TaxTMI Updates e-Newsletter
Apr 02,2012

Summary: The Finance Minister and the World Bank President affirmed the strategic value of sustained Bank India partnership to support infrastructure investment, poverty reduction, and long term development financing, with the Bank offering additional financing and innovative mechanisms including private sector leverage and knowledge transfer to enhance resource flows and support regional integration.

Summary: A administrative direction directs income-tax offices to remain open on the financial year closing date, with receipts counters operating during normal hours, and requires special operational arrangements, including additional receipt counters where necessary, to facilitate convenient filing of tax returns by taxpayers under the exercise of delegated administrative powers.

Summary: RBI directed banks to perform annual reviews of accounts inactive for over one year, launch drives to locate account holders or legal heirs for accounts in the "Inoperative Accounts" ledger, permit operations after due diligence without charging for reactivation, and publish on bank websites the names and addresses of long term inactive account holders along with claim procedures, forms, documentary requirements and safeguards to verify genuine claimants, with a timeline to complete and regularly update disclosures.

Summary: Portability of savings bank account numbers is recommended to allow customers to retain the same account number when shifting branches or cities. The Damodaran Committee proposed account number continuity and RBI advised banks to implement it. However, the Prevention of Money Laundering Act and rules require the bank establishing the customer relationship to retain identity and transaction records for ten years after cessation, which precludes interbank account portability under the current statutory record keeping regime.

Summary: IRDA requires prior approval of all life insurance products and the sales literature at the product-approval stage; insurers and agents must use only approved promotional materials, including specified benefit illustrations, and IRDA may order withdrawal and commence action where unapproved or non-compliant literature is used.

Summary: Immediate post-disaster assistance is provided from the State Disaster Response Fund (SDRF) maintained by each state, with supplementary financial aid from the National Disaster Response Fund (NDRF) when state expenditure exceeds the SDRF balance. The Centre released its share of SDRF to Bihar during the relevant fiscal years and additionally released NDRF funds for immediate relief; rehabilitation works are undertaken by the State from its own resources or sector-specific plan funds.

Summary: SEBI requires CRAs to follow a comprehensive Code of Conduct mandating due diligence, independent professional judgment and objectivity; standardises rating symbols and definitions; prescribes disclosure requirements for rating procedures, default studies, income sources, conflict of interest measures, structured products and unsolicited ratings; and mandates half yearly internal audits with board consideration and Action Taken Reports to SEBI addressing investor grievance redressal and compliance.

Summary: Import of gold is permitted free for non monetary purposes under the Exim Code classification, but remains subject to Reserve Bank of India regulations; there is no proposal to change this policy. Imports reported for the two most recent financial years are presented as aggregate quantities and values, and operational compliance requires following the Exim classification and applicable RBI controls.

Summary: Banks must release all securities and title documents on loan repayment and return mortgage documents within fifteen days, with compensation payable for delays. Non compliance with these regulatory guidelines and the banking consumer code is a ground for complaint under the Banking Ombudsman Scheme, and supervisory inspections review delays and issuance of no due certificates while industry bodies are notified for follow up.

Summary: Cash Reserve Ratio reductions were made to expand primary liquidity in the banking system, enabling banks to increase lending to productive sectors and support credit growth; the adjustments aim to mitigate downside risks to growth and anchor medium term expectations toward low and stable inflation.

Summary: A Working Group constituted in 2010 to examine a Financial Holding Company structure recommended limits on the expansion of non banking activities by groups that migrate into Banking Financial Holding Companies; its report has been published on the central bank's website.

Summary: A centrally supported Mission Mode Project under the National e Governance Plan will computerize Commercial Tax Departments of States and UTs, with Cabinet-approved funding, specified central assistance, a portion of funds already released to states, and an expected completion of state projects by March 2013.

Summary: Reserve Bank of India proposes permitting White Label ATMs allowing non-bank entities to set up, own and operate ATMs to improve ATM penetration and financial inclusion. Draft guidelines assign primary responsibility for redress of failed ATM transaction complaints to the issuing bank, with the sponsor bank required to support the issuing bank by providing records, information and operational arrangements with the White Label ATM operator.

Summary: The Government has initiated a procurement process to introduce advanced security features in Indian banknotes of all denominations, adopting a structured multi stage acquisition framework recommended by a committee and accepted by the Government to promote transparency and accountability in procurement, with the objective of checking fake currency, as communicated by the Minister of State for Finance in a written parliamentary reply.

Summary: India's external debt stock at end-December 2011 rose versus end-March 2011, led by higher commercial borrowings and increased short-term trade credit. Short-term debt grew faster and accounted for nearly one-quarter of total external debt, while long-term debt remained the majority. The currency mix was dominated by US dollar liabilities, and key indicators-external debt-to-GDP, short-term debt-to-reserves, and reserves cover of external debt-deteriorated compared with end-March 2011.

Summary: Corrigendum amends Notification No. 12/2012-Customs by altering Table entries-expanding an exclusion in S. No. 236 and changing the column (6) entry for item (b) in S. No. 516-and by correcting Condition No. 74 cross references, replacing item (ii)/(iii) references with item (b)/(c) respectively.

Summary: The Board, invoking powers under the Customs Act and Notification No.15/2002 (NT), assigns a list of show cause notices issued by the DRI Zonal Unit, Bangalore concerning M/s. SAP India Systems and various other parties to the Commissioner (Adjudication), New Customs House, for consolidated adjudication; an annexed Table lists each notice with file reference and issuing authority, and administrative copies are circulated to relevant offices.

Summary: Amends Notification No.16/2011-Cus (N.T.) by substituting, against S.No.2 in the Table, the column (4) entry with "Filter cigarettes, bidis or Pharmaceutical products of Chapter 30", thereby restricting import of the specified inputs to use in manufacture of those goods and clarifying the permissible end-uses under the principal notification.

Summary: The Income tax (4th Amendment) Rules, 2012, effective 1 April 2012, insert the words "installed on or before 31st day of March, 2012" into clauses (l) and (m) of item (8), sub item (xiii) under "III. Machinery and Plant" in New Appendix I Part A (Tangible Assets), thereby restricting the pre amendment depreciation treatment to wind energy plant and machinery installed on or before that date.

Summary: Amendment to rule 12 inserts provisos excluding from certain clauses a resident individual or HUF who has assets located outside India or signing authority in an overseas account, updates year references, and adds clauses requiring individuals or HUFs above a specified income threshold, and resident individuals or HUFs with foreign assets or signing authority who must use ITR-2/ITR-3/ITR-4, to furnish returns in the prescribed electronic manner; Appendix II ITR forms are substituted accordingly.

Summary: The circular clarifies that the amendment to the Point of Taxation Rules allows eligible individuals and partnership firms with taxable-service turnover below the prescribed threshold to defer service tax until receipt of payment for supplies made on or after the effective date. For invoices issued on or before the day before that effective date, the earlier Rule 7 continues to govern: the point of taxation remains the date of payment. Field formations are to notify stakeholders accordingly.

Summary: Printed GR forms will no longer be supplied by Reserve Bank Regional Offices; GR forms are available only online and must be downloaded and printed on legal size paper with appropriate page-setup, with the GR number allotted automatically when the document is sent to the print queue; AD Category I banks must notify their constituents; directions issued under Foreign Exchange Management Act powers without prejudice to other required permissions.

Summary: The Reserve Bank directed continuation of enhanced all-in-cost ceilings for External Commercial Borrowings: 350 basis points over six-month LIBOR for average maturities of three years up to five years, and 500 basis points for maturities exceeding five years, applicable until September 30, 2012 and subject to review. Authorised Dealer Category-I banks must notify customers. The measures are issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999. A related press release applies an all-in-cost of 350 basis points over six-month LIBOR to trade credit up to one year.

Summary: Continuation of the enhanced all-in-cost ceiling for trade credits for imports retains a reference to six month LIBOR plus an additional margin for maturities up to one year and specifies that the all in cost ceiling includes arranger, upfront and management fees, handling/processing charges, out of pocket and legal expenses. The related statement also continues maturity segmented all in cost ceilings for ECB, confirms applicability until the stated review date, and records that the directions are issued under the foreign exchange statute and are subject to other legal permissions.

Summary: Indian parties may seek RBI approval to create charges (pledge, mortgage, hypothecation) on their immovable, movable and other financial assets to secure overseas JV/WOS obligations within the overall financial commitment limit, subject to no-objection from Indian lenders and forthcoming reporting requirements; bank guarantees backed by counter-guarantee or collateral and personal guarantees by indirect resident promoters are to be reckoned or permitted respectively, CCPS are to be treated as equity, and financial commitment without equity may be considered under approval route with host-country compliance.

Summary: Resident individuals are granted general permission to acquire foreign equity as qualification shares for directorship (subject to host-country requirements and within LRS limits), as consideration for professional services or Director's remuneration (within LRS limits), and to purchase shares under foreign ESOPs offered globally on a uniform basis irrespective of the issuing company's stake in the Indian employer, provided an Annual Return is filed through the AD Category I bank; AD banks may permit remittances and regulatory amendments will follow.

Summary: Mandatory online filing of ANF 2E SCOMET export licence applications is required from 1 July 2012, replacing paper submissions after a transitional period ending 30 June 2012. Applicants must use the DGFT portal, complete all required fields (including SCOMET category, item numbers, port of loading, and bank details), upload specified documents such as purchase orders, End User Certificates, technical specifications, prior export lists and Bills of Entry (first application in financial year), and forward original End User Certificates and other hard copies to DGFT(HQRS) with the online ECOM number.

Summary: Extension permits use of re-credited DEPB/Reward Scheme scrips for payment of CVD (SAD) refunds and continues the manual Bill of Entry facility for utilising re-credited amounts. Commissioners must dispose pending refund applications paid through DEPB/Reward scrips within a prescribed internal deadline, report progress to the Board, and may form special teams. The Board reiterates that future refunds require initial SAD payment in cash, as DGFT will not re-credit scrips when payment is by scrips, and directs issuance of public notices and standing orders.

Summary: Chief Commissioners may grant warehousing extensions beyond three months for goods in good condition; only legally due interest is subject to action. Administrative practice allows raising demands without enforcing immediate collection, and waiver of interest for goods imported for specified end uses is considered after the goods are cleared and end-use conditions are satisfied.

Summary: The Circular clarifies that when a project's Mega Power Project certificate is provisional, the required Fixed Deposit Receipt (FDR) equal to the excise duty must be furnished to the jurisdictional Deputy Commissioner or Assistant Commissioner of the factory from which goods are cleared. FDRs may be submitted periodically for successive clearances, but each must meet the prescribed term. The Central Excise concessional removal Rules, 2001 do not apply to removals for use in a project under this notification.