) of section 13 of theSpecial Economic Zones Act, 2005 (28 of 2005), hereby constitutes a Committee to be called the Approval Committee for the above Special Economic Zone for the purposes of section 14 of the said Act consisting of the following Chairperson and Members, namely:-

1.

Development Commissioner of the Special Economic Zone Chairperson ex officio;

2.

Director or Deputy Secretary to the Government of India, Ministry of Commerce and Industry, Department of Commerce or his nominee not below the rank of Under Secretary to the Government of India Member ex officio;

3.

Zonal Joint Director General of Foreign Trade having territorial jurisdiction over the Special Economic Zone Member ex officio;

4.

Commissioner of Customs or Central Excise having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;

5.

Commissioner of Income Tax having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;

6.

Director (Banking) in the Ministry of Finance, Banking Division, Government of India Member ex officio;

7.

Two officers, not below the rank of Joint Secretary, to be nominated by the State Government Member ex officio;

8.

Representative of the Developer of the zone Special invitee

And, therefore, the Central Government, in exercise of the powers conferred by sub-section (2) of section 53 of theSpecial Economic Zones Act, 2005 (28 of 2005), hereby appoints the 31st day of March, 2016 as the date from which the above Special Economic Zone shall be deemed to be Inland Container Depot under section 7 of theCustoms Act, 1962 (52 of 1962)

[F. No. F. 1/2/2016-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

Direct tax mop-up: Explain shortfall, asks Hasmukh Adhia to CBDT : 31-03-2016


Revenue Secretary Hasmukh Adhia has sent a terse missive to the Central Board of Direct Taxes (CBDT) chairman Atulesh Jindal seeking an explanation for a likely shortfall in direct tax collections in 2015-16.

Revenue Secretary Hasmukh Adhia has sent a terse missive to the Central Board of Direct Taxes (CBDT) chairman Atulesh Jindal seeking an explanation for a likely shortfall in direct tax collections in 2015-16.

This comes after the government had sharply lowered its direct tax target for 2015-16 by Rs 45,974 crore in the Union Budget last month, but is unlikely to meet even this revised target.

In a letter dated March 23, Adhia has expressed his disappointment to the CBDT chairman for “laxity shown” by field officers in collection of taxes, despite a reduction in revenue target in the Budget presented last month.

“The CBDT requested for reduction in BE target which was done. In spite of that, it now appears to me that RE target may also not be achieved. If this happens, Board and field functionaries will have to explain why it happened. Responsibility will also have to be fixed,” the letter to the CBDT head said.

While presenting Union Budget for 2016-17 last month, finance minister Arun Jaitley had revised downwards the estimate for direct taxes to Rs 7,52,021 crore from Rs 7,97,995 crore estimated earlier for the financial year ending March 31.

The estimates for indirect taxes, on the other hand, were revised upwards due to which the gross tax revenue target for 2015-16 was revised upwards to Rs 14,59,611 crore from Rs 14,49,490 crore estimated earlier.

In his letter to the CBDT head, the revenue secretary has further stated that it will not be possible to achieve the tax targets without day-to-day supervision and constant communication.

“You must show your leadership and see to it that the RE targets are achieved fully,” the letter said. Both the revenue secretary and the CBDT chairman did not respond to e-mail queries regarding the letter. The official CBDT spokesperson told The Indian Express that the query will be communicated to the CBDT chairman. A response was, however, awaited till the time of going to print.

Source : The Hindu

Govt allows 100% FDI in e-retail, but with riders : 31-03-2016


Almost 10 years after e-commerce started in a big way, the National Democratic Alliance government on Tuesday allowed 100 per cent foreign direct investment (FDI) in e-commerce marketplaces.

Though it has been introduced with a few riders, the reform comes just ahead of Chinese major Alibaba’s proposed entry into the country. It also coincides with a recent markdown of valuation of e-commerce companies.

Some of the prominent e-commerce marketplace players in India are Flipkart, Snapdeal, ShopClues and Paytm – all funded by marquee foreign investors. American major Amazon, the biggest rival for Flipkart, too, entered India as a fully-owned online marketplace player two years ago.

The sector has got an estimated $10 billion (Rs 65,000 crore) of foreign investment since it began in a big way 10 years ago. In 2015, around $5 billion (Rs 32,500 crore) of foreign funds were raised by e-commerce companies. Even now, no FDI is allowed in inventory-led online businesses that companies such as Amazon have in the US.

Till now, policy guidelines had stated that no FDI was permitted in e-commerce.

While liberalising e-commerce, the Department of Industrial Policy & Promotion (DIPP) has introduced conditions to ensure that platform owners do not turn sellers. Some of the conditions are that sales cannot exceed 25 per cent for any vendor, marketplace players or their group companies cannot sell, guarantee and warranty must be the sole responsibilities of the sellers, and platform owners cannot influence pricing of products so that there’s a level-playing field.

International consultants and analysts claim that the government’s move will bring in greater foreign investment into a sector that is set to grow from $16 billion to $70 billion by 2020 (excluding travel). But, domestic traders’ body Confederation of All India Traders (CAIT) has hit out at the government, calling it a U-turn in policy that will permit backdoor entry to global players.

International players as well as Indian entrepreneurs have exploited the grey area in the policy till now, thereby running online operations with dollar funds from marquee investors.

Online marketplace platforms, where companies such as Amazon India, Flipkart, Snapdeal and many others hosted thousands of sellers, were described as technology enablers rather than e-retailers. They claimed to have no inventory of their own. That kept them going even with a ban on FDI in e-commerce. The government has now put an official stamp on how the e-commerce majors have for many years operated their business.

Almost two years after coming to power, the NDA has brought some clarity to the sector. Multi-brand retail, however, continues to be a category open to interpretation.

While its predecessor, the United Progressive Alliance had permitted 51 per cent FDI in multi-brand retail, the NDA is opposed to foreign investment in the area as that could result in loss of jobs for local traders and neighbourhood stores. It has, however, not changed the rulebook on multi-brand policy, execution of which is anyway with states.

DIPP has clarified that 100 per cent FDI is only for the marketplace format of e-commerce, where the company provides a platform to act as a facilitator between buyers and sellers – and not for the inventory-led model.

It has defined e-commerce as buying and selling of goods and services, including digital products over digital and electronic network.

“The government has come with a much-needed clarification on foreign investment in e-commerce,” said Amarjeet Singh, partner, tax, KPMG in India.

“Although, some of the structures practiced by existing players may require alteration, it will give the much-needed clarity to undertake business with certainty in longer term. Needless to add, this will further facilitate foreign investment in this sector,” he added.

The cap of 25 per cent on sales by a vendor on a marketplace will ensure a broad base of vendors for a true marketplace, said Akash Gupt, partner and leader, regulatory, PwC. “This may require some of the operators to go on the drawing board to comply with the conditions.”

He added: “This sector has attracted the maximum FDI in 2015. Enabling the marketplace operator to provide value add services like warehousing, delivery, payment processing will improve customer experience and market outreach for small and medium size suppliers.”

However, there are others who said that while the government is moving in the right direction bringing in FDI in the inventory-led model would have been a better move.

“Marketplace was never in the purview of the government. What should have been done is allowing FDI in the inventory-led model, which would have been a game changer,’” said Sandeep Aggarwal, the founder and chief executive officer of Droom, who also founded ShopClues.

The conditions that have been introduced with FDI in marketplace are being seen as tough by some. According to Paresh Parekh, tax partner, retail & consumer products, EY, certain new conditions regarding limit on single vendor sales through marketplace could impact certain existing players.

Also, Aamir Jariwala, secretary, E-commerce Coalition, said: “Unnecessary restrictions on the number of sellers and sole responsibility on them for warranty and guarantee will throttle the growth of the industry.”

Source : PTI

Notification No. F.No. 17/151/2013-CL-V 30-3-2016


Companies (Accounting Standards)Amendment Rules, 2016 – F.No. 17/151/2013-CL-V – Dated 30-3-2016 – Companies Law

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 30th March, 2016

G.S.R. 364(E).-In exercise of the powers conferred by clause (a) of sub-section (1) of section 642 of theCompanies Act, 1956 (1 of 1956) read with section 210A and sub-section (3C) of section 211 and of the said Act, the Central Government, in consultation with National Advisory Committee on Accounting Standards, hereby makes the following rules to amend the Companies (Accounting Standards) Rules, 2006, namely:-

1. Short title and commencement.- (1) These rules may be called the Companies (Accounting Standards) Amendment Rules, 2016.

2. They shall come into force on the date of their publication in the Official Gazette.

(ii) In the Companies( Accounting Standards) Rules, 2006 (hereinafter referred to as the principal rules), in rule 2,-

(i) for clauses (a) and (b), the following clauses shall be substituted, namely:-

‘(a) “Accounting Standards” means the standards of accounting or any addendum thereto as specified in rule 3 of these rules;

(b) “Act” means the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013), as the case may be;’;

(ii) for clauses (d) and (e), the following clauses shall be substituted, namely:-

‘(d) “Financial Statements” means financial statements as defined in sub-section (40) of section 2 of the Companies Act, 2013;

(e) “Enterprise” means a ‘company’ as defined in sub-section (20) of section 2 of the Companies Act, 2013 or as defined in section 3 of the Companies Act, 196, as the case may be;’.

3. In the principal rules, in rule 4, in sub-rule (2), the words “General Purpose” shall be omitted.

4. In the principals rules, in the ANNEXURE, under the heading “ACCOUNTING STANDARDS”, under the subheading “A. General Instructions”, after paragraph 4, the following paragraph shall be inserted namely:-

5. The reference to ‘Schedule VI’ or ‘Companies Act, 1956’ shall mutatis mutandis mean ‘Schedule III’ and ‘Companies Act, 2013’, respectively.

5. In the principal rules, in the “ANNEXURE”, under the heading “ACCOUNTING STANDARDS” for “Accounting Standard (AS) 2”, the following Accounting Standard shall be substituted, namely:-

“Accounting Standard (AS) 2

Valuation of Inventories

(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of its objective and the General Instructions contained in part A of the Annexure to the Notification.)

Objective

A primary issue in accounting for inventories is the determination of the value at which inventories are carried in the financial statements until the related revenues are recognised. This Standard deals with the determination of such value, including the ascertainment of cost of inventories and any write-down thereof to net realisable value.

Scope

1. This Standard should be applied in accounting for inventories other than:

(a) work in progress arising under construction contracts, including directly related service contracts (see Accounting Standard (AS) 7, Construction Contracts);

(b) work in progress arising in the ordinary course of business of service providers;

(c) shares, debentures and other financial instruments held as stock-in-trade; and

(d) producers’ inventories of livestock, agricultural and forest products, and mineral oils, ores and gases to the extent that they are measured at net realisable value in accordance with well established practices in those industries.

2. The inventories referred to in paragraph 1 (d) are measured at net realisable value at certain stages of production. This occurs, for example, when agricultural crops have been harvested or mineral oils, ores and gases have been extracted and sale is assured under a forward contract or a government guarantee, or when a homogenous market exists and there is a negligible risk of failure to sell. These inventories are excluded from the scope of this Standard.

Definitions

3. The following terms are used in this Standard with the meanings specified:

3.1 Inventories are assets:

(a) held for sale in the ordinary course of business;

(b) in the process of production for such sale; or

(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.

3.2 Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

4. Inventories encompass goods purchased and held for resale, for example, merchandise purchased by a retailer and held for resale, computer software held for resale, or land and other property held for resale. Inventories also encompass finished goods produced, or work in progress being produced, by the enterprise and include materials, maintenance supplies, consumables and loose tools awaiting use in the production process. Inventories do not include spare parts, servicing equipment and standby equipment which meet the definition of property, plant and equipment as per AS 10, Property, Plant and Equipment. Such items are accounted for in accordance with Accounting Standard (AS) 10, Property, Plant and Equipment.

Measurement of Inventories

5. Inventories should be valued at the lower of cost and net realisable value.

Cost of Inventories

6. The cost of inventories should comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Costs of Purchase

7. The costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and other similar items are deducted in determining the costs of purchase.

Costs of Conversion

8. The costs of conversion of inventories include costs directly related to the units of production, such as direct labour. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. Fixed production overheads are those indirect costs of production that remain relatively constant regardless of the volume of production, such as depreciation and maintenance of factory buildings and the cost of factory management and administration. Variable production overheads are those indirect costs of production that vary directly, or nearly directly, with the volume of production, such as indirect materials and indirect labour.

9. The allocation of fixed production overheads for the purpose of their inclusion in the costs of conversion is based on the normal capacity of the production facilities. Normal capacity is the production expected to be achieved on an average over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. The actual level of production may be used if it approximates normal capacity. The amount of fixed production overheads allocated to each unit of production is not increased as a consequence of low production or idle plant. Un allocated overheads are recognised as an expense in the period in which they are incurred. In periods of abnormally high production, the amount of fixed production overheads allocated to each unit of production is decreased so that inventories are not measured above cost. Variable production overheads are assigned to each unit of production on the basis of the actual use of the production facilities.

10. A production process may result in more than one product being produced simultaneously. This is the case, for example, when joint products are produced or when there is a main product and a by-product. When the costs of conversion of each product are not separately identifiable, they are allocated between the products on a rational and consistent basis. The allocation may be based, for example, on the relative sales value of each product either at the stage in the production process when the products become separately identifiable, or at the completion of production. Most by-products as well as scrap or waste materials, by their nature, are immaterial. When this is the case, they are often measured at net realisable value and this value is deducted from the cost of the main product. As a result, the carrying amount of the main product is not materially different from its cost.

Other Costs

11. Other costs are included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition. For example, it may be appropriate to include overheads other than production overheads or the costs of designing products for specific customers in the cost of inventories.

12. Interest and other borrowing costs are usually considered as not relating to bringing the inventories to their present location and condition and are, therefore, usually not included in the cost of inventories.

Exclusions from the Cost of Inventories

13. In determining the cost of inventories in accordance with paragraph 6, it is appropriate to exclude certain costs and recognise them as expenses in the period in which they are incurred. Examples of such costs are:

(a) abnormal amounts of wasted materials, labour, or other production costs;

(b) storage costs, unless those costs are necessary in the production process prior to a further production stage;

(c) administrative overheads that do not contribute to bringing the inventories to their present location and condition; and

(d) selling and distribution costs.

Cost Formulas

14. The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects should be assigned by specific identification of their individual costs.

15. Specific identification of cost means that specific costs are attributed to identified items of inventory. This is an appropriate treatment for items that are segregated for a specific project, regardless of whether they have been purchased or produced. However, when there are large numbers of items of inventory which are ordinarily interchangeable, specific identification of costs is inappropriate since, in such circumstances, an enterprise could obtain predetermined effects on the net profit or loss for the period by selecting a particular method of ascertaining the items that remain in inventories.

16. The cost of inventories, other than those dealt with in paragraph 14, should be assigned by using the first-in, first-out (FIFO), or weighted average cost formula. The formula used should reflect the fairest possible approximation to the cost incurred in bringing the items of inventory to their present location and condition.

17. A variety of cost formulas is used to determine the cost of inventories other than those for which specific identification of individual costs is appropriate. The formula used in determining the cost of an item of inventory needs to be selected with a view to providing the fairest possible approximation to the cost incurred in bringing the item to its present location and condition. The FIFO formula assumes that the items of inventory which were purchased or produced first are consumed or sold first, and consequently the items remaining in inventory at the end of the period are those most recently purchased or produced. Under the weighted average cost formula, the cost of each item is determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased or produced during the period. The average may be calculated on a periodic basis, or as each additional shipment is received, depending upon the circumstances of the enterprise.

Techniques for the Measurement of Cost

18. Techniques for the measurement of the cost of inventories, such as the standard cost method or the retail method, may be used for convenience if the results approximate the actual cost. Standard costs take into account normal levels of consumption of materials and supplies, labour, efficiency and capacity utilisation. They are regularly reviewed and, if necessary, revised in the light of current conditions.

19. The retail method is often used in the retail trade for measuring inventories of large numbers of rapidly changing items that have similar margins and for which it is impracticable to use other costing methods. The cost of the inventory is determined by reducing from the sales value of the inventory the appropriate percentage gross margin. The percentage used takes into consideration inventory which has been marked down to below its original selling price. An average percentage for each retail department is often used.

Net Realisable Value

20. The cost of inventories may not be recoverable if those inventories are damaged, if they have become wholly or partially obsolete, or if their selling prices have declined. The cost of inventories may also not be recoverable if the estimated costs of completion or the estimated costs necessary to make the sale have increased. The practice of writing down inventories below cost to net realisable value is consistent with the view that assets should not be carried in excess of amounts expected to be realised from their sale or use.

21. Inventories are usually written down to net realisable value on an item-by-item basis. In some circumstances, however, it may be appropriate to group similar or related items. This may be the case with items of inventory relating to the same product line that have similar purposes or end uses and are produced and marketed in the same geographical area and cannot be practicably evaluated separately from other items in that product line. It is not appropriate to write down inventories based on a classification of inventory, for example, finished goods, or all the inventories in a particular business segment.

22. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made as to the amount the inventories are expected to realise. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the balance sheet date to the extent that such events confirm the conditions existing at the balance sheet date.

23. Estimates of net realisable value also take into consideration the purpose for which the inventory is held. For example, the net realisable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realisable value of the excess inventory is based on general selling prices. Contingent losses on firm sales contracts in excess of inventory quantities held and contingent losses on firm purchase contracts are dealt with in accordance with the principles enunciated in Accounting Standard (AS) 4, Contingencies and Events Occurring After the Balance Sheet Date.

24. Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when there has been a decline in the price of materials and it is estimated that the cost of the finished products will exceed net realisable value, the materials are written down to net realisable value. In such circumstances, the replacement cost of the materials may be the best available measure of their net realisable value.

25. An assessment is made of net realisable value as at each balance sheet date.

Disclosure

26. The financial statements should disclose:

(a) the accounting policies adopted in measuring inventories, including the cost formula used; and

(b) the total carrying amount of inventories and its classification appropriate to the enterprise.

27. Information about the carrying amounts held in different classifications of inventories and the extent of the changes in these assets is useful to financial statement users. Common classifications of inventories are:

(a) Raw materials and components

(b) Work-in-progress

(c) Finished goods

(d) Stock-in-trade (in respect of goods acquired for trading)

(e) Stores and spares

(f) Loose tools

(g) Others (specify nature),”.

6. In the principal rules, in the “ANNEXURE”, under the heading “ACCOUNTING STANDARDS” for “Accounting Standard (AS) 4”, the following Accounting Standard shall be substituted, namely:-

“Accounting Standards (AS) 4*

Contingencies and Events Occurring After the Balance Sheet Date

(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the General Instructions contained in part A of the Annexure to the Notification.)

Introduction

1. This Standard deals with the treatment in financial statements of

(a) contingencies, and

(b) events occurring after the balance sheet date.

2. The following subjects, which may result in contingencies, are excluded from the scope of this Standard in view of special considerations applicable to them:

(a) liabilities of life assurance and general insurance enterprises arising from policies issued;

(b) obligations under retirement benefit plans; and

(c) commitments arising from long-term lease contracts.

Definitions

3. The following terms are used in this Standard with the meanings specified:

3.1 A contingency is a condition or situation, the ultimate outcome of which, gain or loss, will be known or determined only on the occurrence, or non-occurrence, of one or more uncertain future events.

3.2 Events occurring after the balance sheet date are those significant events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financial statements are approved by the Board of Directors in the case of a company, and, by the corresponding approving authority in the case of any other entity.

Two types of events can be identified:

(a) those which provide further evidence of conditions that existed at the balance sheet date; and

(b) those which are indicative of conditions that arose subsequent to the balance sheet date.

Explanation

4. Contingencies

4.1 The term “contingencies” used in this Standard is restricted to conditions or situations at the balance sheet date, the financial effect of which is to be determined by future events which may or may not occur.

4.2 Estimates are required for determining the amounts to be stated in the financial statements for many on-going and recurring activities of an enterprise. One must, however, distinguish between an event which is certain and one which is uncertain. The fact that an estimate is involved does not, of itself, create the type of uncertainty which characterises a contingency. For example, the fact that estimates of useful life are used to determine depreciation, does not make depreciation a contingency; the eventual expiry of the useful life of the asset is not uncertain. Also, amounts owed for services received are not contingencies as defined in paragraph 3.1, even though the amo unts may have been estimated, as there is nothing uncertain about the fact that these obligations have been incurred.

4.3 The uncertainty relating to future events can be expressed by a range of outcomes. This range may be presented as quantified probabilities, but in most circumstances, this suggests a level of precision that is not supported by the available information. The possible outcomes can, therefore, usually be generally described except where reasonable quantification is practicable.

4.4 The estimates of the outcome and of the financial effect of contingencies are determined by the judgement of the management of the enterprise. This judgement is based on consideration of information available up to the date on which the financial statements are approved and will include a review of events occurring after the balance sheet date, supplemented by experience of similar transactions and, in some cases, reports from independent experts.

5. Accounting Treatment of Contingent Losses

5.1 The accounting treatment of a contingent loss is determined by the expected outcome of the contingency. If it is likely that a contingency will result in a loss to the enterprise, then it is prudent to provide for that loss in the financial statements.

5.2 The estimation of the amount of a contingent loss to be provided for in the financial statements may be based on information referred to in paragraph 4.4.

5.3 If there is conflicting or insufficient evidence for estimating the amount of a contingent loss, then disclosure is made of the existence and nature of the contingency.

5.4 A potential loss to an enterprise may be reduced or avoided because a contingent liability is matched by a related counter-claim or claim against a third party. In such cases, the amount of the provision is determined after taking into account the probable recovery under the claim if no significant uncertainty as to its measurability or collectability exists. Suitable disclosure regarding the nature and gross amount of the contingent liability is also made.

5.5 The existence and amount of guarantees, obligations arising from discounted bills of exchange and similar obligations undertaken by an enterprise are generally disclosed in financial statements by way of note, even though the possibility that a loss to the enterprise will occur, is remote.

5.6 Provisions for contingencies are not made in respect of general or unspecified business risks since they do not relate to conditions or situations existing at the balance sheet date.

6. Accounting Treatment of Contingent Gains

Contingent gains are not recognised in financial statements since their recognition may result in the recognition of revenue which may never be realised. However, when the realisation of a gain is virtually certain, then such gain is not a contingency and accounting for the gain is appropriate.

7. Determination of the Amounts at which Contingencies are included in Financial Statements

7.1 The amount at which a contingency is stated in the financial statements is based on the information which is available at the date on which the financial statements are approved. Events occurring after the balance sheet date that indicate that an asset may have been impaired, or that a liability may have existed, at the balance sheet date are, therefore, taken into account in identifying contingencies and in determining the amounts at which such contingencies are included in financial statements.

7.2 In some cases, each contingency can be separately identified, and the special circumstances of each situation considered in the determination of the amount of the contingency. A substantial legal claim against the enterprise may represent such a contingency. Among the factors taken into account by management in evaluating such a contingency are the progress of the claim at the date on which the financial statements are approved, the opinions, wherever necessary, of legal experts or other advisers, the experience of the enterprise in similar cases and the experience of other enterprises in similar situations.

7.3 If the uncertainties which created a contingency in respect of an individual transaction are common to a large number of similar transactions, then the amount of the contingency need not be individually determined, but may be based on the group of similar transactions. An example of such contingencies may be the estimated uncollectable portion of accounts receivable. Another example of such contingencies may be the warranties for products sold. These costs are usually incurred frequently and experience provides a means by which the amount of the liability or loss can be estimated with reasonable precision although the particular transactions that may result in a liability or a loss are not identified. Provision for these costs results in their recognition in the same accounting period in which the related transactions took place.

8. Events Occurring after the Balance Sheet Date

8.1 Events which occur between the balance sheet date and the date on which the financial statements are approved, may indicate the need for adjustments to assets and liabilities as at the balance sheet date or may require disclosure.

8.2 Adjustments to assets and liabilities are required for events occurring after the balance sheet date that provide additional information materially affecting the determination of the amounts relating to conditions existing at the balance sheet date. For example, an adjustment may be made for a loss on a trade receivable account which is confirmed by the insolvency of a customer which occurs after the balance sheet date.

8.3 Adjustments to assets and liabilities are not appropriate for events occurring after the balance sheet date, if such events do not relate to conditions existing at the balance sheet date. An example is the decline in market value of investments between the balance sheet date and the date on which the financial statements are approved. Ordinary fluctuations in market values do not normally relate to the condition of the investments at the balance sheet date, but reflect circumstances which have occurred in the following period.

8.4 Events occurring after the balance sheet date which do not affect the figures stated in the financial statements would not normally require disclosure in the financial statements although they may be of such significance that they may require a disclosure in the report of the approving authority to enable users of financial statements to make proper evaluations and decisions.

8.5 There are events which, although they take place after the balance sheet date, are sometimes reflected in the financial statements because of statutory requirements or because of their special nature. For example, if dividends are declared after the balance sheet date but before the financial statements are approved for issue, the dividends are not recognised as a liability at the balance sheet date because no obligation exists at that time unless a statute requires otherwise. Such dividends are disclosed in the notes.

8.6 Events occurring after the balance sheet date may indicate that the enterprise ceases to be a going concern. A deterioration in operating results and financial position, or unusual changes affecting the existence or substratum of the enterprise after the balance sheet date (e.g., destruction of a major production plant by a fire after the balance sheet date) may indicate a need to consider whether it is proper to use the fundamental accounting assumption of going concern in the preparation of the financial statements.

9. Disclosure

9.1 The disclosure requirements herein referred to apply only in respect of those contingencies or events which affect the financial position to a material extent.

9.2 If a contingent loss is not provided for, its nature and an estimate of its financial effect are generally disclosed by way of note unless the possibility of a loss is remote (other than the circumstances mentioned in paragraph 5.5). If a reliable estimate of the financial effect cannot be made, this fact is disclosed.

9.3 When the events occurring after the balance sheet date are disclosed in the report of the approving authority, the information given comprises the nature of the events and an estimate of their financial effects or a statement that such an estimate cannot be made.

Main Principles

Contingencies

10. The amount of a contingent loss should be provided for by a charge in the statement of profit and loss if:

(a) it is probable that future events will confirm that, after taking into account any related probable recovery, an asset has been impaired or a liability has been incurred as at the balance sheet date, and

(b) a reasonable estimate of the amount of the resulting loss can be made.

11. The existence of a contingent loss should be disclosed in the financial statements if either of the conditions in paragraph 10 is not met, unless the possibility of a loss is remote.

12. Contingent gains should not be recognised in the financial statements.

Events Occurring after the Balance Sheet Date

13. Assets and liabilities should be adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date or that indicate that the fundamental accounting assumption of going concern (i.e., the continuance of existence or substratum of the enterprise) is not appropriate.

14. If an enterprise declares dividends to shareholders after the balance sheet date, the enterprise should not recognise those dividends as a liability at the balance sheet date unless a statute requires otherwise. Such dividends should be disclosed in notes.

15. Disclosure should be made in the report of the approving authority of those events occurring after the balance sheet date that represent material changes and commitments affecting the financial position of the enterprise.

Disclosure

16. If disclosure of contingencies is required by paragraph 11 of this Standard, the following information should be provided:

(a) the nature of the contingency;

(b) the uncertainties which may affect the future outcome;

(c) an estimate of the financial effect, or a statement that such an estimate cannot be made.

17. If disclosure of events occurring after the balance sheet date in the report of the approving authority is required by paragraph 15 of this Standard, the following information should be provided:

(a) the nature of the event;

(b) an estimate of the financial effect, or a statement that such an estimate cannot be made”.

7. In the principals rules, in the “ANNEXURE”, under the heading “ACCOUNTING STANDARDS”, Accounting Standard (AS) 6 shall be omitted.

8. In the principal rules, in the “ANNEXURE”, under the heading “ACCOUNTING STANDARDS”, for Accounting Standard (AS) 10, the following Accounting Standard shall be substituted, namely:-

“Accounting Standard (AS) 10

Property, Plant and Equipment

(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the General Instructions contained in part A of the Annexure to the Notification.)

Objective

1. The objective of this Standard is to prescribe the accounting treatment for property, plant and equipment so that users of the financial statements can discern information about investment made by an enterprise in its property, plant and equipment and the changes in such investment. The principal issues in accounting for property, plant and equipment are the recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment losses to be recognised in relation to them.

Scope

2. This Standard should be applied in accounting for property, plant and equipment except when another Accounting Standard requires or permits a different accounting treatment.

3. This Standard does not apply to:

(a) biological assets related to agricultural activity other than bearer plants. This Standard applies to bearer plants but it does not apply to the produce on bearer plants; and

(b) wasting assets including mineral rights, expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources.

However, this Standard applies to property, plant and equipment used to develop or maintain the assets described in (a) and (b) above.

4. Other Accounting Standards may require recognition of an item of property, plant and equipment based on an approach different from that in this Standard. For example, AS 19, Leases, requires an enterprise to evaluate its recognition of an item of leased property, plant and equipment on the basis of the transfer of risks and rewards. However, in such cases other aspects of the accounting treatment for these assets, including depreciation, are prescribed by this Standard.

5. Investment property, as defined in AS 13, Accounting for Investments, should be accounted for only in accordance with the cost model prescribed in this standard.

Definitions

6. The following terms are used in this Standard with the meanings specified:

Agricultural Activity is the management by an enterprise of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets.

Agricultural Produce is the harvested product of biological assets of the enterprise.

Bearer plant is a plant that

(a) is used in the production or supply of agricultural produce;

(b) is expected to bear produce for more than a period of twelve months; and

(c) has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.

The following are not bearer plants:

(i) plants cultivated to be harvested as agricultural produce (for example, trees grown for use as lumber);

(ii) plants cultivated to produce agricultural produce when there is more than a remote likelihood that the entity will also harvest and sell the plant as agricultural produce, other than as incidental scrap sales (for example, trees that are cultivated both for their fruit and their lumber); and

(iii) annual crops (for example, maize and wheat).

When bearer plants are no longer used to bear produce they might be cut down and sold as scrap, for example, for use as firewood. Such incidental scrap sales would not prevent the plant from satisfying the definition of a bearer plant.

Biological Asset is a living animal1 or plant.

Carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses.

Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of other Accounting Standards.

Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

Enterprise -specific value is the present value of the cash flows an enterprise expects to arise from the continuing use of an asset and from its disposal at the end of its useful life or expects to incur when settling a liability.

Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.

Gross carrying amount of an asset is its cost or other amount substituted for the cost in the books of account, without making any deduction for accumulated depreciation and accumulated impairment losses.

An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount.

Property, plant and equipment are tangible items that:

(a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and

(b) are expected to be used during more than a period of twelve months.

Recoverable amount is the higher of an asset’s net selling price and its value in use.

The residual value of an asset is the estimated amount that an enterprise would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

Useful life is:

(a) the period over which an asset is expected to be available for use by an enterprise ; or

(b) the number of production or similar units expected to be obtained from the asset by an enterprise.

Recognition

7. The cost of an item of property, plant and equipment should be recognised as an asset if, and only if:

(a) it is probable that future economic benefits associated with the item will flow to the enterprise; and

(b) the cost of the item can be measured reliably.

8. Items such as spare parts, stand-by equipment and servicing equipment are recognised in accordance with this Standard when they meet the definition of property, plant and equipment. Otherwise, such items are classified as inventory.

9. This Standard does not prescribe the unit of measure for recognition, i.e., what constitutes an item of property, plant and equipment. Thus, judgement is required in applying the recognition criteria to specific circumstances of an enterprise. An example of a ‘unit of measure’ can be a ‘project’ of construction of a manufacturing plant rather than individual assets comprising the project in appropriate cases for the purpose of capitalisation of expenditure incurred during construction period. Similarly, it may be appropriate to aggregate individually insignificant items, such as moulds, tools and dies and to apply the criteria to the aggregate value. An enterprise may decide to expense an item which could otherwise have been included as property, plant and equipment, because the amount of the expenditure is not material.

10. An enterprise evaluates under this recognition principle all its costs on property, plant and equipment at the time they are incurred. These costs include costs incurred:

(a) initially to acquire or construct an item of property, plant and equipment; and

(b) subsequently to add to, replace part of, or service it.

Initial Costs

11. The definition of ‘property, plant and equipment’ covers tangible items which are held for use or for administrative purposes. The term ‘administrative purposes’ has been used in wider sense to include all business purposes other than production or supply of goods or services or for rental for others. Thus, property, plant and equipment would include assets used for selling and distribution, finance and accounting, personnel and other functions of an enterprise. Items of property, plant and equipment may also be acquired for safety or environmental reasons. The acquisition of such property, plant and equipment, although not directly increasing the future economic benefits of any particular existing item of property, plant and equipment, may be necessary for an enterprise to obtain the future economic benefits from its other assets. Such items of property, plant and equipment qualify for recognition as assets because they enable an enterprise to derive future economic benefits from related assets in excess of what could be derived had those items not been acquired. For example, a chemical manufacturer may install new chemical handling processes to comply with environmental requirements for the production and storage of dangerous chemicals; related plant enhancements are recognised as an asset because without them the enterprise is unable to manufacture and sell chemicals. The resulting carrying amount of such an asset and related assets is reviewed for impairment in accordance with AS 28, Impairment of Assets.

Subsequent Costs

12. Under the recognition principle in paragraph 7, an enterprise does not recognise in the carrying amount of an item of property, plant and equipment the costs of the day-to-day servicing of the item. Rather, these costs are recognised in the statement of profit and loss as incurred. Costs of day-to-day servicing are primarily the costs of labour and consumables, and may include the cost of small parts. The purpose of such expenditures is often described as for the ‘repairs and maintenance’ of the item of property, plant and equipment.

13. Parts of some items of property, plant and equipment may require replacement at regular intervals. For example, a furnace may require relining after a specified number of hours of use, or aircraft interiors such as seats and galleys may require replacement several times during the life of the airframe. Similarly, major parts of conveyor system, such as, conveyor belts, wire ropes, etc., may require replacement several times during the life of the conveyor system. Items of property, plant and equipment may also be acquired to make a less frequently recurring replacement, such as replacing the interior walls of a building, or to make a non-recurring replacement. Under the recognition principle in paragraph 7, an enterprise recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if the recognition criteria are met. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition provisions of this Standard (see paragraphs 74-80).

14. A condition of continuing to operate an item of property, plant and equipment (for example, an aircraft) may be performing regular major inspections for faults regardless of whether parts of the item are replaced. When each major inspection is performed, its cost is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection (as distinct from physical parts) is derecognised.

15. The derecognition of the carrying amount as stated in paragraphs 13-14 occurs regardless of whether the cost of the previous part / inspection was identified in the transaction in which the item was acquired or constructed. If it is not practicable for an enterprise to determine the carrying amount of the replaced part/ inspection, it may use the cost of the replacement or the estimated cost of a future similar inspection as an indication of what the cost of the replaced part/ existing inspection component was when the item was acquired or constructed.

Measurement at Recognition

16. An item of property, plant and equipment that qualifies for recognition as an asset should be measured at its cost.

Elements of Cost

17. The cost of an item of property, plant and equipment comprises:

(a) its purchase price, including import duties and non –refundable purchase taxes,, after deducting trade discounts and rebates.

(b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

(c) the initial estimate of the costs of dismantling, removing the item and restoring the site on which it is located, referred to as ‘decommissioning, restoration and similar liabilities’, the obligation for which an enterprise incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

18. Examples of directly attributable costs are:

(a) costs of employee benefits (as defined in AS 15, Employee Benefits) arising directly from the construction or acquisition of the item of property, plant and equipment;

(b) costs of site preparation;

(c) initial delivery and handling costs;

(d) installation and assembly costs;

(e) costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment); and

(f) professional fees.

19. An enterprise applies AS 2, Valuation of Inventories, to the costs of obligations for dismantling, removing and restoring the site on which an item is located that are incurred during a particular period as a consequence of having used the item to produce inventories during that period. The obligations for costs accounted for in accordance with AS 2 or AS 10 are recognised and measured in accordance with AS 29, Provisions, Contingent Liabilities and Contingent Assets.

20. Examples of costs that are not costs of an item of property, plant and equipment are:

(a) costs of opening a new facility or business, such as, inauguration costs;

(b) costs of introducing a new product or service( including costs of advertising and promotional activities);

(c) costs of conducting business in a new location or with a new class of customer (including costs of staff training); and

(d) administration and other general overhead costs.

21. Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Therefore, costs incurred in using or redeploying an item are not included in the carrying amount of that item. For example, the following costs are not included in the carrying amount of an item of property, plant and equipment:

(a) costs incurred while an item capable of operating in the manner intended by management has yet to be brought into use or is operated at less than full capacity;

(b) initial operating losses, such as those incurred while demand for the output of an item builds up; and

(c) costs of relocating or reorganising part or all of the operations of an enterprise.

22. Some operations occur in connection with the construction or development of an item of property, plant and equipment, but are not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management. These incidental operations may occur before or during the construction or development activities. For example, income may be earned through using a building site as a car park until construction starts. Because incidental operations are not necessary to bring an item to the location and condition necessary for it to be capable of operating in the manner intended by management, the income and related expenses of incidental operations are recognised in the statement of profit and loss and included in their respective classifications of income and expense.

23. The cost of a self-constructed asset is determined using the same principles as for an acquired asset. If an enterprise makes similar assets for sale in the normal course of business, the cost of the asset is usually the same as the cost of constructing an asset for sale (see AS 2). Therefore, any internal profits are eliminated in arriving at such costs. Similarly, the cost of abnormal amounts of wasted material, labour, or other resources incurred in selfconstructing an asset is not included in the cost of the asset. AS 16, Borrowing Costs, establishes criteria for the recognition of interest as a component of the carrying amount of a self-constructed item of property, plant and equipment.

24. Bearer plants are accounted for in the same way as self-constructed items of property, plant and equipment before they are in the location and condition necessary to be capable of operating in the manner intended by management. Consequently, references to ‘construction’ in this Standard should be read as covering activities that are necessary to cultivate the bearer plants before they are in the location and condition necessary to be capable of operating in the manner intended by management.

Measurement of Cost

25. The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognised as interest over the period of credit unless such interest is capitalised in accordance with AS 16.

26. One or more items of property, plant and equipment may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets. The following discussion refers simply to an exchange of one non-monetary asset for another, but it also applies to all exchanges described in the preceding sentence. The cost of such an item of property, plant and equipment is measured at fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset(s) received nor the asset(s) given up is reliably measurable. The acquired item(s) is/are measured in this manner even if an enterprise cannot immediately derecognise the asset given up. If the acquired item(s) is/are not measured at fair value, its/their cost is measured at the carrying amount of the asset(s) given up.

27. An enterprise determines whether an exchange transaction has commercial substance by considering the extent to which its future cash flows are expected to change as a result of the transaction. An exchange transaction has commercial substance if:

(a) the configuration (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred; or

(b) the enterprise-specific value of the portion of the operations of the enterprise affected by the transaction changes as a result of the exchange;

(c) and the difference in (a) or (b) is significant relative to the fair value of the assets exchanged.

For the purpose of determining whether an exchange transaction has commercial substance, the enterprise -specific value of the portion of operations of the enterprise affected by the transaction should reflect post-tax cash flows. In certain cases, the result of these analyses may be clear without an enterprise having to perform detailed calculations.

28. The fair value of an asset is reliably measurable if (a) the variability in the range of reasonable fair value measurements is not significant for that asset or (b) the probabilities of the various estimates within the range can be reasonably assessed and used when measuring fair value. If an enterprise is able to measure reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of the asset received is more clearly evident.

29. Where several items of property, plant and equipment are purchased for a consolidated price, the consideration is apportioned to the various items on the basis of their respective fair values at the date of acquisition. In case the fair values of the items acquired cannot be measured reliably, these values are estimated on a fair basis as determined by competent valuers.

30. The cost of an item of property, plant and equipment held by a lessee under a finance lease is determined in accordance with AS 19, Leases.

31. The carrying amount of an item of property, plant and equipment may be reduced by government grants in accordance with AS 12, Accounting for Government Grants.

Measurement after Recognition

32. An enterprise should choose either the cost model in paragraph 33 or the revaluation model in paragraph 34 as its accounting policy and should apply that policy to an entire class of property, plant and equipment.

Cost Model

33. After recognition as an asset, an item of property, plant and equipment should be carried at its cost less any accumulated depreciation and any accumulated impairment losses.

Revaluation Model

34. After recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably should be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations should be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date.

35. The fair value of items of property, plant and equipment is usually determined from market-based evidence by appraisal that is normally undertaken by professionally qualified valuers.

36. If there is no market-based evidence of fair value because of the specialised nature of the item of property, plant and equipment and the item is rarely sold, except as part of a continuing business, an enterprise may need to estimate fair value using an income approach (for example, based on discounted cash flow projections) or a depreciated replacement cost approach which aims at making a realistic estimate of the current cost of acquiring or constructing an item that has the same service potential as the existing item.

37. The frequency of revaluations depends upon the changes in fair values of the items of property, plant and equipment being revalued. When the fair value of a revalued asset differs materially from its carrying amount, a further revaluation is required. Some items of property, plant and equipment experience significant and volatile changes in fair value, thus necessitating annual revaluation. Such frequent revaluations are unnecessary for items of property, plant and equipment with only insignificant changes in fair value. Instead, it may be necessary to revalue the item only every three or five years.

38. When an item of property, plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the asset is treated in one of the following ways:

(a) the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. For example, the gross carrying amount may be restated by reference to observable market data or it may be restated proportionately to the change in the carrying amount. The accumulated depreciation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses; or

(b) the accumulated depreciation is eliminated against the gross carrying amount of the asset.

The amount of the adjustment of accumulated depreciation forms part of the increase or decrease in carrying amount that is accounted for in accordance with paragraphs 42 and 43.

39. If an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that asset belongs should be revalued.

40. A class of property, plant and equipment is a grouping of assets of a similar nature and use in operations of an enterprise. The following are examples of separate classes:

(a) land;

(b) land and buildings;

(c) machinery;

(d) ships;

(e) aircraft;

(f) motor vehicles;

(g) furniture and fixtures;

(h) office equipment;and

(i) bearer plants.

41. The items within a class of property, plant and equipment are revalued simultaneously to avoid selective revaluation of assets and the reporting of amounts in the financial statements that are a mixture of costs and values as at different dates. However, a class of assets may be revalued on a rolling basis provided revaluation of the class of assets is completed within a short period and provided the revaluations are kept up to date.

42. An increase in the carrying amount of an asset arising on revaluation should be credited directly to owners’ interests under the heading of revaluation surplus However, the increase should be recognised in the statement of profit and loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in the statement of profit and loss.

43. A decrease in the carrying amount of an asset arising on revaluation should be charged to the statement of profit and loss. However, the decrease should be debited directly to owners’ interests under the heading of revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

44. The revaluation surplus included in owners’ interests in respect of an item of property, plant and equipment may be transferred to the revenue reserves when the asset is derecognised. This may involve transferring the whole of the surplus when the asset is retired or disposed of. However, some of the surplus may be transferred as the asset is used by an enterprise. In such a case, the amount of the surplus transferred would be the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on its original cost. Transfers from revaluation surplus to the revenue reserves are not made through the statement of profit and loss.

Depreciation

45. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item should be depreciated separately.

46. An enterprise allocates the amount initially recognised in respect of an item of property, plant and equipment to its significant parts and depreciates each such part separately. For example, it may be appropriate to depreciate separately the airframe and engines of an aircraft, whether owned or subject to a finance lease.

47. A significant part of an item of property, plant and equipment may have a useful life and a depreciation method that are the same as the useful life and the depreciation method of another significant part of that same item. Such parts may be grouped in determining the depreciation charge.

48. To the extent that an enterprise depreciates separately some parts of an item of property, plant and equipment, it also depreciates separately the remainder of the item. The remainder consists of the parts of the item that are individually not significant. If an enterprise has varying expectations for these parts, approximation techniques may be necessary to depreciate the remainder in a manner that faithfully represents the consumption pattern and/or useful life of its parts.

49. An enterprise may choose to depreciate separately the parts of an item that do not have a cost that is significant in relation to the total cost of the item.

50. The depreciation charge for each period should be recognised in the statement of profit and loss unless it is included in the carrying amount of another asset.

51. The depreciation charge for a period is usually recognised in the statement of profit and loss. However, sometimes, the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the depreciation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the depreciation of manufacturing plant and equipment is included in the costs of conversion of inventories (see AS 2). Similarly, the depreciation of property, plant and equipment used for development activities may be included in the cost of an intangible asset recognised in accordance with AS 26, Intangible Assets.

Depreciable Amount and Depreciation Period

52. The depreciable amount of an asset should be allocated on a systematic basis over its useful life.

53. The residual value and the useful life of an asset should be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) should be accounted for as a change in an accounting estimate in accordance with AS 5, Net Profit or Loss for the Period, Prior Period Items and  Changes in Accounting Policies.

54. Depreciation is recognised even if the fair value of the asset exceeds its carrying amount, as long as the asset’s residual value does not exceed its carrying amount. Repair and maintenance of an asset do not negate the need to depreciate it.

55. The depreciable amount of an asset is determined after deducting its residual value.

56. The residual value of an asset may increase to an amount equal to or greater than its carrying amount. If it does, depreciation charge of the asset is zero unless and until its residual value subsequently decreases to an amount below its carrying amount.

57. Depreciation of an asset begins when it is available for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of the date that the asset is retired from active use and is held for disposal and the date that the asset is derecognised. Therefore, depreciation does not cease when the asset becomes idle or is retired from active use (but not held for disposal) unless the asset is fully depreciated. However, under usage methods of depreciation, the depreciation charge can be zero while there is no production.

58. The future economic benefits embodied in an asset are consumed by an enterprise principally through its use. However, other factors, such as technical or commercial obsolescence and wear and tear while an asset remains idle, often result in the diminution of the economic benefits that might have been obtained from the asset. Consequently, all the following factors are considered in determining the useful life of an asset:

(a) expected usage of the asset. Usage is assessed by reference to the expected capacity or physical output of the asset.

(b) expected physical wear and tear, which depends on operational factors such as the number of shifts for which the asset is to be used and the repair and maintenance programme, and the care and maintenance of the asset while idle.

(c) technical or commercial obsolescence arising from changes or improvements in production, or from a change in the market demand for the product or service output of the asset. Expected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of technical or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset.

(d) legal or similar limits on the use of the asset, such as the expiry dates of related leases.

59. The useful life of an asset is defined in terms of its expected utility to the enterprise. The asset management policy of the enterprise may involve the disposal of assets after a specified time or after consumption of a specified proportion of the future economic benefits embodied in the asset. Therefore, the useful life of an asset may be shorter than its economic life. The estimation of the useful life of the asset is a matter of judgement based on the experience of the enterprise with similar assets.

60. Land and buildings are separable assets and are accounted for separately, even when they are acquired together. With some exceptions, such as quarries and sites used for landfill, land has an unlimited useful life and therefore is not depreciated. Buildings have a limited useful life and therefore are depreciable assets. An increase in the value of the land on which a building stands does not affect the determination of the depreciable amount of the building.

61. If the cost of land includes the costs of site dismantlement, removal and restoration, that portion of the land asset is depreciated over the period of benefits obtained by incurring those costs. In some cases, the land itself may have a limited useful life, in which case it is depreciated in a manner that reflects the benefits to be derived from it.

Depreciation Method

62. The depreciation method used should reflect the pattern in which the future economic benefits of the asset are expected to be consumed by the enterprise.

63. The depreciation method applied to an asset should be reviewed at least at each financial year-end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method should be changed to reflect the changed pattern. Such a change should be accounted for as a change in an accounting estimate in accordance with AS 5.

64. A variety of depreciation methods can be used to allocate the depreciable amount of an asset on a systematic basis over its useful life. These methods include the straight-line method, the diminishing balance method and the units of production method. Straight-line depreciation results in a constant charge over the useful life if the residual value of the asset does not change. The diminishing balance method results in a decreasing charge over the useful life. The units of production method results in a charge based on the expected use or output. The enterprise selects the method that most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. That method is applied consistently from period to period unless there is a change in the expected pattern of consumption of those future economic benefits or that the method is changed in accordance with the statute to best reflect the way the asset is consumed.

65. A depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. The revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits of the asset. For example, revenue is affected by other inputs and processes, selling activities and changes in sales volumes and prices. The price component of revenue may be affected by inflation, which has no bearing upon the way in which an asset is consumed.

Changes in Existing Decommissioning, Restoration and Other Liabilities

66. The cost of property, plant and equipment may undergo changes subsequent to its acquisition or construction on account of changes in liabilities, price adjustments, changes in duties, changes in initial estimates of amounts provided for dismantling, removing, restoration and similar factors and included in the cost of the asset in accordance with paragraph 16. Such changes in cost should be accounted for in accordance with paragraphs 67–68 below.

67. If the related asset is measured using the cost model:

(a) subject to (b), changes in the liability should be added to, or deducted from, the cost of the related asset in the current period.

(b) the amount deducted from the cost of the asset should not exceed its carrying amount. If a decrease in the liability exceeds the carrying amount of the asset, the excess should be recognised immediately in the statement of profit and loss.

 (c) if the adjustment results in an addition to the cost of an asset, the enterprise should consider whether this is an indication that the new carrying amount of the asset may not be fully recoverable. If it is such an indication, the enterprise should test the asset for impairment by estimating its recoverable amount, and should account for any impairment loss, in accordance with AS 28.

68. If the related asset is measured using the revaluation model:

(a) changes in the liability alter the revaluation surplus or deficit previously recognised on that asset, so that:

(i) a decrease in the liability should (subject to (b)) be credited directly to revaluation surplus in the owners’ interest, except that it should be recognised in the statement of profit and loss to the extent that it reverses a revaluation deficit on the asset that was previously recognised in the statement of profit and loss;

(ii) an increase in the liability should be recognised in the statement of profit and loss, except that it should be debited directly to revaluation surplus in the owners’ interest to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

(b) in the event that a decrease in the liability exceeds the carrying amount that would have been recognised had the asset been carried under the cost model, the excess should be recognised immediately in the statement of profit and loss.

(c) a change in the liability is an indication that the asset may have to be revalued in order to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date. Any such revaluation should be taken into account in determining the amounts to be taken to the statement of profit and loss and the owners’ interest under (a). If a revaluation is necessary, all assets of that class should be revalued.

69. The adjusted depreciable amount of the asset is depreciated over its useful life. Therefore, once the related asset has reached the end of its useful life, all subsequent changes in the liability should be recognised in the statement of profit and loss as they occur. This applies under both the cost model and the revaluation model.

Impairment

70. To determine whether an item of property, plant and equipment is impaired, an enterprise applies AS 28, Impairment of Assets. AS 28 explains how an enterprise reviews the carrying amount of its assets, how it determines the recoverable amount of an asset, and when it recognises, or reverses the recognition of, an impairment loss.

Compensation for Impairment

71. Compensation from third parties for items of property, plant and equipment that were impaired, lost or given up should be included in the statement of profit and loss when the compensation becomes receivable.

72. Impairments or losses of items of property, plant and equipment, related claims for or payments of compensation from third parties and any subsequent purchase or construction of replacement assets are separate economic events and are accounted for separately as follows:

(a) impairments of items of property, plant and equipment are recognised in accordance with AS 28;

(b) derecognition of items of property, plant and equipment retired or disposed of is determined in accordance with this Standard;

(c) compensation from third parties for items of property, plant and equipment that were impaired, lost or given up is included in determining profit or loss when it becomes receivable; and

(d) the cost of items of property, plant and equipment restored, purchased or constructed as replacements is determined in accordance with this Standard.

Retirements

73. Items of property, plant and equipment retired from active use and held for disposal should be stated at the lower of their carrying amount and net realisable value. Any write-down in this regard should be recognised immediately in the statement of profit and loss.

Derecognition

74. The carrying amount of an item of property, plant and equipment should be derecognised

(a) on disposal; or

(b) when no future economic benefits are expected from its use or disposal.

75. The gain or loss arising from the derecognition of an item of property, plant and equipment should be included in the statement of profit and loss when the item is derecognised (unless AS 19, Leases, requires otherwise on a sale and leaseback). Gains should not be classified as revenue, as defined in AS 9, Revenue Recognition.

76. However, an enterprise that in the course of its ordinary activities, routinely sells items of property, plant and equipment that it had held for rental to others should transfer such assets to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of such assets should be recognised in revenue in accordance with AS 9, Revenue Recognition.

77. The disposal of an item of property, plant and equipment may occur in a variety of ways (e.g. by sale, by entering into a finance lease or by donation). In determining the date of disposal of an item, an enterprise applies the criteria in AS 9 for recognising revenue from the sale of goods. AS 19, Leases, applies to disposal by a sale and leaseback.

78. If, under the recognition principle in paragraph 7, an enterprise recognises in the carrying amount of an item of property, plant and equipment the cost of a replacement for part of the item, then it derecognises the carrying amount of the replaced part regardless of whether the replaced part had been depreciated separately. If it is not practicable for an enterprise to determine the carrying amount of the replaced part, it may use the cost of the replacement as an indication of what the cost of the replaced part was at the time it was acquired or constructed.

79. The gain or loss arising from the derecognition of an item of property, plant and equipment should be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

80. The consideration receivable on disposal of an item of property, plant and equipment is recognised in accordance with the principles enunciated in AS 9.

Disclosure

81. The financial statements should disclose, for each class of property, plant and equipment:

(a) the measurement bases (i.e., cost model or revaluation model) used for determining the gross carrying amount;

(b) the depreciation methods used;

(c) the useful lives or the depreciation rates used. In case the useful lives or the depreciation rates used are different from those specified in the statute governing the enterprise, it should make a specific mention of that fact;

(d) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period; and

(e) a reconciliation of the carrying amount at the beginning and end of the period showing:

(i) additions;

(ii) assets retired from active use and held for disposal;

(iii) acquisitions through business combinations ;

(iv) increases or decreases resulting from revaluations under paragraphs 34, 42 and 43 and from impairment losses recognised or reversed directly in revaluation surplus in accordance with AS 28;

(v) impairment losses recognised in the statement of profit and loss in accordance with AS 28;

(vi) impairment losses reversed in the statement of profit and loss in accordance with AS 28;

(vii) depreciation;

(viii) the net exchange differences arising on the translation of the financial statements of a non-integral foreign operation in accordance with AS 11, The Effects of Changes in Foreign Exchange Rates; and

(ix) other changes.

82. The financial statements should also disclose:

(a) the existence and amounts of restrictions on title, and property, plant and equipment pledged as security for liabilities;

(b) the amount of expenditure recognised in the carrying amount of an item of property, plant and equipment in the course of its construction;

(c) the amount of contractual commitments for the acquisition of property, plant and equipment;

(d) if it is not disclosed separately on the face of the statement of profit and loss, the amount of compensation from third parties for items of property, plant and equipment that were impaired, lost or given up that is included in the statement of profit and loss; and

(e) the amount of assets retired from active use and held for disposal.

83. Selection of the depreciation method and estimation of the useful life of assets are matters of judgement. Therefore, disclosure of the methods adopted and the estimated useful lives or depreciation rates provides users of financial statements with information that allows them to review the policies selected by management and enables comparisons to be made with other enterprises. For similar reasons, it is necessary to disclose:

(a) depreciation, whether recognised in the statement of profit and loss or as a part of the cost of other assets, during a period; and

(b) accumulated depreciation at the end of the period.

84. In accordance with AS 5, an enterprise discloses the nature and effect of a change in an accounting estimate that has an effect in the current period or is expected to have an effect in subsequent periods. For property, plant and equipment, such disclosure may arise from changes in estimates with respect to:

(a) residual values;

(b) the estimated costs of dismantling, removing or restoring items of property, plant and equipment;

(c) useful lives; and

(d) depreciation methods.

85. If items of property, plant and equipment are stated at revalued amounts, the following should be disclosed:

(a) the effective date of the revaluation;

(b) whether an independent valuer was involved;

(c) the methods and significant assumptions applied in estimating fair values of the items;

(d) the extent to which fair values of the items were determined directly by reference to observable prices in an active market or recent market transactions on arm’s length terms or were estimated using other valuation techniques; and

(e) the revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance to shareholders.

86. In accordance with AS 28, an enterprise discloses information on impaired property, plant and equipment in addition to the information required by paragraph 81 (e), (iv), (v) and (vi).

87. An enterprise is encouraged to disclose the following:

(a) the carrying amount of temporarily idle property, plant and equipment;

(b) the gross carrying amount of any fully depreciated property, plant and equipment that is still in use;

(c) for each revalued class of property, plant and equipment, the carrying amount that would have been recognised had the assets been carried under the cost model;

(d) the carrying amount of property, plant and equipment retired from active use and not held for disposal.

Transitional Provisions

88. Where an entity has in past recognized an expenditure in the statement of profit and loss which is eligible to be included as a part of the cost of a project for construction of property, plant and equipment in accordance with the requirements of paragraph 9, it may do so retrospectively for such a project. The effect of such retrospective application of this requirement, should be recognised net-of-tax in revenue reserves.

89. The requirements of paragraphs 26-28 regarding the initial measurement of an item of property, plant and equipment acquired in an exchange of assets transaction should be applied prospectively only to transactions entered into after this Standard becomes mandatory.

90. On the date of this Standard becoming mandatory, the spare parts, which hitherto were being treated as inventory under AS 2, Valuation of Inventories, and are now required to be capitalised in accordance with the requirements of this Standard, should be capitalised at their respective carrying amounts. The spare parts so capitalised should be depreciated over their remaining useful lives prospectively as per the requirements of this Standard.

91. The requirements of paragraph 32 and paragraphs 34 – 44 regarding the revaluation model should be applied prospectively. In case, on the date of this Standard becoming mandatory, an enterprise does not adopt the revaluation model as its accounting policy but the carrying amount of item(s) of property, plant and equipment reflects any previous revaluation it should adjust the amount outstanding in the revaluation reserve against the carrying amount of that item. However, the carrying amount of that item should never be less than residual value. Any excess of the amount outstanding as revaluation reserve over the carrying amount of that item should be adjusted in revenue reserves”.

9. In the principal rules, in the “ANNEXURE”, under the heading “ACCOUNTING STANDARDS”, for Accounting Standard (AS) 13, the following Accounting Standard shall be substituted, namely:-

“Accounting Standard (AS) 13

Accounting for Investments

(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the General Instructions contained in part A of the Annexure to the Notification.)

Introduction

1. This Standard deals with accounting for investments in the financial statements of enterprises and related disclosure requirements.2

2. This Standard does not deal with:

(a) the bases for recognition of interest, dividends and rentals earned on investments which are covered by Accounting Standard 9 on Revenue Recognition;

(b) operating or finance leases;

(c) investments of retirement benefit plans and life insurance enterprises; and

(d) mutual funds and venture capital funds and/or the related asset management companies, banks and public financial institutions formed under a Central or State Government Act or so declared under the Companies Act, 2013.

Definitions

3. The following terms are used in this Standard with the meanings assigned:

3.1 Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not ‘investments’.

3.2 A current investment is an investment that is by its nature readily realisable and is intended to be held for not more than one year from the date on which such investment is made.

3.3 A long term investment is an investment other than a current investment.

3.4 An investment property is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise.

3.5 Fair value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction. Under appropriate circumstances, market value or net realisable value provides an evidence of fair value.

3.6 Market value is the amount obtainable from the sale of an investment in an open market, net of expenses necessarily to be incurred on or before disposal.

Explanation

Forms of Investments

4. Enterprises hold investments for diverse reasons. For some enterprises, investment activity is a significant element of operations, and assessment of the performance of the enterprise may largely, or solely, depend on the reported results of this activity.

5. Some investments have no physical existence and are represented merely by certificates or similar documents (e.g., shares) while others exist in a physical form (e.g., buildings). The nature of an investment may be that of a debt, other than a short or long term loan or a trade debt, representing a monetary amount owing to the holder and usually bearing interest; alternatively, it may be a stake in the results and net assets of an enterprise such as an equity share. Most investments represent financial rights, but some are tangible, such as certain investments in land or buildings.

6. For some investments, an active market exists from which a market value can be established. For such investments, market value generally provides the best evidence of fair value. For other investments, an active market does not exist and other means are used to determine fair value.

Classification of Investments

7. Enterprises present financial statements that classify fixed assets, investments and current assets into separate categories. Investments are classified as long term investments and current investments. Current investments are in the nature of current assets, although the common practice may be to include them in investments.3

8. Investments other than current investments are classified as long term investments, even though they may be readily marketable.

Cost of Investments

9. The cost of an investment includes acquisition charges such as brokerage, fees and duties.

10. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued (which, in appropriate cases, may be indicated by the issue price as determined by statutory authorities). The fair value may not necessarily be equal to the nominal or par value of the securities issued.

11. If an investment is acquired in exchange, or part exchange, for another asset, the acquisition cost of the investment is determined by reference to the fair value of the asset given up. It may be appropriate to consider the fair value of the investment acquired if it is more clearly evident.

12. Interest, dividends and rentals receivables in connection with an investment are generally regarded as income, being the return on the investment. However, in some circumstances, such inflows represent a recovery of cost and do not form part of income. For example, when unpaid interest has accrued before the acquisition of an interest-bearing investment and is therefore included in the price paid for the investment, the subsequent receipt of interest is allocated between pre-acquisition and post-acquisition periods; the preacquisition portion is deducted from cost. When dividends on equity are declared from pre-acquisition profits, a similar treatment may apply. If it is difficult to make such an allocation except on an arbitrary basis, the cost of investment is normally reduced by dividends receivable only if they clearly represent a recovery of a part of the cost.

13. When right shares offered are subscribed for, the cost of the right shares is added to the carrying amount of the original holding. If rights are not subscribed for but are sold in the market, the sale proceeds are taken to the profit and loss statement. However, where the investments are acquired on cum-right basis and the market value of investments immediately after their becoming ex-right is lower than the cost for which they were acquired, it may be appropriate to apply the sale proceeds of rights to reduce the carrying amount of such investments to the market value.

Carrying Amount of Investments

Current Investments

14. The carrying amount for current investments is the lower of cost and fair value. In respect of investments for which an active market exists, market value generally provides the best evidence of fair value. The valuation of current investments at lower of cost and fair value provides a prudent method of determining the carrying amount to be stated in the balance sheet.

15. Valuation of current investments on overall (or global) basis is not considered appropriate. Sometimes, the concern of an enterprise may be with the value of a category of related current investments and not with each individual investment, and accordingly the investments may be carried at the lower of cost and fair value computed categorywise (i.e. equity shares, preference shares, convertible debentures, etc.). However, the more prudent and appropriate method is to carry investments individually at the lower of cost and fair value.

16. For current investments, any reduction to fair value and any reversals of such reductions are included in the profit and loss statement.

Long-term Investments

17. Long-term investments are usually carried at cost. However, when there is a decline, other than temporary, in the value of a long term investment, the carrying amount is reduced to recognise the decline. Indicators of the value of an investment are obtained by reference to its market value, the investee’s assets and results and the expected cash flows from the investment. The type and extent of the investor’s stake in the investee are also taken into account. Restrictions on distributions by the investee or on disposal by the investor may affect the value attributed to the investment.

18. Long-term investments are usually of individual importance to the investing enterprise. The carrying amount of long-term investments is therefore determined on an individual investment basis.

19. Where there is a decline, other than temporary, in the carrying amounts of long term investments, the resultant reduction in the carrying amount is charged to the profit and loss statement. The reduction in carrying amount is reversed when there is a rise in the value of the investment, or if the reasons for the reduction no longer exist.

Investment Properties

20. An investment property is accounted for in accordance with cost model as prescribed in Accounting Standard (AS) 10, Property, Plant and Equipment. The cost of any shares in a co-operative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property.

Disposal of Investments

21. On disposal of an investment, the difference between the carrying amount and the disposal proceeds, net of expenses, is recognised in the profit and loss statement.

22. When disposing of a part of the holding of an individual investment, the carrying amount to be allocated to that part is to be determined on the basis of the average carrying amount of the total holding of the investment.4

Reclassification of Investments

23. Where long-term investments are reclassified as current investments, transfers are made at the lower of cost and carrying amount at the date of transfer.

24. Where investments are reclassified from current to long-term, transfers are made at the lower of cost and fair value at the date of transfer.

Disclosure

25. The following disclosures in financial statements in relation to investments are appropriate:-

(a) the accounting policies for the determination of carrying amount of investments;

(b) the amounts included in profit and loss statement for:

(i) interest, dividends (showing separately dividends from subsidiary companies*), and rentals on investments showing separately such income from long term and current investments. Gross income should be stated, the amount of income tax deducted at source being included under Advance Taxes Paid;

(ii) profits and losses on disposal of current investments and changes in carrying amount of such investments;

(iii) profits and losses on disposal of long-term investments and changes in the carrying amount of such investments;

(c) significant restrictions on the right of ownership, realisability of investments or the remittance of income and proceeds of disposal;

(d) the aggregate amount of quoted and unquoted investments, giving the aggregate market value of quoted investments;

(e) other disclosures as specifically required by the relevant statute governing the enterprise.

Main Principles

Classification of Investments

26. An enterprise should disclose current investments and long-term investments distinctly in its financial statements.

27. Further classification of current and long-term investments should be as specified in the statute governing the enterprise. In the absence of a statutory requirement, such further classification should disclose, where applicable, investments in:

(a) Government or Trust securities

(b) Shares, debentures or bonds

(c) Investment properties

(d) Others-specifying nature.

Cost of Investments

28. The cost of an investment should include acquisition charges such as brokerage, fees and duties.

29. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost should be the fair value of the securities issued (which in appropriate cases may be indicated by the issue price as determined by statutory authorities). The fair value may not necessarily be equal to the nominal or par value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition cost of the investment should be determined by reference to the fair value of the asset given up. Alternatively, the acquisition cost of the investment may be determined with reference to the fair value of the investment acquired if it is more clearly evident.

Investment Properties

30. An enterprise holding investment properties should account for them in accordance with cost model as prescribed in AS 10, Property, Plant and Equipment.

Carrying Amount of Investments

31. Investments classified as current investments should be carried in the financial statements at the lower of cost and fair value determined either on an individual investment basis or by category of investment, but not on an overall (or global) basis.

32. Investments classified as long term investments should be carried in the financial statements at cost. However, provision for diminution shall be made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

Changes in Carrying Amounts of Investments

33. Any reduction in the carrying amount and any reversals of such reductions should be charged or credited to the profit and loss statement.

Disposal of Investments

34. On disposal of an investment, the difference between the carrying amount and net disposal proceeds should be charged or credited to the profit and loss statement.

Disclosure

35. The following information should be disclosed in the financial statements:

(a) the accounting policies for determination of carrying amount of investments;

(b) classification of investments as specified in paragraphs 26 and 27 above;

(c) the amounts included in profit and loss statement for:

(i) interest, dividends (showing separately dividends from subsidiary companies), and rentals on investments showing separately such income from long term and current investments. Gross income should be stated, the amount of income tax deducted at source being included under Advance Taxes Paid;

(ii) profits and losses on disposal of current investments and changes in the carrying amount of such investments; and

(iii) profits and losses on disposal of long term investments and changes in the carrying amount of such investments;

(d) significant restrictions on the right of ownership, realisability of investments or the remittance of income and proceeds of disposal;

(e) the aggregate amount of quoted and unquoted investments, giving the aggregate market value of quoted investments;

(f) other disclosures as specifically required by the relevant statute governing the enterprise”.

10. In the principal rules, in the “ANNEXURE”, under the heading “ACCOUNTING STANDARDS”, for Accounting Standard (AS) 14, the following Accounting Standard shall be substituted, namely:-

Accounting Standard (AS) 14

Accounting for Amalgamations

(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the General Instructions contained in part A of the Annexure to the Notification.)

Introduction

1. This standard deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves. This standard is directed principally to companies although some of its requirements also apply to financial statements of other enterprises.

2. This standard does not deal with cases of acquisitions which arise when there is a purchase by one company (referred to as the acquiring company) of the whole or part of the shares, or the whole or part of the assets, of another company (referred to as the acquired company) in consideration for payment in cash or by issue of shares or other securities in the acquiring company or partly in one form and partly in the other. The distinguishing feature of an acquisition is that the acquired company is not dissolved and its separate entity continues to exist.

Definitions

3. The following terms are used in this standard with the meanings specified:

(a) Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 2013 or any other statute which may be applicable to companies and includes ‘merger’.

(b) Transferor company means the company which is amalgamated into another company.

(c) Transferee company means the company into which a transferor company is amalgamated.

(d) Reserve means the portion of earnings, receipts or other surplus of an enterprise (whether capital or revenue) appropriated by the management for a general or a specific purpose other than a provision for depreciation or diminution in the value of assets or for a known liability.

(e) Amalgamation in the nature of merger is an amalgamation which satisfies all the following conditions.

(i) All the assets and liabilities of the transferor company become, after amalgamation, the assets and liabilities of the transferee company.

(ii) Share holders holding not less than 90% of the face value of the equity shares of the transferor company (other than the equity shares already held therein, immediately before the amalgamation, by the transferee company or its subsidiaries* or their nominees) become equity shareholders of the transferee company by virtue of the amalgamation.

(iii) The consideration for the amalgamation receivable by those equity shareholders of the transferor company who agree to become equity shareholders of the transferee company is discharged by the transferee company wholly by the issue of equity shares in the transferee company, except that cash may be paid in respect of any fractional shares.

(iv) The business of the transferor company is intended to be carried on, after the amalgamation, by the transferee company.

(v) No adjustment is intended to be made to the book values of the assets and liabilities of the transferor company when they are incorporated in the financial statements of the transferee company except to ensure uniformity of accounting policies.

(f) Amalgamation in the nature of purchase is an amalgamation which does not satisfy any one or more of the conditions specified in sub-paragraph (e) above.

(g) Consideration for the amalgamation means the aggregate of the shares and other securities issued and the payment made in the form of cash or other assets by the transferee company to the shareholders of the transferor company.

(h) Fair value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction.

(i) Pooling of interests is a method of accounting for amalgamations the object of which is to account for the amalgamation as if the separate businesses of the amalgamating companies were intended to be continued by the transferee company. Accordingly, only minimal changes are made in aggregating the individual financial statements of the amalgamating companies.

Explanation

Types of Amalgamations

4. Generally speaking, amalgamations fall into two broad categories. In the first category are those amalgamations where there is a genuine pooling not merely of the assets and liabilities of the amalgamating companies but also of the shareholders’ interests and of the businesses of these companies. Such amalgamations are amalgamations which are in the nature of ‘merger’ and the accounting treatment of such amalgamations should ensure that the resultant figures of assets, liabilities, capital and reserves more or less represent the sum of the relevant figures of the amalgamating companies. In the second category are those amalgamations which are in effect a mode by which one company acquires another company and, as a consequence, the shareholders of the company which is acquired normally do not continue to have a proportionate share in the equity of the combined company, or the business of the company which is acquired is not intended to be continued. Such amalgamations are amalgamations in the nature of ‘purchase’.

5. An amalgamation is classified as an ‘amalgamation in the nature of merger’ when all the conditions listed in paragraph 3(e) are satisfied. There are, however, differing views regarding the nature of any further conditions that may apply. Some believe that, in addition to an exchange of equity shares, it is necessary that the shareholders of the transferor company obtain a substantial share in the transferee company even to the extent that it should not be possible to identify any one party as dominant therein. This belief is based in part on the view that the exchange of control of one company for an insignificant share in a larger company does not amount to a mutual sharing of risks and benefits.

6. Others believe that the substance of an amalgamation in the nature of merger is evidenced by meeting certain criteria regarding the relationship of the parties, such as the former independence of the amalgamating companies, the manner of their amalgamation, the absence of planned transactions that would undermine the effect of the amalgamation, and the continuing participation by the management of the transferor company in the management of the transferee company after the amalgamation.

Methods of Accounting for Amalgamations

7. There are two main methods of accounting for amalgamations:

(a) the pooling of interests method; and

(b) the purchase method.

8. The use of the pooling of interests method is confined to circumstances which meet the criteria referred to in paragraph 3(e) for an amalgamation in the nature of merger.

9. The object of the purchase method is to account for the amalgamation by applying the same principles as are applied in the normal purchase of assets. This method is used in accounting for amalgamations in the nature of purchase.

The Pooling of Interests Method

10. Under the pooling of interests method, the assets, liabilities and reserves of the transferor company are recorded by the transferee company at their existing carrying amounts (after making the adjustments required in paragraph 11).

11. If, at the time of the amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies is adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies are reported in accordance with Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.

The Purchase Method

12. Under the purchase method, the transferee company accounts for the amalgamation either by incorporating the assets and liabilities at their existing carrying amounts or by allocating the consideration to individual identifiable assets and liabilities of the transferor company on the basis of their fair values at the date of amalgamation. The identifiable assets and liabilities may include assets and liabilities not recorded in the financial statements of the transferor company.

13. Where assets and liabilities are restated on the basis of their fair values, the determination of fair values may be influenced by the intentions of the transferee company. For example, the transferee company may have a specialised use for an asset, which is not available to other potential buyers. The transferee company may intend to effect changes in the activities of the transferor company which necessitate the creation of specific provisions for the expected costs, e.g. planned employee termination and plant relocation costs.

Consideration

14. The consideration for the amalgamation may consist of securities, cash or other assets. In determining the value of the consideration, an assessment is made of the fair value of its elements. A variety of techniques is applied in arriving at fair value. For example, when the consideration includes securities, the value fixed by the statutory authorities may be taken to be the fair value. In case of other assets, the fair value may be determined by reference to the market value of the assets given up. Where the market value of the assets given up cannot be reliably assessed, such assets may be valued at their respective net book values.

15. Many amalgamations recognise that adjustments may have to be made to the consideration in the light of one or more future events. When the additional payment is probable and can reasonably be estimated at the date of amalgamation, it is included in the calculation of the consideration. In all other cases, the adjustment is recognised as soon as the amount is determinable [see Accounting Standard (AS) 4, Contingencies and Events Occurring After the Balance Sheet Date].

Treatment of Reserves on Amalgamation

16. If the amalgamation is an ‘amalgamation in the nature of merger’, the identity of the reserves is preserved and they appear in the financial statements of the transferee company in the same form in which they appeared in the financial statements of the transferor company. Thus, for example, the General Reserve of the transferor company becomes the General Reserve of the transferee company, the Capital Reserve of the transferor company becomes the Capital Reserve of the transferee company and the Revaluation Reserve of the transferor company becomes the Revaluation Reserve of the transferee company. As a result of preserving the identity, reserves which are available for distribution as dividend before the amalgamation would also be available for distribution as dividend after the amalgamation. The difference between the amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) and the amount of share capital of the transferor company is adjusted is reserves in the financial statements of the transferee company.

17. If the amalgamation is an ‘amalgamation in the nature of purchase’, the identity of the reserves, other than the statutory reserves dealt with in paragraph 18, is not preserved. The amount of the consideration is deducted from the value of the net assets of the transferor company acquired by the transferee company. If the result of the computation is negative, the difference is debited to goodwill arising on amalgamation and dealt with in the manner stated in paragraphs 19-20. If the result of the computation is positive, the difference is credited to Capital Reserve.

18. Certain reserves may have been created by the transferor company pursuant to the requirements of, or to avail of the benefits under, the Income-tax Act, 1961; for example, Development Allowance Reserve, or Investment Allowance Reserve. The Act requires that the identity of the reserves should be preserved for a specified period. Likewise, certain other reserves may have been created in the financial statements of the transferor company in terms of the requirements of other statutes. Though, normally, in an amalgamation in the nature of purchase, the identity of reserves is not preserved, an exception is made in respect of reserves of the aforesaid nature (referred to hereinafter as ‘statutory reserves’) and such reserves retain their identity in the financial statements of the transferee company in the same form in which they appeared in the financial statements of the transferor company, so long as their identity is required to be maintained to comply with the relevant statute. This exception is made only in those amalgamations where the requirements of the relevant statute for recording the statutory reserves in the books of the transferee company are complied with. In such cases the statutory reserves are recorded in the financial statements of the transferee company by a corresponding debit to a suitable account head (e.g., ‘Amalgamation Adjustment Reserve’) which is presented as a separate line item. When the identity of the statutory reserves is no longer required to be maintained, both the reserves and the aforesaid account are reversed.

Treatment of Goodwill Arising on Amalgamation

19. Goodwill arising on amalgamation represents a payment made in anticipation of future income and it is appropriate to treat it as an asset to be amortised to income on a systematic basis over its useful life. Due to the nature of goodwill, it is frequently difficult to estimate its useful life with reasonable certainty. Such estimation is, therefore, made on a prudent basis. Accordingly, it is considered appropriate to amortise goodwill over a period not exceeding five years unless a somewhat longer period can be justified.

20. Factors which may be considered in estimating the useful life of goodwill arising on amalgamation include:

(a) the foreseeable life of the business or industry;

(b) the effects of product obsolescence, changes in demand and other economic factors;

(c) the service life expectancies of key individuals or groups of employees;

(d) expected actions by competitors or potential competitors; and

(e) legal, regulatory or contractual provisions affecting the useful life.

Balance of Profit and Loss Account

21. In the case of an ‘amalgamation in the nature of merger’, the balance of the Profit and Loss Account appearing in the financial statements of the transferor company is aggregated with the corresponding balance appearing in the financial statements of the transferee company. Alternatively, it is transferred to the General Reserve, if any.

22. In the case of an ‘amalgamation in the nature of purchase’, the balance of the Profit and Loss Account appearing in the financial statements of the transferor company, whether debit or credit, loses its identity.

Treatment of Reserves Specified in A Scheme of Amalgamation

23.* The scheme of amalgamation sanctioned under the provisions of the Companies Act, 1956 or any other statute may prescribe the treatment to be given to the reserves of the transferor company after its amalgamation. Where the treatment is so prescribed, the same is followed. In some cases, the scheme of amalgamation sanctioned under a statute may prescribe a different treatment to be given to the reserves of the transferor company after amalgamation as compared to the requirements of this Standard that would have been followed had no treatment been prescribed by the scheme. In such cases, the following disclosures are made in the first financial statements following the amalgamation:

(a) A description of the accounting treatment given to the reserves and the reasons for following the treatment different from that prescribed in this Standard.

(b) Deviations in the accounting treatment given to the reserves as prescribed by the scheme of amalgamation sanctioned under the statute as compared to the requirements of this Standard that would have been followed had no treatment been prescribed by the scheme.

(c) The financial effect, if any, arising due to such deviation.

Disclosure

24. For all amalgamations, the following disclosures are considered appropriate in the first financial statements following the amalgamation:

(a) names and general nature of business of the amalgamating companies;

(b) effective date of amalgamation for accounting purposes;

(c) the method of accounting used to reflect the amalgamation; and

(d) particulars of the scheme sanctioned under a statute.

25. For amalgamations accounted for under the pooling of interests method, the following additional disclosures are considered appropriate in the first financial statements following the amalgamation:

(a) description and number of shares issued, together with the percentage of each company’s equity shares exchanged to effect the amalgamation;

(b) the amount of any difference between the consideration and the value of net identifiable assets acquired, and the treatment thereof.

26. For amalgamations accounted for under the purchase method, the following additional disclosures are considered appropriate in the first financial statements following the amalgamation:

(a) consideration for the amalgamation and a description of the consideration paid or contingently payable; and

(b) the amount of any difference between the consideration and the value of net identifiable assets acquired, and the treatment thereof including the period of amortisation of any goodwill arising on amalgamation.

Amalgamation after the Balance Sheet Date

27. When an amalgamation is effected after the balance sheet date but before the issuance of the financial statements of either party to the amalgamation, disclosure is made in accordance with AS 4, ‘Contingencies and Events Occurring After the Balance Sheet Date’, but the amalgamation is not incorporated in the financial statements. In certain circumstances, the amalgamation may also provide additional information affecting the financial statements themselves, for instance, by allowing the going concern assumption to be maintained.

Main Principles

28. An amalgamation may be either –

(a) an amalgamation in the nature of merger, or

(b) an amalgamation in the nature of purchase.

29. An amalgamation should be considered to be an amalgamation in the nature of merger when all the following conditions are satisfied:

(i) All the assets and liabilities of the transferor company become, after amalgamation, the assets and liabilities of the transferee company.

(ii) Shareholders holding not less than 90% of the face value of the equity shares of the transferor company (other than the equity shares already held therein, immediately before the amalgamation, by the transferee company or its subsidiaries or their nominees) become equity shareholders of the transferee company by virtue of the amalgamation.

(iii) The consideration for the amalgamation receivable by those equity shareholders of the transferor company who agree to become equity shareholders of the transferee company is discharged by the transferee company wholly by the issue of equity shares in the transferee company, except that cash may be paid in respect of any fractional shares.

(iv) The business of the transferor company is intended to be carried on, after the amalgamation, by the transferee company.

(v) No adjustment is intended to be made to the book values of the assets and liabilities of the transferor company when they are incorporated in the financial statements of the transferee company except to ensure uniformity of accounting policies.

30. An amalgamation should be considered to be an amalgamation in the nature of purchase, when any one or more of the conditions specified in paragraph 29 is not satisfied.

31. When an amalgamation is considered to be an amalgamation in the nature of merger, it should be accounted for under the pooling of interests method described in paragraphs 33–35.

32. When an amalgamation is considered to be an amalgamation in the nature of purchase, it should be accounted for under the purchase method described in paragraphs 36–39.

The Pooling of Interests Method

33. In preparing the transferee company’s financial statements, the assets, liabilities and reserves (whether capital or revenue or arising on revaluation) of the transferor company should be recorded at their existing carrying amounts and in the same form as at the date of the amalgamation. The balance of the Profit and Loss Account of the transferor company should be aggregated with the corresponding balance of the transferee company or transferred to the General Reserve, if any.

34. If, at the time of the amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies should be adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies should be reported in accordance with Accounting Standard (AS) 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.

35. The difference between the amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) and the amount of share capital of the transferor company should be adjusted in reserves.

The Purchase Method

36. In preparing the transferee company’s financial statements, the assets and liabilities of the transferor company should be incorporated at their existing carrying amounts or, alternatively, the consideration should be allocated to individual identifiable assets and liabilities on the basis of their fair values at the date of amalgamation. The reserves (whether capital or revenue or arising on revaluation) of the transferor company, other than the statutory reserves, should not be included in the financial statements of the transferee company except as stated in paragraph 39.

37. Any excess of the amount of the consideration over the value of the net assets of the transferor company acquired by the transferee company should be recognised in the transferee company’s financial statements as goodwill arising on amalgamation. If the amount of the consideration is lower than the value of the net assets acquired, the difference should be treated as Capital Reserve.

38. The goodwill arising on amalgamation should be amortised to income on a systematic basis over its useful life. The amortisation period should not exceed five years unless a somewhat longer period can be justified.

39. Where the requirements of the relevant statute for recording the statutory reserves in the books of the transferee company are complied with, statutory reserves of the transferor company should be recorded in the financial statements of the transferee company. The corresponding debit should be given to a suitable account head (e.g., ‘Amalgamation Adjustment Reserve’) which should be presented as a separate line item. When the identity of the statutory reserves is no longer required to be maintained, both the reserves and the aforesaid account should be reversed.

Common Procedures

40. The consideration for the amalgamation should include any noncash element at fair value. In case of issue of securities, the value fixed by the statutory authorities may be taken to be the fair value. In case of other assets, the fair value may be determined by reference to the market value of the assets given up. Where the market value of the assets given up cannot be reliably assessed, such assets may be valued at their respective net book values.

41. Where the scheme of amalgamation provides for an adjustment to the consideration contingent on one or more future events, the amount of the additional payment should be included in the consideration if payment is probable and a reasonable estimate of the amount can be made. In all other cases, the adjustment should be recognised as soon as the amount is determinable [see Accounting Standard  (AS) 4, Contingencies and Events Occurring After the Balance Sheet Date].

Treatment of Reserves Specified in A Scheme of Amalgamation

42.* Where the scheme of amalgamation sanctioned under a statute prescribes the treatment to be given to the reserves of the transferor company after amalgamation, the same should be followed. Where the scheme of amalgamation sanctioned under a statute prescribes a different treatment to be given to the reserves of the transferor company after amalgamation as compared to the requirements of this Standard that would have been followed had no treatment been prescribed by the scheme, the following disclosures should be made in the first financial statements following the amalgamation:

(a) A description of the accounting treatment given to the reserves and the reasons for following the treatment different from that prescribed in this Standard.

(b) Deviations in the accounting treatment given to the reserves as prescribed by the scheme of amalgamation sanctioned under the statute as compared to the requirements of this Standard that would have been followed had no treatment been prescribed by the scheme.

(c) The financial effect, if any, arising due to such deviation.

Disclosure

43. For all amalgamations, the following disclosures should be made in the first financial statements following the amalgamation:

(a) names and general nature of business of the amalgamating companies;

(b) effective date of amalgamation for accounting purposes;

(c) the method of accounting used to reflect the amalgamation; and

(d) particulars of the scheme sanctioned under a statute.

44. For amalgamations accounted for under the pooling of interests method, the following additional disclosures should be made in the first financial statements following the amalgamation:

(a) description and number of shares issued, together with the percentage of each company’s equity shares exchanged to effect the amalgamation;

(b) the amount of any difference between the consideration and the value of net identifiable assets acquired, and the treatment thereof.

45. For amalgamations accounted for under the purchase method, the following additional disclosures should be made in the first financial statements following the amalgamation:

(a) consideration for the amalgamation and a description of the consideration paid or contingently payable; and

(b) the amount of any difference between the consideration and the value of net identifiable assets acquired, and the treatment thereof including the period of amortisation of any goodwill arising on amalgamation.

Amalgamation after the Balance Sheet Date

46. When an amalgamation is effected after the balance sheet date but before the issuance of the financial statements of either party to the amalgamation, disclosure should be made in accordance with 4, ‘Contingencies and Events Occurring After the Balance Sheet Date’, but the amalgamation should not be incorporated in the financial statements. In certain circumstances, the amalgamation may also provide additional information affecting the financial statements themselves, for instance, by allowing the going concern assumption to be maintained”.

11. In the principal rules, in the “ANNEXURE”, under the heading “ACCOUNTING STANDARDS”, for Accounting Standard (AS) 21, the following Accounting Standard shall be substituted, namely:-

“Accounting Standard (AS) 21

Consolidated Financial Statements5

(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of its objective and the General Instructions contained in part A of the Annexure to the Notification.)

Objective

The objective of this Standard is to lay down principles and procedures for preparation and presentation of consolidated financial statements. Consolidated financial statements are presented by a parent (also known as holding enterprise) to provide financial information about the economic activities of its group. These statements are intended to present financial information about a parent and its subsidiary (ies) as a single economic entity to show the economic resources controlled by the group, the obligations of the group and results the group achieves with its resources.

Scope

1. This Standard should be applied in the preparation and presentation of consolidated financial statements for a group of enterprises under the control of a parent.

2. This Standard should also be applied in accounting for investments in subsidiaries in the separate financial statements of a parent.

3. In the preparation of consolidated financial statements, other Accounting Standards also apply in the same manner as they apply to the separate statements.

4. This Standard does not deal with:

(a) methods of accounting for amalgamations and their effects on consolidation, including goodwill arising on amalgamation (see AS 14, Accounting for Amalgamations);

(b) accounting for investments in associates (at present governed by AS 13, Accounting for Investments6 ); and

(c) accounting for investments in joint ventures (at present governed by AS 13, Accounting for Investments7).

Definitions

5. For the purpose of this Standard, the following terms are used with the meanings specified:

5.1 Control:

(a) the ownership, directly or indirectly through subsidiary(ies), of more than one-half of the voting power of an enterprise; or

(b) control of the composition of the board of directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise so as to obtain economic benefits from its activities.

5.2 A subsidiary is an enterprise that is controlled by another enterprise (known as the parent).

5.3 A parent is an enterprise that has one or more subsidiaries.

5.4 A group is a parent and all its subsidiaries.

5.5 Consolidated financial statements are the financial statements of a group presented as those of a single enterprise.

5.6 Equity is the residual interest in the assets of an enterprise after deducting all its liabilities.

5.7 Minority interest is that part of the net results of operations and of the net assets of a subsidiary attributable to interests which are not owned, directly or indirectly through subsidiary(ies), by the parent.

6. Consolidated financial statements normally include consolidated balance sheet, consolidated statement of profit and loss, and notes, other statements and explanatory material that form an integral part thereof. Consolidated cash flow statement is presented in case a parent presents its own cash flow statement. The consolidated financial statements are presented, to the extent possible, in the same format as that adopted by the parent for its separate financial statements.

Explanation:

All the notes appearing in the separate financial statements of the parent enterprise and its subsidiaries need not be included in the notes to the consolidated financial statements. For preparing consolidated financial statements, the following principles may be observed in respect of notes and other explanatory material that form an integral part thereof:

(a) Notes which are necessary for presenting a true and fair view of the consolidated financial statements are included in the consolidated financial statements as an integral part thereof.

(b) Only the notes involving items which are material need to be disclosed. Materiality for this purpose is assessed in relation to the information contained in consolidated financial statements. In view of this, it is possible that certain notes which are disclosed in separate financial statements of a parent or a subsidiary would not be required to be disclosed in the consolidated financial statements when the test of materiality is applied in the context of consolidated financial statements.

(c) Additional statutory information disclosed in separate financial statements of the subsidiary and/or a parent having no bearing on the true and fair view of the consolidated financial statements need not be disclosed in the consolidated financial statements. An illustration of such information in the case of companies is attached to the Standard.

Presentation of Consolidated Financial Statements

7. A parent which presents consolidated financial statements should present these statements in addition to its separate financial statements.

8. Users of the financial statements of a parent are usually concerned with, and need to be informed about, the financial position and results of operations of not only the enterprise itself but also of the group as a whole.

This need is served by providing the users –

(a) separate financial statements of the parent; and

(b) consolidated financial statements, which present financial information about the group as that of a single enterprise without regard to the legal boundaries of the separate legal entities.

Scope of Consolidated Financial Statements

9. A parent which presents consolidated financial statements should consolidate all subsidiaries, domestic as well as foreign, other than those referred to in paragraph 11. Where an enterprise does not have a subsidiary but has an associate and/or a joint venture such an enterprise should also prepare consolidated financial statements in accordance with Accounting Standard (AS) 23, Accounting for Associates in Consolidated Financial Statements, and Accounting Standard (AS) 27, Financial Reporting of Interests in Joint Ventures respectively.

10. The consolidated financial statements are prepared on the basis of financial statements of parent and all enterprises that are controlled by the parent, other than those subsidiaries excluded for the reasons set out in paragraph 11. Control exists when the parent owns, directly or indirectly through subsidiary(ies), more than one-half of the voting power of an enterprise. Control also exists when an enterprise controls the composition of the board of directors (in the case of a company) or of the corresponding governing body (in case of an enterprise not being a company) so as to obtain economic benefits from its activities. An enterprise may control the composition of the governing bodies of entities such as gratuity trust, provident fund trust etc. Since the objective of control over such entities is not to obtain economic benefits from their activities, these are not considered for the purpose of preparation of consolidated financial statements. For the purpose of this Standard, an enterprise is considered to control the composition of:

(i) the board of directors of a company, if it has the power, without the consent or concurrence of any other person, to appoint or remove all or a majority of directors of that company. An enterprise is deemed to have the power to appoint a director, if any of the following conditions is satisfied:

(a) a person cannot be appointed as director without the exercise in his favour by that enterprise of such a power as aforesaid; or

(b) a person’s appointment as director follows necessarily from his appointment to a position held by him in that enterprise; or

(c) the director is nominated by that enterprise or a subsidiary thereof.

(ii) the governing body of an enterprise that is not a company, if it has the power, without the consent or the concurrence of any other person, to appoint or remove all or a majority of members of the governing body of that other enterprise. An enterprise is deemed to have the power to appoint a member, if any of the following conditions is satisfied:

(a) a person cannot be appointed as member of the governing body without the exercise in his favour by that other enterprise of such a power as aforesaid; or

(b) a person’s appointment as member of the governing body follows necessarily from his appointment to a position held by him in that other enterprise; or

(c) the member of the governing body is nominated by that other enterprise.

Explanation:

It is possible that an enterprise is controlled by two enterprises – one controls by virtue of ownership of majority of the voting power of that enterprise and the other controls, by virtue of an agreement or otherwise, the composition of the board of directors so as to obtain economic benefits from its activities. In such a rare situation, when an enterprise is controlled by two enterprises as per the definition of ‘control’, the first mentioned enterprise will be considered as subsidiary of both the controlling enterprises within the meaning of this Standard and, therefore, both the enterprises need to consolidate the financial statements of that enterprise as per the requirements of this Standard.

11. A subsidiary should be excluded from consolidation when:

(a) control is intended to be temporary because the subsidiary is acquired and held exclusively with a view to its subsequent disposal in the near future; or

(b) it operates under severe long-term restrictions which significantly impair its ability to transfer funds to the parent.

In consolidated financial statements, investments in such subsidiaries should be accounted for in accordance with Accounting Standard (AS) 13, Accounting for Investments. The reasons for not consolidating a subsidiary should be disclosed in the consolidated financial statements.

Explanation:

(a) Where an enterprise owns majority of voting power by virtue of ownership of the shares of another enterprise and all the shares are held as ‘stock-in-trade’ and are acquired and held exclusively with a view to their subsequent disposal in the near future, the control by the first mentioned enterprise is considered to be temporary within the meaning of paragraph 11(a).

(b) The period of time, which is considered as near future for the purposes of this Standard primarily depends on the facts and circumstances of each case. However, ordinarily, the meaning of the words ‘near future’ is considered as not more than twelve months from acquisition of relevant investments unless a longer period can be justified on the basis of facts and circumstances of the case. The intention with regard to disposal of the relevant investment is considered at the time of acquisition of the investment. Accordingly, if the relevant investment is acquired without an intention to its subsequent disposal in near future, and subsequently, it is decided to dispose off the investment, such an investment is not excluded from consolidation, until the investment is actually disposed off. Conversely, if the relevant investment is acquired with an intention to its subsequent disposal in near future, but, due to some valid reasons, it could not be disposed off within that period, the same will continue to be excluded from consolidation, provided there is no change in the intention.

12. Exclusion of a subsidiary from consolidation on the ground that its business activities are dissimilar from those of the other enterprises within the group is not justified because better information is provided by consolidating such subsidiaries and disclosing additional information in the consolidated financial statements about the different business activities of subsidiaries. For example, the disclosures required by Accounting Standard (AS) 17, Segment Reporting, help to explain the significance of different business activities within the group.

Consolidation Procedures

13. In preparing consolidated financial statements, the financial statements of the parent and its subsidiaries should be combined on a line by line basis by adding together like items of assets, liabilities, income and expenses. In order that the consolidated financial statements present financial information about the group as that of a single enterprise, the following steps should be taken:

 (a) the cost to the parent of its investment in each subsidiary and the parent’s portion of equity of each subsidiary, at the date on which investment in each subsidiary is made, should be eliminated;

(b) any excess of the cost to the parent of its investment in a subsidiary over the parent’s portion of equity of the subsidiary, at the date on which investment in the subsidiary is made, should be described as goodwill to be recognised as an asset in the consolidated financial statements;

(c) when the cost to the parent of its investment in a subsidiary is less than the parent’s portion of equity of the subsidiary, at the date on which investment in the subsidiary is made, the difference should be treated as a capital reserve in the consolidated financial statements;

(d) minority interests in the net income of consolidated subsidiaries for the reporting period should be identified and adjusted against the income of the group in order to arrive at the net income attributable to the owners of the parent; and

(e) minority interests in the net assets of consolidated subsidiaries should be identified and presented in the consolidated balance sheet separately from liabilities and the equity of the parent’s shareholders.

Minority interests in the net assets consist of:

(i) the amount of equity attributable to minorities at the date on which investment in a subsidiary is made; and

(ii) the minorities’ share of movements in equity since the date the parent-subsidiary relationship came in existence.

Where the carrying amount of the investment in the subsidiary is different from its cost, the carrying amount is considered for the purpose of above computations.

Explanation:

(a) The tax expense (comprising current tax and deferred tax) to be shown in the consolidated financial statements should be the aggregate of the amounts of tax expense appearing in the separate financial statements of the parent and its subsidiaries.

(b) The parent’s share in the post-acquisition reserves of a subsidiary, forming part of the corresponding reserves in the consolidated balance sheet, is not required to be disclosed separately in the consolidated balance sheet keeping in view the objective of consolidated financial statements to present financial information of the group as a whole. In view of this, the consolidated reserves disclosed in the consolidated balance sheet are inclusive of the parent’s share in the post-acquisition reserves of a subsidiary.

14. The parent’s portion of equity in a subsidiary, at the date on which investment is made, is determined on the basis of information contained in the financial statements of the subsidiary as on the date of investment. However, if the financial statements of a subsidiary, as on the date of investment, are not available and if it is impracticable to draw the financial statements of the subsidiary as on that date, financial statements of the subsidiary for the immediately preceding period are used as a basis for consolidation. Adjustments are made to these financial statements for the effects of significant transactions or other events that occur between the date of such financial statements and the date of investment in the subsidiary.

15. If an enterprise makes two or more investments in another enterprise at different dates and eventually obtains control of the other enterprise, the consolidated financial statements are presented only from the date on which holding-subsidiary relationship comes in existence. If two or more investments are made over a period of time, the equity of the subsidiary at the date of investment, for the purposes of paragraph 13 above, is generally determined on a step-by-step basis; however, if small investments are made over a period of time and then an investment is made that results in control, the date of the latest investment, as a practicable measure, may be considered as the date of investment.

16. Intragroup balances and intragroup transactions and resulting unrealised profits should be eliminated in full. Unrealised losses resulting from intragroup transactions should also be eliminated unless cost cannot be recovered.

17. Intragroup balances and intragroup transactions, including sales, expenses and dividends, are eliminated in full. Unrealised profits resulting from intragroup transactions that are included in the carrying amount of assets, such as inventory and fixed assets, are eliminated in full. Unrealised losses resulting from intragroup transactions that are deducted in arriving at the carrying amount of assets are also eliminated unless cost cannot be recovered.

18. The financial statements used in the consolidation should be drawn up to the same reporting date. If it is not practicable to draw up the financial statements of one or more subsidiaries to such date and, accordingly, those financial statements are drawn up to different reporting dates, adjustments should be made for the effects of significant transactions or other events that occur between those dates and the date of the parent’s financial statements. In any case, the difference between reporting dates should not be more than six months.

19. The financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements are usually drawn up to the same date. When the reporting dates are different, the subsidiary often prepares, for consolidation purposes, statements as at the same date as that of the parent. When it is impracticable to do this, financial statements drawn up to different reporting dates may be used provided the difference in reporting dates is not more than six months. The consistency principle requires that the length of the reporting periods and any difference in the reporting dates should be the same from period to period.

20. Consolidated financial statements should be prepared using uniform accounting policies for like transactions and other events in similar circumstances. If it is not practicable to use uniform accounting policies in preparing the consolidated financial statements, that fact should be disclosed together with the proportions of the items in the consolidated financial statements to which the different accounting policies have been applied.

21. If a member of the group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements when they are used in preparing the consolidated financial statements.

22. The results of operations of a subsidiary are included in the consolidated financial statements as from the date on which parent-subsidiary relationship came in existence. The results of operations of a subsidiary with which parent-subsidiary relationship ceases to exist are included in the consolidated statement of profit and loss until the date of cessation of the relationship. The difference between the proceeds from the disposal of investment in a subsidiary and the carrying amount of its assets less liabilities as of the date of disposal is recognised in the consolidated statement of profit and loss as the profit or loss on the disposal of the investment in the subsidiary. In order to ensure the comparability of the financial statements from one accounting period to the next, supplementary information is often provided about the effect of the acquisition and disposal of subsidiaries on the financial position at the reporting date and the results for the reporting period and on the corresponding amounts for the preceding period.

23. An investment in an enterprise should be accounted for in accordance with Accounting Standard (AS) 13, Accounting for Investments, from the date that the enterprise ceases to be a subsidiary and does not become an associate8.

24. The carrying amount of the investment at the date that it ceases to be a subsidiary is regarded as cost thereafter.

25. Minority interests should be presented in the consolidated balance sheet separately from liabilities and the equity of the parent’s shareholders. Minority interests in the income of the group should also be separately presented.

26. The losses applicable to the minority in a consolidated subsidiary may exceed the minority interest in the equity of the subsidiary. The excess, and any further losses applicable to the minority, are adjusted against the majority interest except to the extent that the minority has a binding obligation to, and is able to, make good the losses. If the subsidiary subsequently reports profits, all such profits are allocated to the majority interest until the minority’s share of losses previously absorbed by the majority has been recovered.

27. If a subsidiary has outstanding cumulative preference shares which are held outside the group, the parent computes its share of profits or losses after adjusting for the subsidiary’s preference dividends, whether or not dividends have been declared.

Accounting for Investments in Subsidiaries in a Parent’s Separate Financial Statements

28. In a parent’s separate financial statements, investments in subsidiaries should be accounted for in accordance with Accounting Standard (AS) 13, Accounting for Investments.

Disclosure

29. In addition to disclosures required by paragraph 11 and 20, following disclosures should be made:

(a) in consolidated financial statements a list of all subsidiaries including the name, country of incorporation or residence, proportion of ownership interest and, if different, proportion of voting power held;

(b) in consolidated financial statements, where applicable:

(i) the nature of the relationship between the parent and a subsidiary, if the parent does not own, directly or indirectly through subsidiaries, more than one-half of the voting power of the subsidiary;

(ii) the effect of the acquisition and disposal of subsidiaries on the financial position at the reporting date, the results for the reporting period and on the corresponding amounts for the preceding period; and

(iii) the names of the subsidiary(ies) of which reporting date(s) is/are different from that of the parent and the difference in reporting dates.

Transitional Provisions

30. On the first occasion that consolidated financial statements are presented, comparative figures for the previous period need not be presented. In all subsequent years full comparative figures for the previous period should be presented in the consolidated financial statements.

Illustration

Note: This illustration does not form part of the Accounting Standard. Its purpose is to assist in clarifying the meaning of the Accounting Standard.

In the case of companies, the information such as the following given in the notes to the separate financial statements of the parent and/or the subsidiary, need not be included in the consolidated financial statements:

(i) Source from which bonus shares are issued, e.g., capitalisation of profits or Reserves or from Share Premium Account.

(ii) Disclosure of all unutilised monies out of the issue indicating the form in which such unutilised funds have been invested.

(iii) The name(s) of small scale industrial undertaking(s) to whom the company owe any sum together with interest outstanding for more than thirty days.

(iv) A statement of investments (whether shown under “Investment” or under “Current Assets” as stock-in-trade) separately classifying trade investments and other investments, showing the names of the bodies corporate (indicating separately the names of the bodies corporate under the same management) in whose shares or debentures, investments have been made (including all investments, whether existing or not, made subsequent to the date as at which the previous balance sheet was made out) and the nature and extent of the investment so made in each such body corporate.

(v) Quantitative information in respect of sales, raw materials consumed, opening and closing stocks of goods produced/ traded and purchases made, wherever applicable.

(vi) A statement showing the computation of net profits in accordance with section 198 of the Companies Act, 2013, with relevant details of the calculation of the commissions payable by way of percentage of such profits to the directors (including managing directors) or manager (if any).

(vii) In the case of manufacturing companies, quantitative information in regard to the licensed capacity (where licence is in force); the installed capacity; and the actual production.

(viii) Value of imports calculated on C.I.F. basis by the company during the financial year in respect of :

(a) raw materials;

(b) components and spare parts;

(c) capital goods.

(ix) Expenditure in foreign currency during the financial year on account of royalty, know-how, professional, consultation fees, interest, and other matters.

(x) Value of all imported raw materials, spare parts and components consumed during the financial year and the value of all indigenous raw materials, spare parts and components similarly consumed and the percentage of each to the total consumption.

(xi) The amount remitted during the year in foreign currencies on account of dividends, with a specific mention of the number of non-resident shareholders, the number of shares held by them on which the dividends were due and the year to which the dividends related.

(xii) Earnings in foreign exchange classified under the following heads, namely:

(a) export of goods calculated on F.O.B. basis;

(b) royalty, know-how, professional and consultation fees;

(c) interest and dividend;

(d) other income, indicating the nature thereof”.

12. In the principal rules, in the “ANNEXURE”, under the heading “ACCOUNTING STANDARDS”, for Accounting  Standard (AS) 29, the following Accounting Standard shall be substituted, namely:-

“Accounting Standard (AS) 29

Provisions, Contingent Liabilities and Contingent Assets

(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs set in bold italic type indicate the main principles. This Accounting Standard should be read in the context of its objective and the General Instructions contained in part A of the Annexure to the Notification.)

Pursuant to this Ac