Service Tax on Rail freight deferred

CBEC has deferred service tax on Railway Freight from April 1 to July 1.

Click here for the notification no. 20,21,22/10, dated 30-03-10.

Agricultural Debt Waiver and Debt Relief Scheme, 2008 – Prudential Norms

Agricultural Debt Waiver and Debt Relief Scheme, 2008 – Prudential Norms on Income Recognition, Asset Classification, Provisioning and Capital Adequacy

In view of the recent drought in some States and the severe floods in some other parts of the country, the Government of India, as announced in the Union Budget 2010-11, has now decided to extend the last date of payment of 75% of overdue portion by the ‘other farmer’ under Debt Relief Scheme (under ADWDR) for another six months beyond December 31, 2009, i.e up to June 30, 2010. The eligible “other farmers” may be allowed to repay this amount in one or more instalments up to June 30, 2010.

Accordingly, Where the farmers covered under the Debt Relief Scheme have given the undertaking, agreeing to pay their share under the OTS, their relevant accounts may be treated by banks as "standard" / "performing" provided :

(a) adequate provision is made by the banks for the loss in present value (PV) terms for all the receivables due from the borrowers. (For computing the amount of loss in PV terms under the Scheme, the balance amount receivable from the farmers may be assumed to be due on June 30, 2010. The cash flows should be discounted to the present value at the interest rate at which the loan was granted including the element of interest subsidy, if any, available from the Government.)

(b) such farmers pay their share of the settlement latest by the revised last date, i.e. June 30, 2010.

 

In case, however, the payments are delayed by the farmers beyond June 30, 2010, the outstanding amount in the relevant accounts of such farmers shall be treated as NPA.

 

Click here for the text of the notification DBOD.No.BP.BC. 82 /21.04.048/2009-10

Classification in the Balance Sheet - Capital Instruments

It has been noticed by RBI that there is no uniformity in the accounting practice followed by banks in classifying the various regulatory capital instruments for the purpose of presentation in the Balance Sheet. RBI has recently examined the issue and advise that the classification as mentioned in the attached notification may be adopted in the balance sheet from the financial year ending March 31, 2010.

Click here for the text of the notification no. DBOD.BP.BC No.81/ 21.01.002/2009-10

PPF Scheme, 1968- Clarification regarding reckoning of the date of deposit

Till now when a subscriber makes a deposit by local cheque or demand draft in to PPF account, the date of tender of cheque or draft at the Accounting Office is treated as date of deposit, provided the related cheque is honoured on presentation for encashment.

It has now been decided that when a deposit is made in the PPF account by means of a local cheque or demand draft by the subscriber, the date of realization of the amount will be the date of deposit.

Click here for the text of the notification DGBA.CDD. H- 7530/15.02.001/2009-10.

KYC guidelines - accounts of proprietary concerns

It has been decided to lay down criteria for the customer identification procedure for account opening by proprietary concerns. Accordingly, apart from following the extant guidelines on customer identification procedure as applicable to the proprietor, banks / financial institutions should call for and verify the following documents before opening of accounts in the name of a proprietary concern:

i) Proof of the name, address and activity of the concern, like registration certificate (in the case of a registered concern), certificate/licence issued by the Municipal authorities under Shop & Establishment Act, sales and income tax returns, CST/VAT certificate, certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities, Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.

ii) Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.

Click here for the text of the notification no. DBOD.AML.BC.No.80/14.01.001/2009-10.

Procedure for electronic filing of Central Excise and Service Tax returns and for electronic payment of excise duty and service tax

DG (Systems) of CBEC has prepared comprehensive instructions outlining the procedure for electronic filing of excise and service tax return and electronic payment of taxes under ACES. The said instructions outline the registration process for new assessees, existing assessees, non–assessees and for Large Taxpayers Unit assessees, steps for preparing and filing of return, using of XML Schema for filing dealers’ return, procedure for obtaining acknowledgement of E-filed return, procedure for E-payment etc.

Click here for the text of the circular No. 919 / 09 / 2010 - CX. containing the above instructions.

CBDT Clarification regarding allowing losses on account of forex derivatives

Instruction No. 03/2010, dated 23-3-2010

1.Foreign Exchange derivative transactions entered into by the corporate sector in India have witnessed a substantial growth in recent years. This combined with extreme volatility in the foreign exchange market in the last financial year is reported to have resulted in substantial losses to an assessee on account of trading in forex-derivatives. A large number of assesses are said to be reporting such losses on 'marked to market' basis either suo motu or in compliance of the Accounting Standard or advisory circular issued by the Institute of Chartered Accountants. The issue whether such losses on account of forex-derivatives can be allowed against the taxable income of an assessee has been considered by the Board. In this connection, I am directed to say that the Assessing Officers may follow the guidelines given below:

'Marked to Market Losses':

2. "Marked to Market" is in substance a methodology of assigning value to a position held in a financial instrument based on its market price on the closing day of the accounting or reporting record. Essentially, 'Marked to Market' is a concept under which financial instruments are valued at market rate so as to report their actual value on the reporting date. This is required from the point of view of transparent accounting practices for the benefit of the shareholders of the company and its other stakeholders. Where companies make such an adjustment through their Trading or Profit/Loss Account, they book a corresponding loss (i.e the difference between the purchase price and the value as on the valuation date) in their accounts. This loss is a notional loss as no sale/conclusion/settlement of contract has taken place and the asset continues to be owned by the company.

A 'Marked to Market' loss may be given different accounting treatment by different assesses. Some may reflect such loss as a balance sheet item without making any corresponding adjustment in the Profit and Loss Account. Other may book the loss in the Profit and Loss Account which may result in the reduction of book profit. In cases where no sale or settlement has actually taken place and the loss on Marked to Market basis has resulted in reduction of book profits, such a notional loss would be contingent in nature and cannot be allowed to be set off against the taxable income. The same should therefore be added back for the purpose of computing the taxable income of an assessee.

3. Treatment of loss from actual transactions in forex-derivatives

In a case where a loss on a forex-derivative transaction arises on actual settlement / conclusion of contract and is not a notional or marked to market book entry, a further question will arise as to whether such a loss is on account of a speculative transaction as contemplated in Section 43(5) of the Income tax Act. For determining whether loss from a transaction in respect of a forex-derivative is a speculation loss or not, the Assessing Officers may refer to Proviso (d) below sub-section (5) of Section 43 inserted by the Finance Act, 2005, with effect from 1.4.2006. It lays down that any 'eligible transaction' in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956, that has been carried out in a recognized stock exchange shall not be treated as a speculative transaction. Further, an 'eligible transaction' for this purpose would be one that fulfils the conditions laid down in Explanation to Section 43(5)(d). Any loss in a speculative transaction can be set off only against profit from speculative transactions.

As the revenue implications of such transaction are large, the Assessing Officers need to examine the statements of accounts and the notes to accounts with a view to find out any reference to any loss on account of forex-derivatives. In some cases, these losses may be camouflaged under the 'financial charges' 'foreign exchange loss' or some similar head which may make it difficult to detect them. In such cases, the Assessing Officers should make a specific query asking the assessee to give a break up of any 'Marked to Market' loss on a forex-derivatives included in the Profit and Loss Account and examine whether such transactions are 'eligible transaction' in terms of Sec.43(5)(d). An adjustment to the taxable income may therefore be made, if necessary, keeping in view the provisions of law referred to above.

Corrigendum in Notification from CBDT on TDS Rules

CBDT has issued Corrigendum in the Notification of Government of India, Ministry of Finance, Department of Revenue (Central Board of Direct taxes), number 9/2010 dated 18-02-2010 bearing S.O. 424(E) and published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated 18th February, 2010.

Click here for the text of the notification. 

Additional Disclosures by banks in Notes to Accounts

The Reserve Bank has been taking several steps from time to time to enhance the transparency in the operations of banks by stipulating comprehensive disclosures in tune with the international best practices.

On a review of the existing disclosures, it has been decided to prescribe the following additional disclosures in the ‘Notes to Accounts’ in the banks’ balance sheets, from the year ending March 2010:

I. Concentration of Deposits, Advances, Exposures and NPAs

II. Sector-wise NPAs

III. Movement of NPAs

IV. Overseas assets, NPAs and revenue

V. Off-balance sheet SPVs sponsored by banks

 

The prescribed formats are furnished in Annexure to the circular no. RBI/2009-10/347.

MVAT and CST

MVAT and CST departments has issued following trade circulars and notifications in the month of March.

1. Circular No. 9T of 2010 on Extension of date for applying CST declarations for the periods prior to 01.04.2008.

2. Circular no. 10T of 2010 making amendment to the Maharashtra Value Added Tax Rules, 2005 & Central Sales Tax(Bombay) Rules,1957

3. VAT-1510/CR 47/Taxation-1 Dt.10.03.2010 on increase in tax-Rate of C-schedule goods (except declared goods) from 4% to 5% from 1st April 2010
 
4. Corrigendum to above Notification dated 10th March 2010 
 
5. Trade circular no. 11T of 2010 on above notification date 10th March 2010
 

Master Circular on Oversight of Members

This master circular consolidates and updates the requirements/obligations with regard to oversight of members (Inspection by Stock Exchanges/Clearing Corporations, Internal Audit and Default) prescribed by the following circulars:

A. Circular no. SMD(B)/104/22775/93 dated October 29, 1993

B. Circular no. SMD/MDP/CIR/043/96 dated August 5, 1996

C. Circular no. SMD/Policy/Cir-24/97 dated September 26, 1997

D. Circular no. SMDRP/POLICY/Cir-45/2001 dated September 17, 2001

E. Circular no. SEBI/SMD/DBA-1/CIR-27/2003 dated June 25, 2003

F. Circular no. MIRSD/DPSIII/Cir-26/08 dated August 22, 2008, and

G. Circular no. MRD/DMS/Cir-29/2008 dated October 21, 2008

Click here for the text of the Master Circular SEBI/MIRSD/Master Cir-04/2010

Circular for mutual funds

Regulation 25 (8) of SEBI (Mutual Funds) Regulations, 1996 mandates that the payment of brokerage or commission, if any, to the sponsor or any of its associates, employees or their relatives, has to be disclosed in the half–yearly annual accounts of the mutual fund.

In order to standardize the said disclosures on brokerage and commission paid to associates/related parties/group companies of sponsor/Asset Management Company in the unaudited half yearly financial results, the abridged scheme wise annual report and the SAI, these disclosures shall henceforth be made in the format as prescribed in Annexure A of the circular.

Click here for the text of the circular SEBI/IMD/CIR No 18 /198647 /2010

Companies(Central Government's) General Rules and Forms (Amendment), 2010 - revision of Form NO. 32

In exercise of the powers conferred by sub-section (1) of section 642 read with sub-section (1) of 610B of the Companies Act, 1956, the Central Government hereby makes the Companies (Central Government's) General Rules and Forms (Amendment), 2010 revising the form no. 32.

Click here for the text of the notification No. GSR 68(E) 10-2-2010.

Companies(Central Government's) General Rules and Forms (Second Amendment) , 2010 - New Form NO. 68 inserted

In exercise of the powers conferred by sub-section (1) of section 642 read with sub-section (1) of 610B of the Companies Act, 1956, the Central Government hereby makes the Companies (Central Government's) General Rules and Forms (Second Amendment), 2010 notifying the new form no. 68.

An application for rectification of mistakes made while filing Form No.1, Form No. 1A and Form No. 44 electronically, on the Ministry's website, shall be made to the Registrar of Companies in Form No. 68 and such application shall be accompanied by fee of rupees one thousand for rectification of mistakes in Form No. 1 and Form No. 1A and rupees ten thousand for rectification of mistakes in Form No. 44 respectively.

Click here for the notification no. GSR 177(E) 5-3-2010.

SEBI Press Release

PR No.59/2010

SEBI Board Meeting

The Board met on March 6, 2010 in Mumbai and took the following decisions:

A. Margin Requirement in Public Issues

The Board decided that with effect from 1st May 2010, all types of investors would be required to bring in 100% of the application money as margin along with the application for securities in public issues. This would avoid inflated demand in public issues and provide level playing field to all investors subscribing for securities.

B. Reservation for Employees in Public/Rights Issues

The Board also decided that the reservation for employees in public/rights issues would be available to employees of subsidiaries and material associates of the issuer whose financial statements are consolidated with the issuer’s financial statements.

C. Reforms in Derivatives Market

The Board further decided in principle to allow the Stock Exchanges to introduce:

a. equity derivatives contracts with tenures upto 5 years;

b. derivative contracts on volatility indexes which have suitable track record, and

c. physical settlement of equity derivatives.

Mumbai

March 06, 2010

Indirect Tax Budget Notifications

CBEC has issued various notifications to give effect to budget 2010-11 provisions.

Click here for all the indirect tax budget notifications.

External Commercial Borrowings (ECB) Policy

RBI has amended ECB policy wrt Infrastructure Loans vide three belowmentioed circulars.

1. External Commercial Borrowings (ECB) Policy - Infrastructure
2. External Commercial Borrowings (ECB) Policy- NBFC
3. External Commercial Borrowings (ECB) Policy – Structured Obligations.

TDS on interest in case of banks - Clarification by CBDT

CBDT clarifies that Explanation to 194A is not meant to apply in cases of banks where credit is made to provisioning account on daily/monthly basis for the purposes of macro monitoring only by the use of CBS software

It is clarified that since no constructive credit to the depositor’s / payee’s account takes place while calculating interest on time deposits on daily or monthly basis in the CBS software used by banks, tax need not be deducted at source on such provisioning of interest by banks for the purposes of macro monitoring only - Circular No. 03/2010, dated 2-3-2010.

1.As per provisions of section 194A of the Income Tax Act 1961, income tax has to be deducted at source at the time of credit of interest income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, at the rates in force if such interest amount exceeds specified limit. Further, Explanation to section 194A states that “for the purpose of this section, where any income by way of interest as aforesaid is credited to any account, whether called ‘Interest payable account’ or ‘Suspense Account’ or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly”.

2. Representations have been received from Indian Banks Association (IBA) seeking clarification regarding deduction of tax at source from payment of interest on time deposits by banks using Core-Branch Banking Solutions (CBS) software. In case of banks using CBS software, interest payable on time deposits is calculated generally on daily basis or monthly basis and is swept & parked accordingly in the provisioning account for the purposes of macro-monitoring only. However, constructive credit is given to the depositor’s / payee’s account either at the end of the financial year or at periodic intervals as per practice of the bank or as per the depositor’s / payee’s requirement or on maturity or on encashment of time deposits; whichever is earlier.

3. The matter has been considered by the Board. Explanation to section 194A was introduced with effect from 1.4.1987 by the Finance Act, 1987 to plug the loophole of avoiding deduction of tax at source by crediting interest in the books of accounts under accounting heads ‘interest payable account’ or ‘suspense account’ instead of to the depositor’s / payee’s account. Therefore, the Explanation is not meant to apply in cases of banks where credit is made to provisioning account on daily/monthly basis for the purposes of macro monitoring only by the use of CBS software.

4. In view of the above position, it is clarified that since no constructive credit to the depositor’s / payee’s account takes place while calculating interest on time deposits on daily or monthly basis in the CBS software used by banks, tax need not be deducted at source on such provisioning of interest by banks for the purposes of macro monitoring only. In such cases, tax shall be deducted at source on accrual of interest at the end of financial year or at periodic intervals as per practice of the bank or as per the depositor’s / payee’s requirement or on maturity or on encashment of time deposits; whichever event takes place earlier; whenever the aggregate of amounts of interest income credited or paid or likely to be credited or paid during the financial year by the banks exceeds the limits specified in section 194A.