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RBI UPDATE
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|||
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Sr No
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Circular/ Notification number
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Particulars
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Applicability
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1 (a)
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RBI/2011-12/530
DBOD.No.BP.BC.98 /21.06.201/2011-12 dated May 2, 2012
|
Guidelines on Implementation of Basel
III Capital Regulations in India
|
All
Scheduled Commercial Banks (Excluding Local Area Banks and Regional Rural
Banks)
|
|
(b)
|
RBI/2011-12/529 A. P.
(DIR Series) Circular No.114 dated May 2, 2012
|
Exim Bank's Line of Credit to the Government of Republic of Burundi
|
Authorised
dealers
|
|
(c)
|
RBI/2011-12/535 DBOD.Dir.BC. 02/13.03.00/2011-12 dated May 4, 2012.
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Interest Rates on FCNR(B) Deposits |
All
scheduled commercial banks
|
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(d)
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RBI/2011-12/534
DBOD.DIR. No.100/ 04.02.001/2011-12 dated May 4, 2012.
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Deregulation of
Interest Rates on Export Credit in Foreign Currency
|
All
scheduled commercial banks
|
|
(e)
|
i. RBI/2011-12/533 A. P. (DIR Series) Circular No.116 dated May 4, 2012 and
ii. RBI/2011-12/532 A. P. (DIR Series) Circular No.115
dated May 4, 2012
|
Exim
Bank's Line of Credit to the Government of the Democratic Socialist Republic
of Sri Lanka / Government of the Republic of Congo
|
Authorised
Dealer Banks
|
|
(f)
|
RBI/2011-12/536 A. P. (DIR Series) Circular No.117 dated May 7, 2012
|
Transfer of Funds from Non-Resident Ordinary (NRO)
account to Non-
Resident External (NRE) Account |
Authorised
Dealer Banks and other Authorized Banks
|
|
(g)
|
RBI/2011-12/537 A. P. (DIR Series) Circular No.118 dated May 7, 2012
|
Release of Foreign Exchange for Miscellaneous Remittances
|
All
Authorised Dealers in Foreign Exchange
|
|
(h)
|
RBI/2011-12/539 A. P. (DIR Series) Circular No.119 dated May 7, 2012
|
ECB
Policy - Utilisation of ECB Proceeds for Rupee Expenditure
|
All
Authorised Dealers
|
|
(i)
|
RBI/2011-12/542 A. P. (DIR Series) Circular No.121 dated May 8, 2012
|
Foreign
investment in Commodity Exchanges and NBFC Sector - Amendment to the FDI
Scheme
|
All
Authorised Dealer Banks
|
|
(j)
|
RBI/2011-12/541 A. P. (DIR Series) Circular No.120 dated May 8, 2012
|
Foreign Direct Investment (FDI) in India - Issue of equity shares
under the FDI scheme allowed under the Government route
|
All
Authorised Dealer Banks
|
|
(k)
|
RBI/2011-12/545 A. P. (DIR Series) Circular No. 122 dated May 8, 2012
|
Risk Management and Inter Bank Dealings
|
All
Authorised Dealer Banks
|
|
(l)
|
RBI/2011-12/551
DBOD. No.BP.BC-104/21.04.048/2011-12 dated May 10, 2012
|
Transfer
of Borrowal Accounts from One Bank to Another
|
All
Scheduled Commercial Banks
|
|
(m)
|
RBI/2011-12/547 A. P. (DIR Series) Circular No. 124 dated May 10, 2012
|
Exchange
Earner's Foreign Currency (EEFC) Account
|
All
Authorised Dealers Banks
|
|
(n)
|
RBI/2011-12/547 A. P. (DIR Series) Circular No. 124 dated May 10, 2012
|
Exchange
Earner's Foreign Currency (EEFC) Account
|
All
Authorised Dealers Banks
|
|
(o)
|
RBI/2011-12/546 A.P. (DIR Series) Circular No.123 dated May 10, 2012
|
Risk
Management and Inter Bank Dealings
|
All
Authorised Dealers Banks
|
|
SEBI UPDATES
|
|||
|
2 (a)
|
CIR/CFD/DIL/5/2012 dated May 3, 2012
|
Filing
Offer Documents under SEBI( Issue of Capital and Disclosure Requirements)
Regulations, 2009
|
All
the Registered Merchant Bankers and listed companies
|
|
LEGAL
WORLD
|
|||
|
3
|
a.
Amendment of the Juvenile Justice Act on the Anvil Consultations held with
States 28 April 2012
b. Violation of Child Labour Act April 26, 2012c. Reduction of Interest Rate on EPF |
||
|
CASE
STUDY
|
|||
|
4
|
b. Income from other source should be compute as per the provision of sec 57of the Act |
||
RBI UPDATES
1(a) Guidelines on Implementation of Basel III Capital Regulations in India
RBI Notification – May 2, 2012
We draw your attention to the RBI notification no RBI/2011-12/530 DBOD.No.BP.BC.98 /21.06.201/2011-12 dated May 2, 2012.
Applicability:
All
Scheduled Commercial Banks (Excluding Local Area Banks and Regional Rural
Banks)
Crux of the Notification:
The RBI on May 2, 2012 has notified that the Basel
III capital ratios will be fully implemented on March 31, 2018.
|
Existing
|
As per the notification
|
|
- As per
the existing capital adequacy guidelines based on the Basel II framework,
banks are required to maintain Tier I capital of at least 6 per cent of their
risk weighted assets.
|
- the Banks have to maintain Tier I capital, or
core capital, of at least 7 per cent of their risk weighted assets on an
ongoing basis
|
The total capital ratio, including Tier I and Tier
II, must be at least 9 per cent, unchanged from the current requirement, the
RBI said in a statement, compared with the Basel III minimum requirement of 8
per cent.
The capital requirements for the implementation of
Basel III guidelines may be lower during the initial periods and higher during
the later years.
While undertaking the capital planning exercise,
banks should keep this in view,” RBI said in a notification to banks.
For the financial year ending March 31, 2013, banks
will have to disclose the capital ratios computed under the existing guidelines
(Basel II) on capital adequacy as well as those computed under the Basel III
capital adequacy framework, RBI added.
The Basel Committee on Banking Supervision (BCBS)
issued a comprehensive reform package entitled ‘Basel III: A global regulatory
framework for more resilient banks and banking systems' in December 2010, with
the objective to improve the banking sector's ability to absorb shocks arising
from financial and economic stress.
A revised version of this document (Basel III) was
issued in June 2011. This will amend certain provisions of existing Basel II
framework, in addition to introducing some new concepts and requirements.
For further details information please follow the below link
1(b) Exim Bank's Line of Credit to the Government
of Republic of Burundi
RBI Notification – May 2, 2012
We draw your attention to the RBI notification no RBI/2011-12/529 A. P.
(DIR Series) Circular No.114 dated May 2, 2012.
Applicability:
Authorised
dealers
Crux of the Notification:
The
Export-Import Bank of India (Exim Bank) has concluded an Agreement dated May
24, 2011 with the Government of the Republic of Burundi, making available to
the latter, a Line of Credit (LOC) of USD 80 million (USD Eighty million) for
financing eligible goods, machinery, equipment and services including
consultancy services from India for the purpose of installation of the Kabu
Hydro Electric Project in Burundi. The goods, machinery, equipment and services
including consultancy services from India for exports under this
Agreement are those which are eligible for export under the Foreign Trade
Policy of the Government of India and whose purchase may be agreed to be
financed by the Exim Bank under this Agreement. Out of the total credit by Exim
Bank under this Agreement, the goods and services including consultancy
services of the value of at least 75 per cent of the contract price shall be
supplied by the sellers from India and the remaining 25 per cent goods and
services (other than consultancy services) may be procured by the sellers for
the purpose of Eligible Contract from outside India.
2.
The Credit Agreement under the LOC is effective from April 19, 2012 and the
date of execution of Agreement is May 24, 2011. Under the LOC, the last date for
opening of Letters of Credit and Disbursement will be 48 months from the
scheduled completion date(s) of contract(s) in the case of project exports and
72 months (May 23, 2017) from the execution date of the Credit Agreement in the
case of supply contracts.
3.
Shipments under the LOC will have to be declared on GR / SDF Forms as per
instructions issued by the Reserve Bank from time to time.
4.
No agency commission is payable under the above LOC. However, if required, the
exporter may use his own resources or utilize balances in his Exchange Earners’
Foreign Currency Account for payment of commission in free foreign exchange.
Authorised Dealer Category- l (AD Category-l) banks may allow such remittance
after realization of full payment of contract value subject to compliance with
the prevailing instructions for payment of agency commission.
For further details information please follow the below link
1(c) Interest
Rates on FCNR(B) Deposits
RBI Notification – May 4, 2012
We draw your attention to the RBI notification no RBI/2011-12/535
DBOD.Dir.BC. 02/13.03.00/2011-12 dated May 4, 2012.
Applicability:
All
scheduled commercial banks
Crux of the Notification:
In
view of the prevailing market conditions, it has been decided by RBI that w.e.f
May 4, 2012 and until further notification the interest rates on FCNR(B)
Deposits will be as under:
|
Maturity Period
|
Existing
|
Revised
|
|
1
year to less than 3 years
|
LIBOR/Swap
plus 125 basis points
|
LIBOR/Swap
plus 200 basis points
|
|
3
- 5 years
|
LIBOR/Swap
plus 125 basis points
|
LIBOR/Swap
plus 300 basis points
|
On
floating rate deposits, interest shall be paid within the ceiling of swap rates
for the respective currency/maturity plus 200 bps/300 bps as the case may be.
For floating rate deposits, the interest reset period shall be six months.
2.
Foreign currency loans out of FCNR(B) deposits may be given as Pre-shipment
Credit in Foreign Currency (PCFC)/ Rediscounting of Export Bills Abroad (EBR)
to exporters and other entities (including exporters who desire to avail of
foreign currency term loans for creating export capability) having a natural
hedge or entities having a risk management policy for managing the exchange
risk.
3.
All other instructions in this regard, as amended from time to time, will
remain unchanged.
For further details information please follow the below link
1 (d) Deregulation of
Interest Rates on Export Credit in Foreign Currency
RBI Notification – May 4, 2012
We draw your attention to the RBI notification no
RBI/2011-12/534 DBOD.DIR. No.100/ 04.02.001/2011-12 dated May 4, 2012.
Applicability:
All
scheduled commercial banks
Crux of the Notification:
It
has been decided by the RBI to allow banks to determine their interest rates on
export credit in foreign currency with effect from May 5, 2012.
In
exercise of the powers conferred by Sections 21 and 35A of the Banking
Regulation Act, 1949, and with a view to increasing the availability of funds
to exporters the Reserve Bank of India being satisfied that it is necessary and
expedient in the public interest so to do, hereby directs the banks to
determine their interest rates on export credit in foreign currency with effect
from May 5, 2012.
For further details information please follow the below link
1 (e) Exim Bank's Line of Credit
to the Government of the Democratic Socialist Republic of Sri Lanka / Government of the Republic of Congo
RBI Notification – May 4, 2012
We draw your attention to the RBI notification no
i.
RBI/2011-12/533 A. P.
(DIR Series) Circular No.116 dated May 4, 2012 and
ii.
RBI/2011-12/532 A. P.
(DIR Series) Circular No.115 dated May 4, 2012
Applicability:
Authorised
Dealer Banks
Crux of the Notification:
RBI
has concluded and Agreement dated January 17, 2012 and December 14, 2011 with
the Government of the Democratic
Socialist Republic of Sri Lanka,
and Government of the Republic
of Congo for making
available to the latter, a Line of Credit (LOC) of such amount as agreed
between the parties.
For further details information please follow the below link
1 (f) Transfer of Funds
from Non-Resident Ordinary (NRO) account to Non-
Resident External (NRE)
Account
RBI Notification – May 7, 2012
We draw your attention to the RBI notification no RBI/2011-12/536 A. P.
(DIR Series) Circular No.117 dated May 7, 2012.
Applicability:
Authorised
Dealer Banks and other Authorized Banks
Crux of the Notification:
It
has been decided that henceforth NRI as defined in Foreign Exchange Management
(Deposit) Regulations, 2000 contained in Notification No. FEMA.5/2000-RB dated 3rd May 2000, as
amended from time to time, shall be eligible to transfer funds from NRO account
to NRE account within the overall ceiling of USD one million per financial year
subject to payment of tax,
as applicable (i.e. as applicable if funds were remitted abroad). Such credit
of funds to NRE account shall be treated as eligible credit in terms of
paragraph 3(j) of Schedule-1 of Notification No. FEMA.5/2000-RB dated 3rd May 2000
For further details information please follow the below link
1 (g) Release of Foreign Exchange
for Miscellaneous Remittances
RBI
Notification – May 7, 2012
We draw your attention to the RBI notification no RBI/2011-12/537 A. P.
(DIR Series) Circular No.118 dated May 7, 2012.
Applicability:
All
Authorised Dealers in Foreign Exchange
Crux of the Notification:
Attention
of Authorised Dealers in foreign exchange is drawn to A.P.(DIR Series) Circular No. 16 dated September 12, 2002,
in terms of which the Authorised Dealers were advised to release amounts up to
USD 500 or its equivalent for all permissible transactions on the basis of a
simple letter from the applicant containing the basic information, viz., names
and the addresses of the applicant and the beneficiary, amount to be remitted
and the purpose of remittance. It was clarified in the circular that Authorised
Dealers need not insist upon submission of A2 Forms in such cases. The limit
was subsequently enhanced to USD 5000 in terms of the A.P.(DIR Series) Circular No. 55 dated December 23, 2003.
2.
With a view to further liberalizing the documentation requirements, the limit
for foreign exchange remittance for miscellaneous purposes without
documentation formalities, has been raised from USD 5000 to USD 25000 with
immediate effect.
3.It
is clarified that Authorised Dealers need not obtain any document, including
Form A-2, except a simple letter as stated above as long as the foreign
exchange is being purchased for a current account transaction (not included in
the Schedules I and II of Government Notification on Current Account
Transactions), and the amount does not exceed USD 25000 or its equivalent and
the payment is made by a cheque drawn on the applicant's bank account or by a
Demand Draft. AD banks shall prepare dummy A-2 so as to enable them to provide
purpose of remittance for statistical inputs for Balance of Payment.
For further details information please follow the below link
1 (h) ECB Policy - Utilisation of
ECB Proceeds for Rupee Expenditure
RBI Notification – May 7, 2012
We draw your attention to the RBI notification no RBI/2011-12/539 A. P.
(DIR Series) Circular No.119 dated May 7, 2012.
Applicability:
All
Authorised Dealers
Crux of the Notification:
As
per the extant guidelines, ECB proceeds can be utilized for permissible foreign
currency expenditure and Rupee expenditure. On a review, it has been decided
that at the time of availing Loan Registration Number (LRN) from the Reserve
Bank, borrowers should provide bifurcation of the utilization of the ECB
proceeds towards foreign currency and Rupee expenditure in Form-83.
2.
The primary responsibility to ensure that the ECB proceeds meant for Rupee
expenditure in India are repatriated to India for credit to their Rupee
accounts with AD Category- I banks in India as per A.P. (DIR Series) Circular No. 52 dated
November 23, 2011 is that of the borrower concerned and any
contravention of the ECB guidelines will be viewed seriously and will invite
penal action under the Foreign Exchange Management Act (FEMA), 1999. The
designated AD bank is also required to ensure that the ECB proceeds meant for
Rupee expenditure are repatriated to India immediately after drawdown.
3.
The modifications to the ECB policy will come into force with immediate effect
and subject to review. All other aspects of the ECB policy shall remain
unchanged.
For further details information please follow the below link
RBI
Notification – May 8, 2012
We draw your attention to the RBI notification no RBI/2011-12/542 A. P.
(DIR Series) Circular No.121 dated May 8, 2012.
Applicability:
All
Authorised Dealer Banks
Crux of the Notification:
The
extant policy for foreign investment in commodity exchanges, has been reviewed
and it has been decided that prior approval of the Government (FIPB) would be
required only for FDI component and Government approval would not be required
for investment by registered FIIs in commodity exchanges. All other conditions
contained in A.P (DIR Series) Circular No.41 dated April 28, 2008 shall remain
unchanged.
Further,
under the extant FDI policy, ‘leasing and finance’ is one of the 18 NBFC
activities wherein FDI up to 100 per cent is permitted under automatic route,
subject to minimum capitalisation norms. It is hereby clarified that FDI is
permitted only in ‘financial leases’ (financial leasing activity) and not in
’operating leases’ (operating leasing activity).
AD
Category - I banks may bring the contents of the circular to the notice of
their customers/constituents concerned.
Necessary
amendments to Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident Outside India) Regulations, 2000 (Notification No. FEMA
20/2000-RB dated May 3, 2000) are being notified separately.
For further details information please follow the below link
1 (j) Foreign Direct Investment (FDI) in India - Issue
of equity shares under the
FDI scheme allowed under the Government route
FDI scheme allowed under the Government route
RBI
Notification – May 8, 2012
We draw your attention to the RBI notification no RBI/2011-12/541 A. P.
(DIR Series) Circular No.120 dated May 8, 2012.
Applicability:
All
Authorised Dealer Banks
Crux of the Notification:
With
a view to incentivising use of machinery embodying the latest state-of-the-art
technology, compliant with international standards, in terms of being green,
clean and energy efficient, it has now been decided to exclude conversion of
imported second-hand machinery from the purview of this provision.
2.
All the other instructions contained in the above referred A.P. (DIR Series)
Circulars shall remain unchanged.
3.
AD Category - I banks may bring the contents of the circular to the notice of
their customers/constituents concerned.
4.
Necessary amendments to Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident Outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated May 3, 2000) are
being notified separately.
For further details information please follow the below link
1 (k) Risk Management and Inter Bank Dealings
RBI
Notification – May 8, 2012
We draw your attention to the RBI notification no RBI/2011-12/545 A. P.
(DIR Series) Circular No. 122 dated May 8, 2012.
Applicability:
All
Authorised Dealer Banks
Crux of the Notification:
In
terms of paragraph C 4(iv) of the aforesaid circular, AD banks have been
permitted to deploy foreign currency funds for granting loans to resident
constituents for meeting their foreign exchange requirements or for the rupee
working capital/capital expenditure needs subject to the
prudential/interest-rate norms, credit discipline and credit monitoring
guidelines in force.
2.
The Reserve Bank of India
has reviewed the interest rate and the end use of the FCNR(B) deposits vide its
circular DBOD.Dir.BC.102/13.03.00/2011-12 dated May 4, 2012.
Accordingly, it has been decided that FCNR(B) funds representing deposit
liabilities may be utilised for making loans to resident constituents for
meeting -
i.
their foreign exchange requirements or
ii.
for the rupee working capital/capital expenditure
needs of exporters /corporates who have a natural hedge or a risk management policy
for managing the exchange risk
subject
to the prudential/interest-rate norms, credit discipline and credit monitoring
guidelines in force. Authorised dealers may be guided accordingly.
For further details information please follow the below link
1 (l) Transfer of Borrowal Accounts from One Bank
to Another
RBI
Notification – May 10, 2012
We draw your attention to the RBI notification no
RBI/2011-12/551 DBOD. No.BP.BC-104/21.04.048/2011-12 dated May 10, 2012.
Applicability:
All
Scheduled Commercial Banks
Crux of the Notification:
Due
to the references/complaints received with regard to the critical information
on the health of the borrowal accounts being taken over is not being shared by
the transferor bank with the transferee bank, resulting in inadequate due
diligence at the time of taking over of accounts, RBI had advised that
a)
Banks should put in place a Board approved policy with regard to take-over of
accounts from another bank. The policy may include norms relating to the nature
of the accounts that may be taken over, authority levels for sanction of
takeover, reporting of takeover to higher authorities, monitoring mechanism of
taken over accounts, credit audit of taken over accounts, examination of staff
accountability especially in case of quick mortality of such cases after
takeover, periodic review of taken over accounts at Board /Board Committee
level, Top Management level, etc.
b)
In addition, before taking over an account, the transferee bank should obtain
necessary credit information from the transferor bank as per the format
prescribed in our circular DBOD.No.BP.BC.94/ 08.12.001/2008-09 dated December 8,
2008 on “Lending under Consortium Arrangement/Multiple Banking
Arrangements”. The format is furnished in Annex.
This would enable the transferee bank to be fully aware of the irregularities,
if any, existing in the borrower's account(s) with the transferor bank. The
transferor bank, on receipt of a request from the transferee bank, should share
necessary credit information as per the prescribed format at the earliest.
For further details information please follow the below link
1 (m) Exchange Earner's Foreign Currency (EEFC)
Account
RBI
Notification – May 10, 2012
We draw your attention to the RBI notification no RBI/2011-12/547 A. P.
(DIR Series) Circular No. 124 dated May 10, 2012.
Applicability:
All
Authorised Dealers Banks
Crux of the Notification:
With
regard to the RBI circular A.P. (DIR Series) Circular No.15 dated November 30, 2006 ,
all foreign exchange earners were permitted to retain 100% of their forex
earnings in EEFC account with any AD in India.
2.
On a review of the Scheme, it has been decided as under :-
a)
50% of the balances in the EEFC accounts should be converted forthwith into
rupee balances and credited to the rupee accounts as per the directions of the
account holder. This process may be completed within a fortnight from the
date of the circular and compliance reported to the Chief General Manager,
Foreign Exchange Department, Central Office, Trade Division, Amar Building, Sir
P.M. Road, Fort, Mumbai 400 001
b)
In respect of all future forex earnings, an exchange earner is eligible to
retain 50% (as against the previous limit of 100%) in non-interest bearing EEFC
accounts. The balance 50% shall be surrendered for conversion to rupee
balances.
c)
The facility of EEFC scheme is intended to enable exchange earners to save on
conversion/transaction costs while undertaking forex transactions in future.
This facility is not intended to enable exchange earners to maintain assets in
foreign currency, as India
is still not fully convertible on Capital Account. Accordingly, EEFC
account holders henceforth will be permitted to access the forex market for
purchasing foreign exchange only after utilising fully the available balances
in the EEFC accounts. ADs may, accordingly, obtain a declaration while
selling foreign exchange to their constituents.
3.
It may be noted that the provisions at paragraph 2(b) and 2(c) above will
apply, mutatis mutandis, also to holder of either a Resident Foreign
Currency Account (RFC) or a Diamond Dollar Account (DDA).
For further details information please follow the below link
1 (n) Exchange Earner's Foreign Currency (EEFC)
Account
RBI
Notification – May 10, 2012
We draw your attention to the RBI notification no RBI/2011-12/547 A. P.
(DIR Series) Circular No. 124 dated May 10, 2012.
Applicability:
All
Authorised Dealers Banks
Crux of the Notification:
With
regard to the RBI circular A.P. (DIR Series) Circular No.15 dated November 30, 2006 ,
all foreign exchange earners were permitted to retain 100% of their forex
earnings in EEFC account with any AD in India.
2.
On a review of the Scheme, it has been decided as under :-
a)
50% of the balances in the EEFC accounts should be converted forthwith into
rupee balances and credited to the rupee accounts as per the directions of the
account holder. This process may be completed within a fortnight from the
date of the circular and compliance reported to the Chief General Manager,
Foreign Exchange Department, Central Office, Trade Division, Amar Building, Sir
P.M. Road, Fort, Mumbai 400 001
b)
In respect of all future forex earnings, an exchange earner is eligible to
retain 50% (as against the previous limit of 100%) in non-interest bearing EEFC
accounts. The balance 50% shall be surrendered for conversion to rupee
balances.
c)
The facility of EEFC scheme is intended to enable exchange earners to save on
conversion/transaction costs while undertaking forex transactions in future.
This facility is not intended to enable exchange earners to maintain assets in
foreign currency, as India
is still not fully convertible on Capital Account. Accordingly, EEFC
account holders henceforth will be permitted to access the forex market for
purchasing foreign exchange only after utilising fully the available balances
in the EEFC accounts. ADs may, accordingly, obtain a declaration while
selling foreign exchange to their constituents.
3.
It may be noted that the provisions at paragraph 2(b) and 2(c) above will
apply, mutatis mutandis, also to holder of either a Resident Foreign
Currency Account (RFC) or a Diamond Dollar Account (DDA).
For further details information please follow the below link
1 (o) Risk Management and Inter Bank Dealings
RBI Notification – May 10, 2012
We draw your attention to the RBI notification no RBI/2011-12/546 A.P. (DIR
Series) Circular No.123
dated May 10, 2012.
Applicability:
All
Authorised Dealers Banks
Crux of the Notification:
With
regard to the RBI circular A.P. (DIR Series) Circular No.58 dated December 15, 2011
the Intra-day open position / daylight limit of Authorised Dealers should not
exceed the erstwhile Net Overnight Open Position Limit available to them. It
was further clarified through FEDAI Circular SPL-58/Risk Mgmt./2011 dated 21st
December 2011 that restrictions placed on Intraday positions limits is only
applicable for positions involving Rupee as one of the currencies.
2.
On a review it has been decided to fix the intra-day open position / daylight
limit of the Authorised Dealers at five times the Net Overnight Open Position
Limit available to them or the existing Intra-day open position limit as
approved by the Reserve Bank, whichever is higher, for positions involving
Rupee as one of the currencies.
3.
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.
For further details information please follow the below link
SEBI UPDATES
2 (a) Filing Offer Documents under SEBI( Issue of
Capital and Disclosure Requirements) Regulations, 2009
SEBI Circular –
May 3, 2012
We draw your attention to SEBI Circular no CIR/CFD/DIL/5/2012 dated May 3, 2012.
Applicability:
All
the Registered Merchant Bankers
Crux of the Notification:
In partial modification of the circular
No. SEBI CIR/CFD/DIL/9/2010 dated October 13, 2010, it has been decided that
the draft offer documents in respect of issues of size upto ` 500 crores shall be filed with the
concerned regional office of the Board under the jurisdiction of which the
registered office of the issuer company falls. Merchant Bankers are accordingly
advised to file the draft offer documents / offer documents with the concerned
office of the Board, based on the estimated issue size as specified in the SEBI
Circular no CIR/CFD/DIL/5/2012
dated
May 3, 2012.
For further details information please follow the below link
3. LEGAL WORLD
a. Amendment of the Juvenile Justice Act on the Anvil Consultations held with States 28 April 2012
Amendments
to the Juvenile Justice (Care and Protection of Children) Act [JJ Act], 2000
are being considered by the Government. Some of the major proposed amendments
are penal provision for non-registration of child care institutions under the
Act; strengthening of the provisions relating to adoption; including roles and
responsibilities of the Child Welfare Committees (CWCs); and addition of new
offences against children etc.
The
Government has sought the opinion of the States Governments in this regard.
Consultations were held with the State Governments at regional and national
levels and suggestions of the State Governments have been considered by a
Committee, set up to review the JJ Act and suggest amendments.
b. Violation of Child Labour Act April 26, 2012
The
Union Labour & Employment Minister Shri Mallikarjun Kharge has informed the
Rajya Sabha that as per 2001 census, the total number of working children
between the age group 5-14 years in the country was 1.26 crore. However, as per
NSSO survey 2009-10, the working children are estimated at 49.84 lakh which
shows declining trend. Under Section 3 of the Child Labour (Prohibition &
Regulation) Act, 1986, prohibits the employment of children below the age of 14
years in 18 Occupations and 65 Processes. Any person who employs a child in any
occupation or process where employment of children is prohibited under the
Child Labour (Prohibition & Regulation) Act, is liable for punishment with
imprisonment for term which shall not be less than 3 months but which may
extend to one year or with fine ranging from Rs.10,000/- to Rs.20,000/-.
States/UT Governments are appropriate Government for implementation of the
Child Labour(Prohibition & Regulation) Act, 1986 in the areas comes under
their jurisdiction . As per the available information State-wise prosecution
launched during 2010 & 2011 is as per Annexure-I.
The
Minister was replying to a written question whether it is a fact that some
State Governments could not prevent the increasing number of child labour and
whether Government has instructed the State Governments to take stringent
action against those who violates Child Labour Act; and the State-wise details
thereof and the total number of cases booked under this act last year?
c. Reduction of Interest Rate on EPF
The
Union Labour & Employment Minister Shri Mallikarjun Kharge has informed the
Rajya Sabha that as per para 60(1) of the Employees’ Provident Funds Scheme,
1952, rate of interest on the Employees Provident Fund is determined by the
Central Government in consultation with the Central Board of Trustees,
Employees Provident Fund. Central Government declared 8.25% rate of interest on
EPF accumulation for the year 2011-12 based on the earnings of the Fund during
the year.
Replying
to a written question the Minister said however, requests from various Central
Trade Unions have been received to maintain the existing rate of interest.
There
is no proposal under consideration to restore the Employees Provident Fund rate
of interest at 9.5 percent for the year 2011-12.
The
interest rate on the Employees Provident Fund in a particular year depends on
the earning of the Fund during that year. Based on the earning of the Fund
during the year 2011-12, 8.25 percent rate of interest on the Employees
Provident Fund has been approved by the Central Government.
4.
CASE STUDY
Court
INCOME
TAX APPELLATE TRIBUNAL
Facts of the Case:
From
the observation we can find the following fact.. The assessee is a company
engaged in management consultancy, implementation of internal controls, system
audits, arranging finance from financial institutions and financing and
advisory services in the capital markets. It is also doing NBFC business and is
a Non-banking Finance Company registered with the Reserve Bank of India and is
engaged in financing business sine 1986. During the impugned assessment year it
disclosed long-term capital gain of ` 43,16,233/- along with short-term capital
gain of ` 13,21,932/- (STT paid) and STGS of ` 19,865/-. The Assessing Officer
after examining the details of the transactions observed that the activity of
selling and purchasing of shares and securities etc. was in the nature of
business activity and it was not an activity of an investor. He noted that the
assessee had purchased 65062 number of shares for ` 1,19,51,834/- and sold
shares worth ` 1,32,92,947/-. Some 10000 shares of Escorts India Ltd. were held
only for five days. 10000 shares of Nav Bharat Ventures were sold within 12 to
60 days and, thus, referring to the CBDT Circular No.4/2007 dated 15.06.2007 he
held that the income therefrom is assessable as business income and, accordingly,
the income therefrom has been treated to be income from business. Learned CIT
(A) has accepted the claim of the assessee on the basis of the decision of ITAT
in the case of the assessee itself dated 3rd September, 2011 for Assessment
Year 2006-07 in which it has been held that the assessee has rightly shown the
long-term capital gain and short-term capital gain on sale of shares held as
investments and, following the said order, learned CIT (A) has decided the
issue in favour of the assessee. The relevant portion of the order of ITAT has
been reproduced by learned CIT (A) in his order.
Citation
DCIT,
Circle 10(1),New Delhi.(Appellant)Vs. Dynamic Consultant Pvt. Ltd.,(now known
as P.R. Kumar Capital Advisors Pvt. Ltd.),U-2, Green Park Main, New Delhi.PAN:
AAACD0042L (Respondent)
Judgement
PER I.P. BANSAL,
JUDICIAL MEMBER
This is an appeal
filed by the revenue. It is directed against the order passed by the CIT (A)
dated 28th November, 2011 for Assessment Year 2008-09. The grounds of appeal
read as under:-
1. Whether the ld.
CIT (A) under the facts and circumstances of the case and in law is justified
in treating profit on sale of shares as LTCG & STCG instead of business
income treated by Assessing Officer?
2. The appellant craves
leave to add, alter or amend any ground of appeal raised above at the time of
the hearing.”
2. The assessee is a
company engaged in management consultancy, implementation of internal controls,
system audits, arranging finance from financial institutions and financing and
advisory services in the capital markets. It is also doing NBFC business and is
a Non-banking Finance Company registered with the Reserve Bank of India and is
engaged in financing business sine 1986. During the impugned assessment year it
disclosed long-term capital gain of ` 43,16,233/- along with short-term capital
gain of ` 13,21,932/- (STT paid) and STGS of ` 19,865/-. The Assessing Officer
after examining the details of the transactions observed that the activity of
selling and purchasing of shares and securities etc. was in the nature of
business activity and it was not an activity of an investor. He noted that the
assessee had purchased 65062 number of shares for ` 1,19,51,834/- and sold
shares worth ` 1,32,92,947/-. Some 10000 shares of Escorts India Ltd. were held
only for five days. 10000 shares of Nav Bharat Ventures were sold within 12 to
60 days and, thus, referring to the CBDT Circular No.4/2007 dated 15.06.2007 he
held that the income therefrom is assessable as business income and, accordingly,
the income therefrom has been treated to be income from business. Learned CIT
(A) has accepted the claim of the assessee on the basis of the decision of ITAT
in the case of the assessee itself dated 3rd September, 2011 for
Assessment Year 2006-07 in which it has been held that the assessee has rightly
shown the long-term capital gain and short-term capital gain on sale of shares
held as investments and, following the said order, learned CIT (A) has decided
the issue in favour of the assessee. The relevant portion of the order of ITAT
has been reproduced by learned CIT (A) in his order.
3. The learned DR, relying
upon the observations of the Assessing Officer in the assessment order, pleaded
that the Assessing Officer has rightly treated the income of the assessee as
income from business and learned CIT (A) has wrongly allowed relief to the
assessee.
4. However, On the other
hand, the learned AR of the assessee has produced before us copy of the
aforementioned order of the Tribunal in the case of the assessee itself and
submitted that learned CIT (A) has rightly granted the relief to the assessee
and his order should be upheld.
5. We have heard both the
parties and their contentions have carefully been considered. The Tribunal,
under similar circumstances in respect of Assessment Year 2006-07 has granted
relief to the assessee vide its order dated 30th September, 2011. A copy of the
said order has been placed on our record. The relevant portion of the order of
ITAT has already been reproduced in the order of CIT (A). After hearing both
the parties and after considering their submissions, we find no reason to
deviate from the findings recorded by the Tribunal in respect of Assessment
Year 2006-07 which will be equally applicable to the facts of the present case.
Therefore, we decline to interfere and the appeal filed by the revenue is
dismissed.
6. In the result, the
appeal is dismissed.
2. Income from other source should be compute as per the provision of sec 57of the Act
Court
INCOME
TAX APPELLATE TRIBUNAL
Facts of the Case:
Out
of the 05 (Five) Grounds of Appeal filed by the appellant against the order of
the CIT(A) dt. 01-12-2010, the following 03 (Three) Grounds of Appeal are
effective. They are: “The learned CIT(A) 21 erred in upholding the adding back
to the total income fresh loans obtained to the tune of Rs. 30,92,425/- by
treating the same as unexplained credit under section 68 of the Income Tax Act,
1961. The learned CIT(A) erred in upholding taxing of income from business in
respect of hut/tents tariffs and food and beverages received from tourists
under the head income from other sources. The learned CIT(A) ought to have
considered that during the same year the same A.O. has accepted in her order
under section 115 WE(3) of I.T. Act, that the Appellant has received rents from
seasonal rents/huts which are rented out to tourists, for parties and picnics
and that the relevant details were verified and placed on records”
Citation
M/s.
Dolphin Adventure Sports Ltd.,C/o. Mr. Sharookh Phiroze Balsara, 201,Helen
Haven, 33 ST. Cyril Road,Bandra (West)Mumbai – 400 050 PAN: AABCD 4247J
(Appellant)Vs.The Income Tax Officer,10(1)(2)4th Floor, Aayakar Bhavan
Mumbai-20 (Respondent)
Judgement
PER RAJENDRA, A.M.
Out of the 05 (Five)
Grounds of Appeal filed by the appellant against the order of the CIT(A) dt.
01-12-2010, the following 03 (Three) Grounds of Appeal are effective. They are:
“The learned CIT(A) 21
erred in upholding the adding back to the total income fresh loans obtained to
the tune of Rs. 30,92,425/- by treating the same as unexplained credit under
section 68 of the Income Tax Act, 1961.
The learned CIT(A) erred in
upholding taxing of income from business in respect of hut/tents tariffs and
food and beverages received from tourists under the head income from other
sources. The learned CIT(A) ought to have considered that during the same year
the same A.O. has accepted in her order under section 115 WE(3) of I.T. Act,
that the Appellant has received rents from seasonal rents/huts which are rented
out to tourists, for parties and picnics and that the relevant details were
verified and placed on records”.
Later on with the
permission of the Bench, appellant filed additional Grounds of Appeal and that
reads as under:
“The Assessing Officer
eared in arbitrarily disallowing administrative and selling expenditure to the
extent of Rs. 4,45,653/- including part of depreciation incurred by the
appellant during the A.Y. 2007-08”
2. With regard to addition
made u/s. 68 of the Act, facts are found on para 5 and 5.1 of the Assessment
Order. AO has narrated the issue in these words:
“Unsecured loan:
Perusal of balance sheet, it is noticed that the
assessee company shown unsecured loan as on 31-03-2007 as Rs. 238,23,628/- as
against Rs. 2,07,31,203/- as on 31-03-2006. from the Schedule-4 forming part of
balance sheet, it is noticed that the loans have been taken from the following
persons:
1) Caroline C oelho (Director) Rs. 8,75,000
2) Malcolm Coelho -do- Rs. 2,04,97,153
3) Maldan Eng. Pvt. Ltd., Rs. 21,51,475
4) Renderrous Rs. 2,50,000
5) Jalram Pinto Rs. 50,000
The assessee has been asked vide notice u/s 142(1)
dated 03- 12-2009 to submit the loan confirmation from the respective persons
and prove the genuineness of the loan. Since the assessee has neither furnished
loan confirmation nor filed any deals to establish the genuiness,
creditworthiness of the lender in respect of the above said loans, therefore
the fresh loan obtained to the tune of Rs.30,92,425/- is added back to the
total income of the assessee and the same has been treated as unexplained
credit u/s. 68 of the Act”.
3. After considering the submission of the
appellant, CIT (A) decided the matter as under:-
“I have considered the facts of the case. As
per facts on record, the A.O. issued first notice on 03-12-2009 and passed the
assessment order on 29-12-2009. Thus evidently, the appellant was not provided
sufficient opportunity to furnish details during assessment proceedings. This
fact of providing inadequate opportunity is relevant in view of the fact that
the lenders were located outside Mumbai and may not be easily available on
account of Christmas vacation. During appellate proceedings, the appellant had
filed copies of confirmations of loan creditors. However, the appellant had not
made any request for admission of additional evidences. During appellate
proceedings, the appellant has argued that since the loans had been received
through account payee cheques, the identity and credit worthiness of creditors
stand proved. Appellant’s this argument is not acceptable. First of all, though
in confirmations, the loans have been shown as received by cheques, but the
bank statement of appellant as well as loan creditors have not been filed.
Therefore, this claim of amount received through banking channels has remained
unsubstantiated. Secondly, even if the amount had been received by cheque, the appellant
was still required to prove the identity and credit worthiness of creditors
which the appellant had failed to prove”.
4. Authorised Representative submitted that only
two new creditors had advanced loan amounting to Rs. 3 Lakhs (Rs. 2,50,000 + 50,000/-)
to the assessee during the year under consideration, that balance amount was
increase in lending from the existing lenders, that CIT(A) had held that
sufficient opportunity was not provided to the appellant, that after admitting
the fact of inadequate opportunity he should not have upheld the additions.
Departmental Representative relied upon the orders of the lower authorities and
stated that inspite of given chance, appellant had not produced evidence before
the AO about the loans in question.
5. We have heard both the parties and perused the
available material. From the order of the CIT(A) one thing becomes clear that
because of paucity of time evidences could not be produced and appreciated in
proper manner. CIT(A) has observed that in absence of bank statements,
authenticity of transaction could not be ascertained. We are of the opinion
that in the interest of justice, matter should be remitted back to the file of
the AO for verification of genuineness and veracity of loans.
6. About the income from business/income from other
sources matter has been discussed by the AO in para 4 and 4.1.1 and 4.1.3 in
the following words:-
“Major source of income credited by the assessee
company in the profit and loss account is “Other Income” of Rs. 3,00,000/- and
Rent of Rs. 1,49,000/-. The assessee had not carried out any business activity
in the current year nor the assessee has produced any evidences in support of
its argument that it has actively pursuing its business activity. The profit
and loss account reveals that the assessee credited Rs. 4,49,000/- as above and
claimed expenditure of Rs. 5,24,298/- being administrative exp and
depreciation. During the year the assessee has not carried out any business
activity. From the above facts also, it is clear that the assessee doe not have
the where withal to run its business and has conclusively terminated its
business activity. It may be mentioned that section 56 of the I.T.Act, has
envisaged in sub-section 1 and 2 the kind of income to be taken under the head
income from other sources. The said section in unequivocal terms makes it clear
that income from rent ought to be charged under the head “Income from other
sources” if such income is not chargeable to income tax under head profit and
gains of business or profession. Section 57 elaborates the deduction available
to the assessee. In the instant case, the assessee has credited rent income and
miscellaneous charges.
Moreover, this treatment is in line with the
decision of New Savan Sugar & Gur Refining Co. Ltd., Vs. CIT (1969) 74 ITR
7 (SC). In this case, the assessee ceased to be a trader and the factory shed
its character as a commercial asset. The factory became merely an asset of the
assessee and the lease rent derived was the fruits of ownership simpliciter.
The income from leasing was classified under the head income from other
sources. Similar issue was affirmed in the case of Universal Plast Ltd., Vs.
CIT (1999) 237 ITR 454 by the Supreme Court.
From the above discussion, it is clear that the
amounts credited to the P&L account such as rent receipt, other charges
received are in the nature of income qualifying under the head “income from
other sources”.
The immediate sources of income of the assessee is
mainly from rent receipt. It can therefore be classified as “income from other
sources” and not income from “business”, since the assessee has not carried out
any business during the year. Thus, the income credited to the P&L account
is treated as ‘Income from other sources”.
6.1 CIT(A) decided the issue about business
income/income from other sources as under:
“I have considered the facts of the case. From the
facts, as stated above, it was evident that the appellant’s business was not
set up and also the business did not commenced during the year under
consideration. Consequently, there was no business activity during the year.
Therefore, the receipts received by appellant were not business receipts. The
A.O. was, therefore, justified in assessing receipts under the head ‘income
from other sources”. During assessment as well as during appellate proceeding,
the appellant failed to establish its case that the expenditure were incurred
to ear the income from other sources. In the facts and circumstances, the A.O.
was justified in disallowing those expenses. These two grounds of appeal are,
therefore dismissed.”
6.2 AR submitted that appellant was carrying on
business during the year under consideration though licenses for bar could not
be obtained, that tents and other equipment were rented out, that income from
business in respect of food and beverages was received from the tourists, that
in the next Assessment Year on the same facts, income of the assessee was
assessed under the head “Income from Business”.
6.3 DR submitted that appellant had no authority to
carry on business during the period under consideration. Equipments were given
on loan and the appellant was getting hire charges, that income or the assessee
was rightly charged under the head ‘income from other sources”.
6.4 After hearing both the parties, we are of the
opinion that activities carried out by the appellant during the Assessment Year
in question cannot be termed as business. Money received by the appellant falls
under the residuary head i.e., “income from other sources”. But while computing
the income of the assessee, AO should compute the same as per the provisions of
Sec. 57 of the Act.
7. Next Ground - additional ground – is about
disallowance of administrative and selling expenditure including partial
depreciation. AO on page No.3 of his order discussed the issue as under:
“However, in the interest of natural justice an
amount equal to 15% of total receipt claimed by the assessee as ‘other income”
and rent i.e., 15% of Rs. 4,49,000/- is allowed as deduction for earning this
income. This amount works out to Rs. 67,350/- and the same is allowed as
deduction”.
CIT (A) confirmed the order of the AO. In this
regard, AR submitted that even if the activities carried out by the appellant
were not from business, the appellant should be allowed to benefit of the
section 57, that it was improper to restrict the claim to 15% i.e., to Rs.
67,305/-, that administrative and selling expenses at pg. 13 of the Paper
book should be allowed except bad debts and remuneration paid to the directors,
that depreciation should be not restricted @ 15%. DR relying upon the orders of
the lower authorities submitted that due deduction had been allowed to the
appellant.
8. We have heard both the sides and we are of the
opinion that expenditure incurred by the appellant (except bad debts and
remuneration) should be allowed in computing the income from other sources.
Similarly, depreciation should be allowed as per rules and should not be
restricted to 15%.
9. As a result, assessee gets part relief.
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