Centralised Processing of TDS Scheme

Centralised Processing of Statements of tax deducted at source scheme, 2013
Notification No. 3/2013[F.No.142/39/2012-SO(TPL)], dated 15-1-2013

In exercise of the powers conferred by sub-section (2) of section 200A of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following scheme for centralised processing

of statements of tax deducted at source, namely:-

Short title and commencement

1. (1) This scheme may be called the Centralised Processing of Statements of Tax Deducted at SourceScheme, 2013.
(2) It shall come into force on the date of its publication in the Official Gazette.
Definitions

2. (1) In this scheme, unless the context otherwise requires,-
(a) "Act" means the Income -tax Act, 1961 (43 of 1961);
(b) "Assessing Officer" means the Assessing Officer who is ordered or directed under section 120 of the Act to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under Chapter XVII of the Act;
(c) "authorised agency" means the person authorised by the Director General to receive the statement of tax deducted at source or correction statement of tax deducted at source;
(d) "Board" means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963);
(e) "Cell" means the Centralised Processing Cell having jurisdiction over such statements of tax deducted at source as may be specified by the Board;
(f) "Commissioner" means the Commissioner of Income-tax in charge of the Centralised Processing Cell;
(g) "correction statement of tax deducted at source" means the statement furnished for rectifying any mistake or to add, delete or update the information furnished in the statement of tax deducted at source furnished under sub-section (3) of section 200 of the Act;
(h) "deductor" means a person deducting tax in accordance with the provisions of Chapter XVII of the Act;
(i) "Director General" means the Director General of Income-tax (Systems) appointed as such under sub-section (1) of section 117 of the Act;
(j) "portal" means the web portal of the authorised agency or the web portal of the Cell, as the case may be;
(k) "statement of tax deducted at source" means statement of tax deducted at source furnished under sub-section (3) of section 200 of the Act.
(2) The words and expressions used herein but not defined and defined in the Act shall have the meaning respectively assigned to them in the Act.
Centralised Processing Cell
3. The Board may set up as many Centralised Processing Cells as it may deem necessary and specify their respective jurisdictions.
Furnishing of correction statement of tax deducted at source
4. (1) A deductor shall furnish the correction statement of tax deducted at source in the form specified by the Director General-
(a) at the authorised agency through electronic mode; or
(b) online through the portal.
(2) The correction statement referred to in sub-paragraph (1) shall be furnished under digital signature or verified through a process in accordance with the procedure, formats, and standards specified by the Director General.
Processing of statements
5. (1) The Cell shall process the statement of tax deducted at source furnished by a deductor in the manner specified under sub-section (1) of section 200A of the Act after taking into account the information contained in the correction statement of tax deducted at source, if any, furnished by the deductor before the date of processing.
(2) The Commissioner may-
(a) adopt appropriate procedure for processing of the statement of tax deducted at source; or
(b) decide the order of priority for processing of the statement of tax deducted at source based on administrative requirements.
Rectification of mistake
6. (1) An Income-tax authority of the Cell may, with a view to rectifying any mistake apparent from the record under section 154 of the Act, on its own motion or on receiving an application from the deductor, amend any order or intimation passed or sent by it under the Act.
(2) An application for rectification shall be furnished in the form and manner specified by the Director General.
(3) Where a rectification has the effect of reducing the refund or increasing the liability of the deductor, an intimation to this effect shall be sent to the deductor electronically by the Cell and the reply of the deductor shall be furnished in the form and manner specified by the Director General.
(4) Where an amendment has the effect of reducing a refund already made or increasing the liability of the deductor, the order under section 154 of the Act passed by an Income-tax authority of the Cell shall be deemed to be a notice of demand under section 156 of the Act.
Adjustment against outstanding tax demand
7. Where a refund arises from the processing of a statement under this scheme, the provisions of section 245 of the Act shall, so far as may be, apply.
Appeal
8. (1) Where a statement of tax deducted at source is processed at the Cell, the appeal proceedings relating to the processing of the statement shall lie with the Commissioner of Income-tax (Appeals) having jurisdiction over the Assessing Officer who has jurisdiction over the deductor and any reference to Commissioner of Income-tax (Appeals) in any communication from the Cell shall mean such jurisdictional Commissioner of Income-tax (Appeals).
(2) The Assessing Officer who has jurisdiction over the deductor shall submit the remand report and any other report to be furnished before the Commissioner of Income-tax (Appeals) and an order, if any, giving effect to appellate order shall be passed by such Assessing Officer.
No personal appearance at the Cell
9. (1) No person shall be required to appear personally or through authorised representative before the authorities at the Cell in connection with any proceedings.
(2) The Cell may call for such clarification, evidence or document as may be required for the purposes of the processing of statement of tax deducted at source or for the purposes of the rectification of any order or intimation passed or sent by the Cell under the provisions of the Act.
(3) The deductor shall furnish the reply to any communication under sub¬paragraph (2) in such format as may be specified by the Director General.
Service of notice or communication
10. (1) The service of a notice or order or intimation or any other communication by the Cell may be made by delivering or transmitting a copy thereof to the deductor,-
(a) by electronic mail; or
(b) by placing such copy in the registered electronic account of the deductor on the portal of the Cell; or (c) by any mode mentioned in sub-section (1) of section 282 of the Act.
(2) The date of posting of any communication under sub-paragraph (1) in the electronic mail or electronic account of the deductor in the portal of the Cell shall be deemed to be the date of service of such communication.
(3) The intimation, orders and notices shall be computer generated and need not carry physical signature of the person issuing it.
Power to specify procedure and processes
11.The Director General may specify procedures and processes, from time to time, for effective functioning of the Cell in an automated and mechanised environment, including specifying the procedure, formats, standards and processes in respect of the following matters, namely:-
(a) form of correction statement of tax deducted at source;
(b) the manner of verification of correction statement of tax deducted at source;
(c) receipt of correction statement of tax deducted at source;
(d) form of rectification application;
(e) the manner of verification of rectification application;
(f) receipt and processing of rectification applications in the Cell;
(g) the mode and format of the acknowledgement to be issued by the Cell for the receipt of any document;
(h) the mode of authentication of any document or information submitted to the Cell, including authentication by digital signature or electronic signature;
(i) validation of any software used for electronic filing of correction statement of tax deducted at source or rectification application;
(j) provision of web portal facility including login facility, tracking status of correction statement of tax deducted at source or statement of tax deducted at source, display of relevant details of tax deduction or refunds to the taxpayer or deductor, as the case may be, and facility of download of relevant information;
(k) call centre to answer queries and provide taxpayer services, including outbound calls to a deductor requesting for clarification to facilitate the processing of the statement of tax deducted at source filed;
(l) provision of grievance redressal mechanism in the Cell;
(m) managing tax administration functions such as receipt, scanning, data entry, processing, storage and retrieval of statement of tax deducted at source and documents in a centralised manner or receipt of paper documents through authorised intermediaries.

DISCREPENCY IN BOOKS OF ACCOUNS AND TDS

No addition for difference in income as per profit and loss account and TDS certificate

ITO vs SAB Miller India Ltd

Assessee is engaged in the business of investing in existing breweries in India and providing technical, managerial and consultancy services to its subsidiaries. Assessee being the holding company, had executed a cost sharing agreement with its subsidiaries in order to provide services such as human resource and back-up support on accounting and financial matters, etc. to its subsidiaries. The cost incurred by the assessee was allocated to various subsidiaries through debit notes which were raised every month on an estimated basis. The subsidiaries were withholding tax on the debit notes received by them from the assessee and were issuing TDS certiifcates  to the assessee on a monthly basis.

The assessee raised debit notes for Rs. 3,35,85,000/- to one of its subsidiaries, namely Mysore Breweries Ltd.The TDS certificate issued by M/s Mysore Breweries Limited also showed that tax at source was deducted on total payment made to the assessee amounting to Rs. 3,35,85,000/-. The tax so deducted had also been deposited into Government Account relevant for the year under consideration. However, the auditors, during the statutory audit, identified that the assessee had raised excess debit notes of Rs. 80,88,000/- , Consequently, the assessee issued a credit note amounting to Rs. 80,88,000/- to Mysore Breweries Ltd as on 31 March, 2003.

on M/s Mysore Breweries Limited as were in excess by such an amount. The submission of assessee was that it was only a clerical mistake of the part of M/s Mysore Breweries Limited in issuing a TDS certificate showing the inflated and wrong figure. A confirmation to this effect was also filed from M/s Mysore Breweries Limited.

However, Mysore Breweries Ltd while issuing the TDS certiifcates  in respect to the above payment did not consider the credit note for Rs. 80,88,000/-  and withheld tax on the entire amount of Rs. 3,35,85,000/-.  instead of on Rs. 2,54,97,000/-. Such excess tax withheld by the subsidiary was claimed as prepaid tax in the tax return of the assessee.

The AO also denied the credit of excess tax withheld on Rs. 80,88,000/-  on the ground that such income was not reported in the profit and loss account.

On appeal CIT(A) deleated the addition of Rs. 80,88,000/- and also directed the AO to allow credit of Rs. 84,924/- being TDS on the amount of Rs. 80,88,000/- addition of which has been deleted by him.”

Whether the ld. CIT(A) erred in deleting the addition of Rs. 80,88,000/- made by the AO on account of difference in receipts as per TDS certificate and those credited to Profit & Loss Account and also by allowing the credit of Rs. 84, 924 being TDS on the amount of Rs. 80,88,000/-.

ITAT observed that the difference of income arose on account of a clerical mistake of the subsidiary Mysore Breweries Ltd, which was confirmed by Mysore Breweries Ltd. ITAT relied on the decision as reported in (2010) 4 TaxCorp (DT) 46141 (DELHI) held that the addition of Rs. 80,88,000/- was wholly unwarranted in the hands of the assessee.

The ITAT bench also held that where the credit note was issued to the subsidiary, the net payment stands reduced by Rs. 80,88,000/- and where its subsidiary had confirmed that the above mistake was due  to a clerical error, the addition would be an unjustified addition.

Relying on hon`ble high court decision in the case of Lear Automotive India Ltd ITA No. 110/2010 dated 05/02/2010 held that the credit of tax withheld on excess amount of Rs. 80,88,000/- shall be available to the assessee and refund shall not be available to the deductor in light of the CBDT Circular as the TDS certificate was already issued to the assessee and the circular cannot take away the deductee's right to claim the refund of excess tax withheld from its income.

Corporates told to rectify any mistake in address

NEW DELHI: The ministry of corporate affairs has asked corporates to rectify any mistake with regard to the address of their respective registered office by June next year.

This initiative has been undertaken "to minimise instances of registration of bogus or misleading addresses as registered office of companies", MCA said in a public notice.

In a circular dated December 21, the ministry has asked the corporates to avail this opportunity to "rectify any mistake" within a period of 180 days from the effective date.

"All professionals and corporates are requested to be more vigilant and be careful in certification and verification in the forms to avoid penal action," the public notice said.

To minimise instances of misleading addresses, the ministry has made certain changes, as per which details of the address of the registered office and proof of registered office address have to be mandatorily attached.

Moreover, the new forms will contain provisions for certification by professionals endorsing the identity such as photographs and attached documents in this regard.

Sub:Income Tax New TDS website

A new website for TDS related matters viz. view Form 26AS, TAN Registration (referred as Deductor Registration), Download Consolidated Statement, Form 16, Form 16A, Defaults generated launched.

Vis

it - http://www.tdscpc.gov.in/

Two types of registrations viz. as Deductor (TAN registration on NSDL website) and as Tax Payer (Registration to view Form 26AS on NSDL website) are introduced.

Very good e-Tutorials are provided for explaining the functionality of the website.
e-Tutorials for Deductor
Registration and Login
Forgot User Id
Forgot Password
Download NSDL Conso File
Download Form 16
Download Form 16A
TRACES PDF Generation Utility
e-Tutorials for Tax Payer
Registration and Login
Forgot Password
Before registering, go through the e-presentations as at the time of registration, various details are asked for which should be kept ready.

व्यापारी अब आसानी से करा सकेंगे पंजीयन

जागरण ब्यूरो, लखनऊ : वाणिज्य कर विभाग ने व्यापारियों के पंजीयन को अब और आसान बना दिया है। इस संबंध में सभी जोनल एडीशनल कमिश्नर को नए सिरे से आदेश जारी किया गया है। दरअसल, विभाग में व्यापारियों के पंजीयन के लिए वाणिज्य कर आयुक्त हिमांशु कुमार ने चार अक्टूबर से नई व्यवस्था लागू करते हुए दिशा-निर्देश जारी किए थे। नई व्यवस्था से सभी व्यापारियों को तमाम तरह की दिक्कतों को देखते हुए आयुक्त ने पंजीयन को आसान बनाने को उसमें कई संशोधन कर दिए हैं। आदेश के मुताबिक पंजीयन के आवेदन को किसी प्रांतीय पंजीकृत व्यापारी के प्रमाणित न करने पर भी जमानत नहीं देनी पड़ेगी। इसी तरह पार्टनर शिप डीड के पंजीकृत न होने पर भी अब उसे पंजीयन के लिए स्वीकार किया जाएगा बशर्ते वह नियमानुसार स्टांप पर निष्पादित करते हुए प्रस्तुत की गई हो। पार्टनर शिप डीड के पंजीकृत होने की अब शर्त नहीं रहेगी। आवेदक व्यापारी यदि माता-पिता के स्वामी वाले निवास स्थान में उनके साथ रहता है तो भवन स्वामी माता या पिता का संबंधित शपथ पत्र से ही अब काम चल जाएगा जबकि अभी उसे इस बात का प्रमाण पत्र देना होता है कि वह उस अचल संपत्ति का लाभार्थी है। साझीदारी फर्म के मामले में अब किसी एक कार्यशील साझीदार के बायोमेट्रिक के आधार पर ही पंजीयन हासिल किया जा सकेगा जबकि अब तक सभी साझीदारों के बायोमेट्रिक की शर्त रही है। कंपनी द्वारा पंजीयन के लिए आवेदन करने के मामले में किसी व्यक्ति को अधिकृत करने के संबंध में अब यह साक्ष्य देने की शर्त भी समाप्त कर दी गई है कि उसके बारे में बोर्ड ऑफ डायरेक्टर्स से प्रस्ताव पारित करके उसकी प्रति रजिस्ट्रार ऑफ कंपनीज को दे दी गई है।

Sex and Service Tax

TIOL-DDT 197502.11.2012
Friday

A Netizen writes in -
"KHAJURAHO is a town in the state of Madhya Pradesh and is famous for its temples containing some sexual or erotic art outside the temple or near the deities. There are many interpretations of the erotic carvings. It is said that these suggest tantric sexual practices. Anyway, the fact of the matter is the hoi polloi perceive it as obscene bordering to the extent of pornography.
The law relating to pornography or 'obscenity' is laid down in Sec.292 of the Indian Penal Code. As per the Act, accessing pornography in private is not illegal. Moving forward (and backward) in India, watching or possessing pornographic materials is legal but distribution of such materials is banned. Likewise, the publication or production of X-rated materials is illegal.
In this scenario, with the massive penetration of Internet in our country thanks to mobile telephony and the various uses to which it is put to by the masses, mushrooming of pornographic sites has become the order of the day.
Coupled with the entry of an Indian born adult star into the Big Boss house last year and the immense popularity that she earned by the second edition of the 'bodily' film, she has gone gung ho and has given feast for the masses eyes by her own website which allows the bleary & dreary eyed to watch her and her performances for a month/a quarter/a year on payment of Indian Rupees (Rs.856.95/Rs.2144.95/Rs.3433.95 respectively) through net banking and all available modes. There are lot many other websites which nowadays cater to the thirsty Indians and which are doing roaring or for that matter screaming business. I had also stumbled (on purpose) to a similar site and found that they were charging Rs.185/- for fifteen minutes of unbridled pleasure! All this I inform through your column because I think that this act falls within the scope of ‘accessing pornography in private' and which is not illegal.
On the question of whether this highly arousing service being provided is chargeable to Service Tax under the category of "on-line information and database access or retrieval", the defence that the ‘adult star' may put forward would be that these services are being provided by her through herself and her husband to allow Indians to liberate themselves and she, in fact, is doing a great ‘service' to the nation obsessed with the three letter word.
She is actually bang on target. A visit to the notification 25/2012-ST would reveal that the Government also has the same ideology inasmuch such ‘services' are exempted from Service Tax. Surprised at the missionary position?
Take a look at the following entry -

"34. Services received from a provider of service located in a non taxable territory by -
(a) Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;"

Obviously, the services are being provided from outside India i.e a ‘non-taxable territory' as these movies are shot in and around homes in California and the "recipient" of the service in India uses it for the purpose other than business or commerce, and obviously so - it is self gratification.
The Indian youth and the old should be thankful to the Central Government for allowing them to ogle and satisfy their voyeuristic tendencies without paying any Service Tax - direct or through the reverse charge mechanism!"

IT : The Hon'ble ITAT Mumbai in the case of SHRIKANT REAL ESTATES (P.) LTD. v. ITO

held that the present system of e-filing of return is totally dependent upon the usage of software and there are possibilities of entering incorrect data without having the expert knowledge. Non-inclusion of STCG under section 111A can be rectified via a rectification application.
FACTS

The return of the assessee

was processed under section 143(1). As per the intimation received under section 143(1), the income and the rate of tax were different from the return as furnished by him. The assessee immediately moved an application under section 154 stating that as per intimation under section 143(1), Short-term capital gain ('STCG') was taxed at normal rates instead of special rates. According to the AO, the proper remedy for assessee was filing of revised return instead of moving an application under section 154 because the assessee had not shown STCG under section 111A in Schedule CG of the e-return. Thus, he rejected the rectification application. The assessee couldn't succeed even before CIT(A).

HELD

(1) The present system of e-filing of return is totally depended upon the usage of software;

(2) The return is prepared electronically which is converted into XML file;

(3) There is every possibility of entering incorrect data without having the expert knowledge of preparing an XML file;

(4) XML file so created is uploaded to the official Website of Income tax department;

(5) Keeping in mind this system of e-filing of the returns, it is clear that assessee had claimed STCG and had shown it in e-return but the same figure did not appear under the item where the STCG is to be taxed at special rate under section 111A of the Act;

(6) However, under 'Schedule SI-income chargeable to income tax at special rates', the assessee had shown 10% tax on STCG, which clearly establishes that the assessee had shown STCG liable to be taxed at special rate of 10%.

Therefore, the AO was directed to tax STCG at a special rate of tax as per provisions of section 111A of the Act and rectify the intimation under section143(1) accordingly

Trade Credits for Import into India

RBI/2012-13/202
A.P. (DIR Series) Circular No. 28

September 11, 2012

To,

All Category - I Authorised Dealer Banks

Madam / Sir,

Trade Credits for Import into India

Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to A.P. (DIR Series) Circular No. 87 dated April 17, 2004 and A.P. (DIR Series) Circular No. 24 dated November 01, 2004.

2. As per the extant guidelines, for import of capital goods as classified by DGFT, AD banks may approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and less than three years (from the date of shipment). No roll-over/extension is permitted beyond the permissible period. AD banks are also permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution, up to USD 20 million per transaction for a period up to three years for import of capital goods, subject to prudential guidelines issued by the Reserve Bank from time to time. The period of such Letters of credit / guarantees / LoU / LoC has to be co-terminus with the period of credit, reckoned from the date of shipment. AD banks shall not, however, approve trade credit exceeding USD 20 million per import transaction.

3. On a review, it has been decided to allow companies in the infrastructure sector, where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB) to avail of trade credit up to a maximum period of five years for import of capital goods as classified by DGFT subject to the following conditions: -

(i) the trade credit must be abinitio contracted for a period not less than fifteen months and should not be in the nature of short-term roll overs; and

(ii) AD banks are not permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution for the extended period beyond three years.

4. The all-in-cost ceilings of trade credit will be as under:

Maturity period	All-in-cost ceilings over 6 months LIBOR*
Up to one year	350 basis points
More than one year and up to three years
More than three years and up to five years
* for the respective currency of credit or applicable benchmark

The all-in-cost ceilings include arranger fee, upfront fee, management fee, handling/ processing charges, out of pocket and legal expenses, if any.

5. All other aspects of Trade Credit policy will remain unchanged and should be complied with. The amended trade credit policy will come into force with immediate effect and is subject to review based on the experience gained in this regard.

6. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated May 3, 2000 are being issued separately wherever necessary.

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

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,

(Rashmi Fauzdar)
Chief General Manager

Making E-payment of Customs duty mandatory-regarding.

http://www.cbec.gov.in/customs/cs-circulars/cs-circ12/circ24-2012-cs.htm

Rail Transportation of goo

ds and passengers exempted from service tax upto 30th sep, 2012

Notification No. 43/2012-Service Tax

New Delhi, the 2nd July, 2012

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) (hereinafter referred to as the said Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services of the description mentioned in the Table below, provided by the Indian Railways from the whole of service tax leviable thereon under section 66B of the said Act, with effect from the date of publication of this notification in the Official Gazette, upto and including the 30th day of September, 2012.

TABLE

Sl. No.	Description of taxable services
1.	Service of transportation of passengers, with or without accompanied belongings, by railways in -- first class; or an air conditioned coach
2.	Services by way of transportation of goods by railways

[F. No. 334/1/2012-TRU]

(Vikas)
Under Secretary to the Government of India

Ministry of Finance10-July, 2012 16:05 IST

Deductors Must Comply with their Obligations to Ensure Correct Credit to Persons from Whose Income Tax is Deducted at Source

All deductors other than Government deductors must file their quarterly TDS statement for the quarter ending 30th June 2012, on or before 15th July 2012 and Government deductors must file their statement on or before 30th July 2012. While submitting their statements, the deductors have to choose correct and relevant form, quote correct PAN against all entries and ensure that correct CIN/BIN is quoted in the TDS statement. Non-quoting of PAN or TAN in TDS statements or delay in filing of TDS statements may lead to levy of penalty.

Filing of TDS statement with correct PAN and CIN/BIN is important because under Rule 37BA of Income Tax Rules, 1962 credit for tax deducted at source is given to the deductees on the basis of TDS statement furnished to the Income-tax Department by the deductor. Filing of TDS statements with incorrect PAN or other details of the deductee would, therefore, cause inconvenience to the deductees (taxpayer).

In case the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, the deductee must file a declaration with the deductor that credit for the TDS shall be given to the other person and not to the deductee. The declaration filed by the deductee must contain the name, address, Permanent Account Number of the person to whom credit is to be given and reasons for giving credit to such person. The deductor must, in the TDS statement, report the tax deduction in the name of such other person and also issue the TDS certificate in the name of the person in whose name credit is shown in the TDS statement.

TDS certificates for deductions on income other than salary income (Form 16A) for the quarter ending 30th June 2012 should be issued on or before 30th July 2012

FOREIGN INVESTMENT IN INDIA - SECTOR SPECIFIC CONDITIONS

A.P. (DIR SERIES 2011-12) CIRCULAR NO. 137, DATED 28-6-2012

Attention of Authorised Dealer Category - I (AD Category-I) banks is invited to Annex A and B of Schedule 1 to 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 whereby description of sectors/activities wherein FDI is prohibited as also the entry norms, sectoral cap and other conditions for sectors/activities in which FDI is permitted under Government route and Automatic route are specified.

2. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India has been updating/notifying the FDI policy through issue of Consolidated FDI Policy Circular. Accordingly, Government has notified the latest FDI policy changes vide FDI Policy Circular 1 of 2012 dated April 10, 2012 and the same is available at Government website www.dipp.gov.in. In order to bring uniformity in the sectoral classification position for FDI as notified under the Consolidated FDI Policy Circular with the FEMA Regulation, the revised position on Annex A and Annex B of Schedule 1 to Notification No. FEMA 20/2000-RB dated 3rd May 2000, has been suitably revised and is enclosed.

3. Necessary amendments to the 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 will be issued separately.

4. AD Category - 1 banks may bring the contents of this circular to the notice of their constituents and customers 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.

ANNEX A

Sectors Prohibited for FDI.

FDI is prohibited in:

(a) Retail Trading (except single brand product retailing)

(b) Lottery Business including Government /private lottery, online lotteries, etc.

(d) Business of Chit funds

(e) Nidhi company

(f) Trading in Transferable Development Rights (TDRs)

(g) Real Estate Business or Construction of Farm Houses

(h) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

(i) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

Note: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

ANNEX B

Sector-specific policy for foreign investment

In the following sectors/activities, FDI up to the limit indicated against each sector/activity is allowed, subject to applicable laws/ regulations; security and other conditionalities In sectors/activities not listed below, FDI is permitted upto 100% on the automatic route, subject to applicable laws/ regulations; security and other conditionalities.

Wherever there is a requirement of minimum capitalization, it shall include share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalization requirement.

Sl. No.	Sector/Activity	% of FDI Cap/Equity	Entry Route
AGRICULTURE
1	Agriculture & Animal Husbandry
	(a) Floriculture, Horticulture, Apiculture and Cultivation of Vegetables & Mushrooms under controlled conditions;	100%	Automatic
	(b) Development and production of Seeds and planting material;
	(c) Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture, under controlled conditions; and
	(d) services related to agro and allied sectors
	Note: Besides the above, FDI is not allowed in any other agricultural sector/activity
1.1	Other conditions:
	I. For companies dealing with development of transgenic seeds/vegetables, the following conditions apply: (i) When dealing with genetically modified seeds or planting material the company shall comply with safety requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms. (ii) Any import of genetically modified materials if required shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992. (iii) The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time. (iv) Undertaking of business activities involving the use of genetically engineered cells and material shall be subject to the receipt of approvals from Genetic Engineering Approval Committee (GEAC) and Review Committee on Genetic Manipulation (RCGM). (v) Import of materials shall be in accordance with National Seeds Policy.
	II. The term 'under controlled conditions' covers the following: ♦ Cultivation under controlled conditions' for the categories of Floriculture, Horticulture, Cultivation of vegetables and Mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically. ♦ In case of Animal Husbandry, scope of the term 'under controlled Conditions' covers - ■ Rearing of animals under intensive farming systems with stall-feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems. ■ Poultry breeding farms and hatcheries where micro-climate is controlled through advanced technologies like incubators, ventilation systems etc. ♦ In the case of pisciculture and aquaculture, scope of the term 'under controlled conditions' covers - ■ Aquariums ■ Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. ♦ In the case of apiculture, scope of the term ''under controlled conditions' covers - ■ Production of honey by bee-keeping, except in forest/wild, in designated spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons.
2	Tea Plantation
2.1	Tea sector including tea plantations Note: Besides the above, FDI is not allowed in any other plantation sector/activity	100%	Government
2.2	Other conditions:
	(i) Compulsory divestment of 26% equity of the company in favour of an Indian partner/Indian public within a period of 5 years (ii) Prior approval of the State Government concerned in case of any future land use change.
3	MINING
3.1	Mining and Exploration of metal and non-metal oresincluding diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development & Regulation) Act, 1957.	100%	Automatic
3.2	Coal and Lignite
	(1) Coal & Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973	100%	Automatic
	(2) Setting up coal processing plants like washeries subject tothe condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.	100%	Automatic
3.3	Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities
3.3.1	Mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject tosectoral regulations and the Mines and Minerals (Development and Regulation Act 1957)	100%	Government
3.3.2	Other conditions:
	India has large reserves of beach sand minerals in the coastal stretches around the country. Titanium bearing minerals viz. Ilmenite, rutile and leucoxene, and Zirconium bearing minerals including zircon are some of the beach sand minerals which have been classified as 'prescribed substances' under the Atomic Energy Act, 1962. Under the Industrial Policy Statement 1991, mining and production of minerals classified as 'prescribed substances' and specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953 were included in the list of industries reserved for the public sector. Vide Resolution No. 8/1(1)/97-PSU/1422 dated 6th October 1998 issued by the Department of Atomic Energy laying down the policy for exploitation of beach sand minerals, private participation including Foreign Direct Investment (FDI), was permitted in mining and production of Titanium ores (Ilmenite, Rutile and Leucoxene) and Zirconium minerals (Zircon). Vide Notification No. S.O.61(E) dated 18.1.2006, the Department of Atomic Energy re-notified the list of 'prescribed substances' under the Atomic Energy Act 1962. Titanium bearing ores and concentrates (Ilmenite, Rutile and Leucoxene) and Zirconium, its alloys and compounds and minerals/concentrates including Zircon, were removed from the list of 'prescribed substances'. (i) FDI for separation of titanium bearing minerals & ores will be subject to the following additional conditions viz.: (A) value addition facilities are set up within India along with transfer of technology; (B) disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987. (ii) FDI will not be allowed in mining of 'prescribed substances' listed in the Notification No. S.O. 61(E) dated 18.1.2006 issued by the Department of Atomic Energy. Clarification: (1) For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Ilmenite can be processed to produce 'Synthetic Rutile or Titanium Slag as an intermediate value added product. (2) The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policycan be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled.
4	Petroleum & Natural Gas
4.1	Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies.	100%	Automatic
4.2	Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs.	49%	Government
	MANUFACTURING
5	Manufacture of items reserved for production in Micro and Small Enterprises (MSEs)
5.1	FDI in MSEs (as defined under Micro, Small And Medium Enterprises Development Act, 2006 (MSMED, Act 2006)) will be subject to the sectoral caps, entry routes and other relevant sectoral regulations. Any industrial undertaking which is not a Micro or Small Scale Enterprise, but manufactures items reserved for the MSE sector would require Government route where foreign investment is more than 24% in the capital. Such an undertaking would also require an Industrial License under the Industries (Development & Regulation) Act 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production and in accordance with the provisions of section 11 of the Industries (Development & Regulation) Act 1951.
6	DEFENCE
6.1	Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act 1951	26%	Government
6.2	Other conditions:
	(i) Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence. (ii) The applicant should be an Indian company / partnership firm. (iii) The management of the applicant company / partnership should be in Indian hands with majority representation on the Board as well as the Chief Executives of the company / partnership firm being resident Indians. (iv) Full particulars of the Directors and the Chief Executives should be furnished along with the applications. (v) The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an established R & D base. (vi) There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the non-resident investor taking into account the category of weapons and equipment that are proposed to be manufactured. (vii) There would be a three-year lock-in period for transfer of equity from one non-resident investor to another non-resident investor (including NRIs & erstwhile OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the Government. (viii) The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipment and overall requirements would be made available to the extent possible. (ix)The capacity norms for production will be provided in the licence based on the application as well as the recommendations of the Ministry of Defence, which will look into existing capacities of similar and allied products. (x) Import of equipment for pre-production activity including development of prototype by the applicant company would be permitted. (xi) Adequate safety and security procedures would need to be put in place by the licensee once the licence is granted and production commences. These would be subject to verification by authorized Government agencies. (xii) The standards and testing procedures for equipment to be produced under licence from foreign collaborators or from indigenous R & D will have to be provided by the licensee to the Government nominated quality assurance agency under appropriate confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Self-certification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals. (xiii) Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. (xiv) Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence. These items may also be sold to other Government entities under the control of the Ministry of Home Affairs and State Governments with the prior approval of the Ministry of Defence. No such item should be sold within the country to any other person or entity. The export of manufactured items would be subject to policy and guidelines as applicable to Ordnance Factories and Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons / entities other than the Central of State Governments with the prior approval of the Ministry of Defence. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence. (xv) Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement.
SERVICES SECTOR
INFORMATION SERVICES
7	Broadcasting
7.1	Terrestrial Broadcasting FM (FM Radio) subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations	26% (FDI, NRI & PIO investments and portfolio investment)	Government
7.2	Cable Network, subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting	49% (FDI, NRI & PIO investments and portfolio investment)	Government
7.3	Direct-to-Home subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting	49% (FDI, NRI & PIO investments and portfolio investment) Within this limit, FDI component not to exceed 20%	Government
7.4	Headend-In-The-Sky (HITS) Broadcasting Service refers to the multichannel downlinking and distribution of television programme in C-Band or Ku Band wherein all the pay channels are downlinked at a central facility (Hub/teleport) and again uplinked to a satellite after encryption of channel. At the cable headend these encrypted pay channels are downlinked using a single satellite antenna, transmodulated and sent to the subscribers by using a land based transmission system comprising of infrastructure of cable/optical fibres network.
7.4.1	FDI limit in (HITS) Broadcasting Service is subject tosuch guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting.	74% (total direct and indirect foreign investment including portfolio and FDI)	Automatic up to 49% Government route beyond 49% and up to 74%
7.5	Setting up hardware facilities such as up-linking, HUB etc.
	(1) Setting up of Up-linking HUB/ Teleports	49% (FDI & FII)	Government
	(2) Up-linking a Non-News & Current Affairs TV Channel	100%	Government
	(3) Up-linking a News & Current Affairs TV Channel subject to the condition that the portfolio investment from FII/ NRI shall not be 'persons acting in concert' with FDI investors, as defined in the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997	26% (FDI & FII)	Government
7.5.1	Other conditions:
	(i) All the activities at (1), (2) and (3) above will be further subject to the condition that the Company permitted to uplink the channel shall certify the continued compliance of this requirement through the Company Secretary at the end of each financial year. (ii) FDI for Up-linking TV Channels will be subject to compliance with the Up-linking Policy notified by the Ministry of Information & Broadcasting from time to time.
8	Print Media
8.1	Publishing of Newspaper and periodicals dealing with news and current affairs	26% (FDI and investment by NRIs/PIOs/FII)	Government
8.2	Publication of Indian editions of foreign magazines dealing with news and current affairs	26% (FDI and investment by NRIs/PIOs/FII)	Government
8.2.1	Other Conditions:
	(i) '[Magazine', for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. (ii) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008.
8.3	Publishing/printing of Scientific and Technical Magazines/specialty journals/ periodicals, subject tocompliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting.	100%	Government
8.4	Publication of facsimile edition of foreign newspapers	100%	Government
8.4.1	Other Conditions:
	(i) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. (ii) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. (iii) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time.
9	Civil Aviation
9.1	The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services / Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. For the purposes of the Civil Aviation sector: (i) 'Airport' means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934; (ii) "Aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto; (iii) "Air transport service" means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights; (iv) "Air Transport Undertaking" means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward; (v) "Aircraft component" means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment; (vi) "Helicopter" means a heavier-than -air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis; (vii) "Scheduled air transport service" means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public; (viii) "'Non-Scheduled Air Transport service" means any service which is not a scheduled air transport service and will include Cargo airlines; (ix) "Cargo airlines" would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation; (x) "Seaplane" means an aeroplane capable normally of taking off from and alighting solely on water; (xi) "Ground Handling" means (i) ramp handling , (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling.
9.2	Airports
	(a) Greenfield projects	100%	Automatic
	(b) Existing projects	100%	Automatic up to 74% Government route beyond 74%
9.3	Air Transport Services
	(a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services. (b) No foreign airlines would be allowed to participate directly or indirectly in the equity of an Air Transport Undertaking engaged in operating Scheduled and Non-Scheduled Air Transport Services except Cargo airlines. (c) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services
	(1) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline	49% FDI (100% for NRIs)	Automatic
	(2) Non-Scheduled Air Transport Service	74% FDI (100% for NRIs)	Automatic up to 49% Government route beyond 49% and up to 74%
	(3) Helicopter services/seaplane services requiring DGCA approval	100%	Automatic
9.4	Other services under Civil Aviation sector
	(1) Ground Handling Services subject to sectoral regulations and security clearance	74% FDI (100% for NRIs)	Automatic up to 49% Government route beyond 49% and up to 74%
	(2) Maintenance and Repair organizations; flying training institutes; and technical training institutions	100%	Automatic
10	Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898 and excluding the activity relating to the distribution of letters.	100%	Government
11	Construction Development: Townships, Housing, Built-up infrastructure
11.1	Townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure)	100%	Automatic
11.2	Investment will be subject to the following conditions: (1) Minimum area to be developed under each project would be as under: (i) In case of development of serviced housing plots, a minimum land area of 10 hectares (ii) In case of construction-development projects, a minimum built-up area of 50,000 sq.mts (iii) In case of a combination project, any one of the above two conditions would suffice (2) Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company. (3) Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. Original investment means the entire amount brought in as FDI. The lock-in period of three years will be applied from the date of receipt of each installment/tranche of FDI or from the date of completion of minimum capitalization, whichever is later. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB. (4) At least 50% of each such project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots. For the purpose of these guidelines, 'undeveloped plots' will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. (5) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned. (6) The investor/investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/ Municipal/Local Body concerned. (7) The State Government/ Municipal/ Local Body concerned, which approves the building / development plans, would monitor compliance of the above conditions by the developer. Note: (i) The conditions at (1) to (4) above would not apply to Hotels & Tourism, Hospitals, Special Economic Zones (SEZs), Education Sector, Old age Homes and investment by NRIs. (ii) FDI is not allowed in Real Estate Business.
12	Industrial Parks - new and existing	100%	Automatic
12.1	(i) " Industrial Park" is a project in which quality infrastructure in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity. (ii) "Infrastructure" refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning. (iii) " Common Facilities" refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. (iv) "Allocable area" in the Industrial Park means- (a) in the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common facilities. (b) in the case of built up space- the floor area and built up space utilized for providing common facilities. (c) in the case of a combination of developed land and built-up space-the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities. (v) "Industrial Activity" means manufacturing; electricity; gas and water supply; post and telecommunications; software publishing, consultancy and supply; data processing, database activities and distribution of electronic content; other computer related activities; basic and applied R&D on bio-technology, pharmaceutical sciences/life sciences, natural sciences and engineering; business and management consultancy activities; and architectural, engineering and other technical activities.
12.2	FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 11 above, provided the Industrial Parks meet with the under-mentioned conditions: (i) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area; (ii) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area.
13	Satellites - Establishment and operation
13.1	Satellites - Establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO	74%	Government
14	Private Security Agencies	49 %	Government
15	Telecom Services Investment caps and other conditions for specified services are given below. However, licensing and security requirements notified by the Department of Telecommunications will need to be complied with for all services.
15.1	(i) Telecom services	74%	Automatic up to 49% Government route beyond 49% and up to 74%
15.1.1	Other conditions:
	(1) General Conditions: (i) This is applicable in case of Basic, Cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services. (ii) Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include investment by Foreign Institutional Investors (FIIs), Non- resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity. In any case, the 'Indian' shareholding will not be less than 26 Percent. (iii) FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. (iv) The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. (v) FDI shall be subject to laws of India and not the laws of the foreign country/countries. (2) Security Conditions: (i) The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. (ii) Details of infrastructure/network diagram (technical details of the network) could be provided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee company. Clearance from the licensor (Department of Telecommunications) would be required if such information is to be provided to anybody else. (iii) For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled/routed to any place outside India. (iv) The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected. (v) The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. (vi) The majority Directors on the Board of the company shall be Indian citizens. (vii) The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee. (viii) The Company shall not transfer the following to any person/place outside India:- (a) Any accounting information relating to subscriber (except for international roaming/billing) (Note: it does not restrict a statutorily required disclosure of financial nature) ; and (b) User information (except pertaining to foreign subscribers using Indian Operator's network while roaming). (ix) The Company must provide traceable identity of their subscribers. However, in case of providing service to roaming subscriber of foreign Companies, the Indian Company shall endeavour to obtain traceable identity of roaming subscribers from the foreign company as a part of its roaming agreement. (x) On request of the licensor or any other agency authorised by the licensor, the telecom service provider should be able to provide the geographical location of any subscriber (BTS location) at a given point of time. (xi) The Remote Access (RA) to Network would be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Ministry of Home Affairs. (xii) Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time. (xiii) The licensee company is not allowed to use remote access facility for monitoring of content. (xiv) Suitable technical device should be made available at Indian end to the designated security agency /licensor in which a mirror image of the remote access information is available on line for monitoring purposes. (xv) Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. (xvi) The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location. (xvii) The telecom service providers should familiarize/train Vigilance Technical Monitoring (VTM)/security agency officers/officials in respect of relevant operations/features of their systems. (xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix) In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories. (xx) For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies. (xxi) The aforesaid Security Conditions shall be applicable to all the licensee companies operating telecom services covered under this circular irrespective of the level of FDI. (xxii) Other Service Providers (OSPs), providing services like Call Centres, Business Process Outsourcing (BPO), tele-marketing, tele-education, etc, and are registered with DoT as OSP. Such OSPs operate the service using the telecom infrastructure provided by licensed telecom service providers and 100% FDI is permitted for OSPs. As the security conditions are applicable to all licensed telecom service providers, the security conditions mentioned above shall not be separately enforced on OSPs. (3) The above General Conditions and Security Conditions shall also be applicable to the companies operating telecom service(s) with the FDI cap of 49%. (4) All the telecom service providers shall submit a compliance report on the aforesaid conditions to the licensor on 1^st day of July and January on six monthly basis.
15.2	(a) ISP with gateways (b) ISP's not providing gateways i.e. without gate-ways (both for satellite and marine cables) Note: The new guidelines of August 24, 2007 Department of Telecommunications provide for new ISP licenses with FDI up to 74%. (c) Radio paging (d) End-to-End bandwidth	74%	Automatic up to 49% Government route beyond 49% and up to 74%
15.3	(a) Infrastructure provider providing dark fibre, right of way, duct space, tower (IP Category I) (b) Electronic Mail (c) Voice Mail Note: Investment in all the above activities is subject to the conditions that such companies will divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world.	100%	Automatic up to 49% Government route beyond 49%
16	TRADING
16.1	(i) Cash & Carry Wholesale Trading/ Wholesale Trading (including sourcing from MSEs)	100%	Automatic
16.1.1	Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce.
16.1.2	Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT): (a) For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained. (b) Except in case of sales to Government, sales made by the wholesaler would be considered as 'cash & carry wholesale trading/wholesale trading' with valid business customers, only when WT are made to the following entities: (I) Entities holding sales tax/ VAT registration/service tax/excise duty registration; or (II) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/ Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial activity; or (III) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or (IV) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self consumption. Note: An Entity, to whom WT is made, may fulfill any one of the 4 conditions. (c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. (d) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture (e) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. (f) A Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly.
16.2	E-commerce activities	100%	Automatic
	E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.
16.3	Test marketing of such items for which a company has approval for manufacture, provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facility commences simultaneously with test marketing.	100%	Government
16.4	Single Brand product retail trading	100%	Government
	(1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. (2) FDI in Single Brand product retail trading would be subject to the following conditions: (a) Products to be sold should be of a 'Single Brand' only. (b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. (c) 'Single Brand' product-retail trading would cover only products which are branded during manufacturing. (d) The foreign investor should be the owner of the brand. (e) In respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% of the value of products sold would have to be done from Indian 'small industries/ village and cottage industries, artisans and craftsmen'. 'Small industries' would be defined as industries which have a total investment in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a 'small industry' for this purpose. The compliance of this condition will be ensured through self-certification by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts, which the company will be required to maintain. (3) Application seeking permission of the Government for FDI in retail trade of 'Single Brand' products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The application would specifically indicate the product/ product categories which are proposed to be sold under a 'Single Brand'. Any addition to the product/ product categories to be sold under 'Single Brand' would require a fresh approval of the Government. (4) Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for Government approval.
	FINANCIAL SERVICES Foreign investment in other financial services , other than those indicated below, would require prior approval of the Government:
17	Asset Reconstruction Companies
17.1	'Asset Reconstruction Company' (ARC) means a company registered with the Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).	49% of paid-up capital of ARC	Government
17.2	Other conditions:
	(i) Persons resident outside India, other than Foreign Institutional Investors (FIIs), can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank only under the Government Route. Such investments have to be strictly in the nature of FDI. Investments by FIIs are not permitted in the equity capital of ARCs. (ii) However, FIIs registered with SEBI can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs can invest up to 49 per cent of each tranche of scheme of SRs, subject to the condition that investment by a single FII in each tranche of SRs shall not exceed 10 per cent of the issue. (iii) Any individual investment of more than 10% would be subject to provisions of section 3(3) (f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
18	Banking -Private sector
18.1	Banking -Private sector	74% including investment by FIIs	Automatic up to 49% Government route beyond 49% and up to 74%
18.2	Other conditions:
	(1) This 74% limit will include investment under the Portfolio Investment Scheme (PIS) by FIIs, NRIs and shares acquired prior to September 16, 2003 by erstwhile OCBs, and continue to include IPOs, Private placements, GDR/ADRs and acquisition of shares from existing shareholders. (2) The aggregate foreign investment in a private bank from all sources will be allowed up to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank. (3) The stipulations as above will be applicable to all investments in existing private sector banks also. (4) The permissible limits under portfolio investment schemes through stock exchanges for FIIs and NRIs will be as follows: (i) In the case of FIIs, as hitherto, individual FII holding is restricted to 10 per cent of the total paid-up capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital, which can be raised to 49 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body. (a) Thus, the FII investment limit will continue to be within 49 per cent of the total paid-up capital. (b) In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and non- repatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-up capital both on repatriation and non-repatriation basis. However, NRI holding can be allowed up to 24 per cent of the total paid-up capital both on repatriation and non-repatriation basis provided the banking company passes a special resolution to that effect in the General Body. (c) Applications for foreign direct investment in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority (IRDA) in order to ensure that the 26 per cent limit of foreign shareholding applicable for the insurance sector is not being breached. (d) Transfer of shares under FDI from residents to non-residents will continue to require approval of RBI and Government as per para 3.6.2 above as applicable. (e) The policies and procedures prescribed from time to time by RBI and other institutions such as SEBI, D/o Company Affairs and IRDA on these matters will continue to apply. (f) RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank, if such acquisition results in any person owning or controlling 5 per cent or more of the paid up capital of the private bank will apply to non-resident investors as well. (ii) Setting up of a subsidiary by foreign banks (a) Foreign banks will be permitted to either have branches or subsidiaries but not both. (b) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank's licensing criteria will be allowed to hold 100 per cent paid up capital to enable them to set up a wholly-owned subsidiary in India. (c) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 per cent in a private bank. (d) A foreign bank will be permitted to establish a wholly-owned subsidiary either through conversion of existing branches into a subsidiary or through a fresh banking license. A foreign bank will be permitted to establish a subsidiary through acquisition of shares of an existing private sector bank provided at least 26 per cent of the paid capital of the private sector bank is held by residents at all times consistent with para (i) (b) above. (e) A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks. (f) Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI (g) All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI. (iii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals.
19	Banking- Public Sector
19.1	Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks.	20% (FDI and Portfolio Investment)	Government
20	Commodity Exchanges
20.1	1. Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges. 2. For the purposes of this chapter, (i) "Commodity Exchange" is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities. (ii) "recognized association" means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952 (iii) "Association" means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative. (iv) "Forward contract" means a contract for the delivery of goods and which is not a ready delivery contract. (v) "Commodity derivative" means- ♦ a contract for delivery of goods, which is not a ready delivery contract; or ♦ a contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the Forward Markets Commission by the Central Government, but does not include securities.
20.2	Policy for FDI in Commodity Exchange	49% (FDI & FII) [Investment by Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26%]	Government (For FDI)
20.3	Other conditions:
	(i) FII purchases shall be restricted to secondary market only and (ii) No non-resident investor/ entity, including persons acting in concert, will hold more than 5% of the equity in these companies.
21	Credit Information Companies (CIC)
21.1	Credit Information Companies	49% (FDI & FII)	Government
21.2	Other Conditions:
	(1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. (2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI. (3) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment. (4) Such FII investment would be permitted subject to the conditions that: (a) No single entity should directly or indirectly hold more than 10% equity. (b) Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement; and (c) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.
22	Infrastructure Company in the Securities Market
22.1	Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations	49% (FDI & FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital]	Government (For FDI)
22.2	Other Conditions:
22.2.1	FII can invest only through purchases in the secondary market
23	Insurance
23.1	Insurance	26%	Automatic
23.2	Other Conditions:
	(1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1938, is allowed under the automatic route. (2) This will be subject to the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority for undertaking insurance activities.
24	Non-Banking Finance Companies (NBFC)
24.1	Foreign investment in NBFC is allowed under the automatic route in only the following activities: (i) Merchant Banking (ii) Under Writing (iii) Portfolio Management Services (iv) Investment Advisory Services (v) Financial Consultancy (vi) Stock Broking (vii) Asset Management (viii) Venture Capital (ix) Custodian Services (x) Factoring (xi) Credit Rating Agencies (xii) Leasing & Finance (xiii) Housing Finance (xiv) Forex Broking (xv) Credit Card Business (xvi) Money Changing Business (xvii) Micro Credit (xviii) Rural Credit	100%	Automatic
24.2	Other Conditions:
	(1) Investment would be subject to the following minimum capitalisation norms: (i) US $0.5 million for foreign capital up to 51% to be brought upfront (ii) US $ 5 million for foreign capital more than 51% and up to 75% to be brought upfront (iii) US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought upfront and the balance in 24 months. (iv) 100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1, therefore, shall not apply to downstream subsidiaries. (v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below. (vi) Non- Fund based activities : US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition: It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company. Note: The following activities would be classified as Non-Fund Based activities: (a) Investment Advisory Services (b) Financial Consultancy (c) Forex Broking (d) Money Changing Business (e) Credit Rating Agencies (vii) This will be subject to compliance with the guidelines of RBI. Note: (i) Credit Card business includes issuance, sales, marketing & design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc. (ii) Leasing & Finance covers only financial leases and not operating leases. (2) The NBFC will have to comply with the guidelines of the relevant regulator/ s, as applicable
25	Pharmaceuticals
25.1	Greenfield	100%	Automatic
25.2	Existing Companies	100%	Government

UPDATES:

No PAN needed for people outside income tax bracket. – "Karnataka High Court"
CBDT asks Income Tax Department to refund excess tax in old cases.
Accessing Officers asked to make corrections in disputed arrear demands even after limitation of 4 years, after checking that they have been paid / adjusted. [Circular 4, dated 20-06-2012]
File DVAT Audit Report if gross annual turnover > 60 lacs or prescribed amount. Format and Period is to be notified, penalty is Rs.10,000. [DVAT 2^nd Amendment Rules dated 15-06-2012]

Provisions of section 40(a) are not applicable in case of charitable trust or institution where income and expenditure is computed in terms of section 11

Court

INCOME TAX APPELLATE TRIBUNAL

Brief

The relevant facts for adjudication of ground No.1 are that the assessee is a charitable institution engaged in carrying out religious and charitable activities within the ambit of section 2(15) of the Income Tax Act. These charitable activities have been recognised by the Department and a certificates under section 12A and 80G has also been granted by the competent authority. During the course of the scrutiny proceeding, the Assessing Officer on perusal of auditor’s report enclosed with the return found that the assessee did not deduct TDS on certain amounts to which the various provisions of Sections 193 & 194 were applicable

Citation

M/s Mahatma Gandhi Seva Mandir, Opp. Bandra Lake, S.V.Rd, Bandra (W), Mum. PAN NO.AAATM1014A Appellant Vs. DDIT (E) 1(2), Mumbai. Respondent

Judgement

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCHES “B”, MUMBAI

BEFORE SHRI G.E. VEERABHADRAPPA, HON'BLE PRESIDENT

AND SHRI AMIT SHUKLA, JUDICIAL MEMBER

ITA No.4138 /Mum/2011

Assessment Year: 2007-2008

M/s Mahatma Gandhi Seva Mandir,

Opp. Bandra Lake, S.V.Rd, Bandra (W), Mum.

PAN NO.AAATM1014A

Appellant

Vs.

DDIT (E) 1(2), Mumbai.

Respondent

Appellant by: Mr. Vijay Mehta

Respondent by: Mr. P.C.Maurya

Date of hearing: 9th April 2012

Date of pronouncement: 11th May, 2012

O R D E R

PER AMIT SHUKLA (J.M.):

This appeal has been filed by the assessee against the order dated 3-11-2010, passed by CIT(A)-1, Mumbai for the quantum of assessment passed under Section 143(3) for the assessment year 2007-2008. In the concise grounds of appeal, the assessee has raised following two grounds :-

1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the disallowance of Rs.3,06,457/- u/s 40(a(ia) disregarding the fact that the appellant’s income is computed u/s 11 of the Act to which provisions of S.40(a)(ia) do not apply.

2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has sustained the addition made by the Assessing Officer that the appellant has not received OT income of Rs.20,192/-.”

2. At the outset, learned AR on behalf of the assessee did not press for ground No.2 and accordingly, ground No.2 is dismissed, being not pressed.

3. The relevant facts for adjudication of ground No.1 are that the assessee is a charitable institution engaged in carrying out religious and charitable activities within the ambit of section 2(15) of the Income Tax Act. These charitable activities have been recognised by the Department and a certificates under section 12A and 80G has also been granted by the competent authority. During the course of the scrutiny proceeding, the Assessing Officer on perusal of auditor’s report enclosed with the return found that the assessee did not deduct TDS on certain amounts to which the various provisions of Sections 193 & 194 were applicable. The Assessing Officer held that in relation to the following payments, the assessee has failed to deduct TDS:-

i) Payment made to Mrs. Suchita Chougule (architect)-Rs.52,550/-

ii) Legal fees to Khona & Kayser (Solicitors) -Rs.52227/-

iii) Professional fees to Dr. Bajaj(Radiologist) -Rs.95,830/-

iv) Consultancy fees to Deepak Bhadra Rs.38,540/-

Dr.Kotkar Rs.32,830/-

Dr. Priyasha Rs.34,480/- Rs.1,05,850/-

Rs.3,06,457/-

and accordingly he disallowed the entire payments on the ground that TDS under Section 194J have not been deducted and added to total income of the assessee.

4. Before the CIT(A), the assessee’s contention was that the provision of Section 40(a)(ia) are not applicable in the case of the assessee’s trust as the expenditure in a case of a trust has to be seen from the point of view of application of income for a charitable purposes. However, the CIT(A) did not find any merit in the said contention of the assessee and held that Section 40(a)(ia) is applicable in the assessee’s case and addition on account of non-deduction of TDS is justified.

5. Learned AR appearing on behalf of the assessee submitted before us that the assessee is a trust which is registered under Section 12A and his income has to be computed as per Section 11. The provisions of Section 40 will not be applicable as the same pertains to computation under the head “business or profession”. In support of his contention, he relied upon the order passed by the ITAT Amritsar Bench in the case of Baba Farid Vdyak Society, Bhatinda Vs. ACIT, vide order dated 31st January 2011 in ITA No.180(ASR)/2010.

6. Contrary to this, learned Senior DR submitted that provisions of TDS are applicable to all the assessees amount deducted and any non-deduction of TDS will amount to disallowance of the claim of the payment in view of the provision of Section 40(a)(ia). Accordingly, he relied heavily upon the findings of the CIT(A) and Assessing Officer.

7. We have carefully considered the rival submissions of both the parties and also the impugned order before us. It is an admitted fact that the assessee is a charitable trust, which is duly registered under Section 12A and accordingly its income and expenditure is computed in terms of section 11. The issue before us is whether the disallowance under Section 40(a)(ia) can be made for the non-deduction of TDS under Section 194 in the case of such kind of assessees. Under the Income Tax Act, computation of total income is made under the various heads of income, viz :-

i) Salary

ii) Income from house property

iii) Profits and gains from business or profession

iv) Capital gains

v) Income from other sources.

7.1. Now, let us examine Section 11 and Section 40 to decide this controversy. Section 11 to 13 is a part of Chapter 3 under the heading “Income which does not form the part of the total income”. Section 11 (1) provides that “subject to the provisions of Section 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income”. Thereafter it is provided as to how the income and to what extent it can be applied for charitable purposes. The manner in which the income can be applied has been laid down in Section 11(1) to Section 11(5). Section 13 provides exception to Section 11 wherein such an income can be excluded from the exempt income of the trust. Thus, Section 11 to 13 provides for application of income by a trust for charitable purposes and to that extent, subject to certain conditions, income of the trust is treated to be exempted from taxation. The incomes which are computed under the various heads of income, the mode of computation has been provided under respective sections.

7.2 Here we are concerned with Section 40, which is part of computation of profit and gains from business or profession. The profits and gains from business or profession are computed under Section 28 and section 29 states that “the income referred to in Section 28 shall be computed in accordance with the provisions contained in Section 30 to 43 D”. Thus, Section 30 to 43 provides various kinds of deductions which are to be made while computing the profit of the assessee from business or profession. Section 40 provides an exception to such deductions which have been provided in Section 30 to 38 and starts with a non obstante clause reading as under :-

“notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head “profits and gains of business or profession”.

Thus, Section 40 is applicable only when deductions under Sections 30 to 38 are being made in computing the income chargeable under the head “profits and gains of business or profession” under Section 28. The exception in Section 40 is carved out, only for the purpose of Section 28 and not for computing the exemption of income of a charitable trust under Section 11. The disallowance made under Section 40(a) will only go to enhance the business profit of an assessee whose income is assessable under section 28 and not otherwise. Hence, provisions of section 40(a) are not applicable in case of charitable trust or institution where income and expenditure is computed in terms of section 11.

8. Accordingly, we do not find any merit in the orders passed by the Assessing Officer as well as by the CIT(A) and delete the disallowance made under Section 40(a)(ia) on account of non-deduction of TDS for sum of Rs.3,06,457/- and the Ground No.1 as raised by the assessee stands allowed.

9. In the result, appeal filed by the assessee is partly allowed.

Order pronounced on this 11th day of May, 2012.

(G.E. VEERABHADRAPPA) (AMIT SHUKLA)

PRESIDENT JUDICIAL MEMBER

MUMBAI, Dt: 11th May, 2012.

Copy forwarded to:

1. The Appellant,

2. The Respondent,

3. The C.I.T.

4. CIT (A)

5. The DR, B - Bench, ITAT, Mumbai

//True Copy//

BY ORDER

ASSISTANT REGISTRAR

ITAT, Mumbai Benches, Mumbai

RECENT JUDGMENTS

Assesses must give proper explanation of the amount deposited in the Bank account of the assessee or to prove that account not belong to him

Posted on 24 May 2012 by Apurba Ghosh

Court

INCOME TAX APPELLATE TRIBUNAL

Brief

That having regard to the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in not quashing the impugned assessment order passed by Assessing Officer u/s. 147 that too without the serving the notices u/s. 148 and 143(2) as per law, without obtaining valid approval as prescribed under the law, without recording valid reasons to believe that income has escaped assessment and without complying with the mandatory requirements as prescribed u/s. 147 to 153 in consequence thereto.

Citation

M/s Adventure Dsigns (P) ltd., C/o M/s RRA Taxindia, D-28, South Extension, Part-I, New Delhi – 110 049 (PAN: AAACA8407C)(Appellant)Vs. Income Tax Officer, Coy.-Ward 1(2), New Delhi (Respondent)

Judgement

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “A”, NEW DELHI

BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER

AND

SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

I.T.A. No. 1617/Del/2010

A.Y.: 2001-02

M/s Adventure Dsigns (P) ltd.,

C/o M/s RRA Taxindia,

D-28, South Extension, Part-I,

New Delhi – 110 049

(PAN: AAACA8407C)

(Appellant)

Vs.

Income Tax Officer,

Coy.-Ward 1(2),

New Delhi

(Respondent)

Assessee by: Sh. Ashwani Taneja, Advocate

Department by: Mrs. Geetmala Mohananey, C.I.T. (D.R.)

ORDER

PER SHAMIM YAHYA: AM

This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-IV, New Delhi dated 25.1.2010 pertaining to assessment year 2001-02.

2. The grounds raised read as under:-

“1. That having regard to the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in not quashing the impugned assessment order passed by Assessing Officer u/s. 147 that too without the serving the notices u/s. 148 and 143(2) as per law, without obtaining valid approval as prescribed under the law, without recording valid reasons to believe that income has escaped assessment and without complying with the mandatory requirements as prescribed u/s. 147 to 153 in consequence thereto.

2. That in any case and in any view of the matter, action of Ld. Commissioner of Income Tax (Appeals) in not quashing the impugned assessment is bad in law and against the facts and circumstances of the case and the same has been passed in violation of principles of natural justice and without confronting any adverse material and without proving adequate opportunity of hearing.

3. That having regard to the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the action of Assessing Officer in making aggregate addition of ` 2,63,00,000/- u/s. 68 on account of unexplained amount deposited in a bank account maintained with Standard Chartered Bank that too without establishing on record that the impugned bank account and the amounts deposited therein belonged to the appellant assessee company and without establishing that these amounts were undisclosed income of the appellant company.

4. That in any case and in any view of the matter Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in not quashing the impugned assessment order passed by Assessing Officer and in not deleting various additions / disallowances made by Assessing Officer as the assessment order is not sustainable on various legal and factual grounds and more so by recording incorrect facts and finding.

5. That having regard to the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in law and facts in not reversing the action of Assessing Officer in charging interest u/s. 234B and 234C of the Income Tax Act, 1961.

6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

3. In this case, the Assessing Officer has observed that specific information was received from the Investigation Wing on the basis of which it was observed that large amounts of money had been credited in the bank account of the assessee details of which were mentioned on pages 2 and 3 of the assessment order. The Assessing Officer has observed that after obtaining information from the Standard Chartered Bank where the amounts had been deposited efforts were made to call the Directors of the Company, but no reply was received form them. The Assessing Officer stated that various opportunities were provided to the assessee to explain these entries in the bank account at Standard Chartered Bank. Despite these efforts no proper replies or explanations were provided by the assessee for establishing the identity, creditworthiness and genuineness of the various credit entries in the bank account at Standard Chartered Bank. The Assessing Officer has elaborately discussed in the assessment order that since the onus had not been discharged by the assessee with regard to the unexplained credits referred to above, the various entries remained unexplained. The efforts made to identify the persons authorized to operate account did not result in any response from any of the parties. In view of the various circumstances the total amount of ` 2,63,00,000/- was treated as unexplained income in the hands of the assessee.

4. Upon assessee’s appeal, Ld. Commissioner of Income Tax (Appeals) observed that the amount of ` 2,63,00,000/- had been deposited in the bank account of Standard Chartered Bank of the assessee. The efforts were made by the Assessing Officer to clarify the nature of these deposits and it was found that the various amounts had been deposited and drafts had been issued, which were subsequently cancelled. Despite various letters and efforts made by the Assessing Officer, the Standard Chartered Bank did not produce any documents on the basis of which it could be established that this bank account belong to some other party and whether the introducer and authorized persons to operate the account were other parties other than this assessee. Ld. Commissioner of Income Tax (Appeals) further noted that assessee has claimed to have filed an FIR with the Police but no finding had been made by the Police on the basis of FIR and there is nothing provided by the assessee to establish that there was no relationship between the relevant bank account and the assessee itself. Ld. Commissioner of Income Tax (Appeals) held that accordingly when Standard Chartered Bank has opened this account with the name of the assessee, the onus lies with the assessee to prove that this account was bogus and the Standard Chartered Bank had opened an account under a bogus name. Ld. Commissioner of Income Tax (Appeals) further observed that in the present set of circumstances there is nothing to establish that the Standard Chartered bank has colluded to prove benefit to some other party by opening a bogus bank account in the name of the assessee. Accordingly, keeping in view the fact that the bank account is in the name of assessee and the same has been opened by an authorized bank of the RBI, unless there is any evidence to prove that this account was bogus and did not belong to the assessee, there is no reason to disagree with the various observations of the Assessing Officer. Accordingly, Ld. Commissioner of Income Tax (Appeals) Ld. Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer.

5. Against this order the Assessee is in appeal before us.

6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that lower authorities have put the onus on the assessee to prove that the said bank

account is bogus. In this regard, assessee has categorically stated that the said account was not opened by the assessee. The bank has not replied to the query of the Assessing Officer. So adverse inference on the assessee cannot be made in this regard. In our considered opinion, interest of justice will be served if the matter is remitted to the file of the Assessing Officer to consider the issue afresh. Accordingly, we remit this issue to the file of the Assessing Officer to consider the issue afresh. Needless to add that the assessee should be given adequate opportunity of being heard.

7. In the result, the appeal filed by the Assessee stands allowed for statistical purposes.

Oder pronounced in the open court on 11/5/2012.

Sd/- Sd/-

[RAJPAL YADAV] [SHAMIM YAHYA]

JUDICIAL MEMBER ACCOUNTANT MEMBER

Date 11/5/2012

“SRBHATNAGAR”

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT

TRUE COPY

By Order,

Assistant Registrar,

ITAT, Delhi Benches

Capital gain from transanction in the portfolio management cannot be treated as business income

Posted on 24 May 2012 by Apurba Ghosh

Court

INCOME TAX APPELLATE TRIBUNAL

Brief

At the outset, the learned counsel for the assessee submitted that the assessee had filed an appeal before the ITAT being aggrieved by the order of learned CIT(A) who had treated the short term capital gains of `82,32,316/- as business income. The ITAT, vide its order dated 13th May, 2011, passed in ITA No.1962/Del/2009, had allowed the appeal of the assessee by holding as under:- “The assessee has maintained investment portfolio as well as trading portfolio. The shares in the investment portfolio have been held in Demat account. Therefore, profit on sale of shares will be assessable under the head ‘short term capital gain’ and not as business income. The assessee’s case is squarely covered by the decision of Hon’ble Bombay High Court in the case of Gopal Purohit Vs. JCIT (supra). In view of the above discussion, it is held that the profits earned on sale of shares held as investment will be assessable under the head ‘short term capital gains’ and not as ‘business income’. We, therefore, decide this issue in favour of the assessee.”

Citation

Deputy Commissioner of Income Tax, Circle-3(1), New Delhi. (Appellant) Vs. M/s CNB Finwiz Limited, 4318/3, Ansari Road, Darya Ganj, New Delhi – 110 002. PAN: AABCB2613A. (Respondent)

Judgement

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘B’: NEW DELHI

BEFORE SHRI G.D.AGRAWAL, VICE PRESIDENT AND

SHRI RAJPAL YADAV, JUDICIAL MEMBER

ITA No.3989/Del/2011

Assessment Year: 2005-06

Deputy Commissioner of Income Tax,

Circle-3(1),

New Delhi.

(Appellant)

Vs.

M/s CNB Finwiz Limited,

4318/3, Ansari Road,

Darya Ganj,

New Delhi – 110 002.

PAN: AABCB2613A.

(Respondent)

Appellant by: Shri Vikas Suryavanshi, Sr.DR.

Respondent by: Shri K.C.Jain, Advocate.

ORDER

PER G.D.AGRAWAL, VP:

This appeal by the Revenue is directed against the order of learned CIT(A)-VI, New Delhi dated 29th June, 2011 for the AY 2005-06.

2. The Revenue has taken the following ground of appeal:-

“The ld.CIT(A) has erred on facts and in law in deleting penalty amounting to Rs.2189177/- imposed u/s 271(1)(c) of the I.T.Act ignoring that the quantum additions in this case had been confirmed by the ld.CIT(A) and the Department is contesting deletion by Hon’ble ITAT.”

3. At the outset, the learned counsel for the assessee submitted that the assessee had filed an appeal before the ITAT being aggrieved by the order of learned CIT(A) who had treated the short term capital gains of `82,32,316/- as business income. The ITAT, vide its order dated 13th May, 2011, passed in ITA No.1962/Del/2009, had allowed the appeal of the assessee by holding as under:-

“The assessee has maintained investment portfolio as well as trading portfolio. The shares in the investment portfolio have been held in Demat account. Therefore, profit on sale of shares will be assessable under the head ‘short term capital gain’ and not as business income. The assessee’s case is squarely covered by the decision of Hon’ble Bombay High Court in the case of Gopal Purohit Vs. JCIT (supra). In view of the above discussion, it is held that the profits earned on sale of shares held as investment will be assessable under the head ‘short term capital gains’ and not as ‘business income’. We, therefore, decide this issue in favour of the assessee.”

4. The learned counsel placed on record the order of the Tribunal dated13th May, 2011 (supra) and submitted that since the very basis of imposition of penalty has been deleted by the Tribunal, the order of learned CIT(A) does not suffer from any infirmity. He, therefore, pleaded for sustaining the same.

5. The learned DR relied upon the order of Assessing Officer.

6. We have carefully considered the submissions of both the sides and perused the material placed before us. In this case, the disallowance made by the Assessing Officer and sustained by the learned CIT(A) was challenged by the assessee before the ITAT in an appeal. The ITAT has decided the said appeal in favour of the assessee. Therefore, at present, when the addition itself has been set aside, there cannot be any case for levy of penalty for concealment of income. Even otherwise, on merits also, the issue is covered in favour of the assessee by the decision of Hon’ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. (supra) wherein their Lordships held as under:-

“Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere taking of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”

7. The ratio of the above decision would be squarely applicable to the facts of the case under appeal because there is no case of the Revenue that the assessee furnished any incorrect or erroneous facts before the Assessing Officer. In view of the above factual and legal position, we do not find any justification to interfere with the order of learned CIT(A). The same is sustained and Revenue’s appeal is dismissed.

8. In the result, the appeal of the Revenue is dismissed.

Decision pronounced in the open Court on conclusion of hearing on15th May, 2012.

Sd/- Sd/-

(RAJPAL YADAV) (G.D.AGRAWAL)

JUDICIAL MEMBER VICE PRESIDENT

Dated: 15.05.2012

VK.

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR, ITAT

Assistant Registrar

CLASSIFICATION OF COMPANIES

What Are Kinds Of Companies?

The companies may be classified as follows:-
I. On the Basis of Incorporation:-

1. Chartered Companies:- Chartered companies are those companies which are formed under a special charter approved by the Royal Head of the State are called Chartered Companies. The charter defines the scope and goals of such companies and confers the rights and privileges on such companies. E.g. Bank of England, the East Indian Company, the Dutch EastIndian company.
2. Statutory Companies:- A company which is incorporated by a special Act of Legislature is known as Statutory Company. The goals, powers, liabilities and other functional areas are defined under the special act. Statutory Companies undertake the public utility services.
Examples of Statutory Companies in India are Reserve Bank of India, Life insurance Corporation etc.
3. Registered Companies:- Registered Companies are those companies which are formed and registered with the Registrar of companies under the Companies Act.

II. On the Basis of Liability:-

1. Limited by Shares:- This is the most common form of company. It may be private or public. The Company in which liability of the shareholders is limited to the extent of amount unpaid on shares held by them is known as company limited by shares. It is necessary for these companies to use the word limited after their name. e.g. AB Co. Ltd.
2. Limited by Guarantee:- The companies where the liability of the shareholders is limited to the extent of amount undertaken by them to contribute to the assets of the firm in the event of winding up are known as companies limited by guarantee. These companies may or may not have the share capital.
3. Unlimited Companies:- A company where there is no limit on the liability of its shareholders is known as Unlimited Company. The liability of each member extends to whole amount of the company’s debts and liabilities.

III. On the basis of Number of Members:-

1. Private Companies:- A private company is a company which
(i) has minimum paid capital of one lakh rupees or more;
(ii) can have a minimum of two and maximum of fifty members;
(iii) has restricted the right to transfer its shares to any other person;
(iv) prohibits any invitation to general public for the subscription of its shares or debentures.
Generally, relatives and friends are given the membership of the private companies.
2. Public Companies:- A public company is that company which
(i) has a minimum paid-up capital of rupees five lakhs or more;
(ii) is not a private company;
(iii) is a private company which is a subsidiary of public company;
(iv) does not limits the maximum number of members.

IV. On the Basis of Ownership:-

1. Government Companies:- Government Companies are the companies in which not less than 51 % of the paid up share capital is held either by central or state government or both of them jointly. All the subsidiary companies of government companies are included in the list of government companies.
2. Non-Government Companies:- The list of Non-government companies includes all those companies which are registered under the Companies Act but not as Government Company.

V. On the Basis of Control:-

1. Holding Companies:- The Company which holds more than half of the nominal value of share capital of another company or controls the composition of board of directors of another company is known as Holding company.
2. Subsidiary Companies:- A company whose more than half of the nominal value of share capital is held by another company or another company controls the composition of board of directors of such company is known as Subsidiary Company.

VI. On the Basis of Nationality:-

1. National Companies:- A company formed under a specific company act of nation is known as National Company. E.g. a company formed and registered under the Indian Companies Act, 1956 is known as Indian Company.
2. Foreign companies:- A company incorporated outside the region of a nation but has a place of business in the nation is known as Foreign Company.

an analysis of finance bill passed by lok sabha

ANALYSIS OF CHANGES MADE BY LOK SABHA IN FINANCE BILL, 2012

(For detailed analysis see Master Guide to Income-tax Act)

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10555

FINANCE BILL, 2012 vs. FINANCE BILL, 2012 AS PASSED BY LOK SABHA

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10556

LIST OF PROSPECTIVE AMENDMENTS BY FINANCE BILL, 2012 AS PASSED BY LOK SABHA

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10558

FINANCE BILL, 2012, AS PASSED BY LOK SABHA & JUDICIAL DECISIONS A RECKONER OF JUDICIAL DECISIONS OVERCOME/INCORPORATED BY THE FINANCE BILL, 2012 AS PASSED BY LOK SABHA

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10559

LIST OF RETROSPECTIVE AMENDMENTS BY FINANCE BILL, 2012 AS PASSED BY LOK SABHA

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10557

SERVICE TAX

Clarification on Rate of Tax - regarding

Central Board of Excise and Customs issued a clarification on the rate of tax applicable wherein invoices were raised before 1^st April 2012 and the payments shall be after 1^st April 2012. Clarification has been requested in case of the 8 specified services provided by individuals or proprietary firms or partnership firms, to which Rule 7 of Point of Taxation Rules 2011 was applicable and services on which tax is paid under reverse charge.

http://www.servicetax.gov.in/circular/st-circular12/st-circ-158-2012.htm

"FAQ on Prevention of Money Laundering Act"

Q1. What is PMLA?

PMLA refers to the Prevention of Money Laundering Act, 2002.

Q2. When did the Prevention of Money Laundering Act come into force?
The Prevention of Money Laundering Act, 2002 has come into force with effect from 1 July, 2005. The Act was amended by Prevention of Money Laundering (Amendment) Act 2009 w.e.f 01.06.2009.

Q3. Does the Act extend to the whole of India?
Yes, it extends to the whole of India including the state of Jammu & Kashmir.

Q4. What is the object of the enactment of Prevention of Money Laundering Act, 2002?

As stated in the Preamble to the Act, it is an Act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering.

Q5 Which agency administers the Prevention of Money Laundering Act?
The Directorate of Enforcement of the Department of Revenue, Ministry of Finance is responsible for administering the Prevention of Money Laundering Act.

Q6. What is Money Laundering?

The goal of a large number of criminal activities is to generate profit for an individual or a group. Money laundering is the processing of these criminal proceeds to disguise their illegal origin.

Illegal arms sales, smuggling, and other organised crime, including drug trafficking and prostitution rings, can generate huge amount of money. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to "legitimise" the ill-gotten gains through money laundering. The money so generated is tainted and is in the nature of `dirty money'. Money Laundering is the process of conversion of such proceeds of crime, the `dirty money', to make it appear Legitimate Money.

Q7. How does Money Laundering take place?

Usually, the process of Money Laundering goes through the following three stages :

(a) Placement:- The Money Launderer, who is holding the money generated from criminal activities, introduces the illegal funds into the financial system. This might be done by breaking up large amount of cash into less conspicuous smaller sums which are deposited directly into a Bank Account or by purchasing a series of instruments such as Cheques, Bank Drafts etc., which are then collected and deposited into one or more accounts at another location.

(b) Layering:- The second stage of Money Laundering is layering. In this stage, the Money Launderer typically engages in a series of continuous conversions or movements of funds, within the financial or banking system by way of numerous accounts, so as to hide their true origin and to distance them from their criminal source. The Money Launderer may use various channels for movement of funds, like a series of Bank Accounts, sometimes spread across the globe, especially in those jurisdictions which do not co–operate in anti Money Laundering investigations.

(c) Integration: - Having successfully processed his criminal profits through the first two stages of Money Laundering, the Launderer then moves to this third stage in which the funds reach the legitimate economy, after getting inseparably mixed with the legitimate money earned through legal sources of income. The Money Launder might then choose to invest the funds into real estate, business ventures & luxury assets, etc. so that he can enjoy the laundered money, without any fear of law enforcement agencies.

The above three steps may not always follow each other. At times, illegal money may be mixed with legitimate money, even prior to placement in the financial system. In certain cash rich businesses, like Casinos (Gambling) and Real Estate, the proceeds of crime may be invested without entering the mainstream financial system at all.

Q8. What has been the international response to tackle Money Laundering?

In response to mounting concern over money laundering, the Financial Action Task Force on money laundering (FATF) was established by the G-7 Summit in Paris in 1989 to develop a co-ordinated international response. One of the first tasks of the FATF was to develop Recommendations which set out the measures national governments should take to implement effective anti-money laundering programmes.

Q9. What steps have been taken by the Government of India to tackle the menace of Money Laundering?

Government of India is committed to tackle the menace of Money Laundering and has always been part of the global efforts in this direction. India is signatory to the following UN Conventions, which deal with Anti Money Laundering / Countering the Financing of Terrorism :

1. International Convention for the Suppression of the Financing of Terrorism (1999)
2. UN Convention against Transnational Organized Crime (2000)
3. UN Convention against Corruption (2003)

In pursuance to the political Declaration adopted by the special session of the United Nations General Assembly (UNGASS) held on 8 to 10 June 1998 (of which India is one of the signatories) calling upon member states to adopt Anti Money Laundering Legislation & Programme, the Parliament has enacted a special law called the `Prevention of Money Laundering Act, 2002' (PMLA 2002). This Act has been substantially amended, by way of enlarging its scope, in 2009 (w.e.f. 1.6.2009), by enactment of Prevention of Money Laundering (Amendment) Act, 2009.

Q10. What is the offence of Money Laundering?

Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money-laundering. (Section 3 of PMLA)

Q11. What are proceeds of crime?

"Proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property;(Section 2(1)(u) of PMLA)

Q12. What is a `scheduled offence' ?

The offences listed in the Schedule to the Prevention of Money Laundering Act, 2002 are scheduled offences in terms of Section 2(1)(y) of the Act. With the amendment of the Act in 2009, a large number of offences have been included in the Schedule of the Act. The scheduled offences are divided into three parts - Part A, Part B, & Part C.

In Part A, certain serious offences such as those connected with waging war against the Nation, circulation of Fake Indian Currency Notes, offences relating to Narcotic Drugs, etc. have been included, wherein no monetary limit for initiating action under PMLA has been prescribed.

In relation to offences under Part 'B' of the schedule, the value involved should be Rs 30 Lakhs or More.

Part `C' of the Schedule deals with trans-border crimes, and is a vital step in tackling Money Laundering across international boundaries.

Q13. What is a Predicate Offence?

Every Scheduled Offence is a Predicate Offence. The Scheduled Offence is called Predicate Offence as the offence is a prerequisite and integral part of Money Laundering Offence.

Q14. What are the major Acts covered in the Schedule?

(a) Indian Penal Code (IPC)
(b) NDPS Act
(c) Unlawful Activities (Prevention ) Act
(d) Prevention of Corruption Act
(e) Customs Act
(f) SEBI Act
(g) Copyright Act
(h) Trademark Act
(i) Information Technology Act
(j) Explosive Act
(k) Wild Life (Protection) Act

The various Acts covered in the Schedule to PMLA are given in Annexure-A.

Q15. Who investigates Scheduled Offences?
Scheduled Offences are investigated by agencies such as Police, Customs, SEBI, NCB, CBI under their respective Acts.
Q16. Who can investigate a case of Money Laundering ?

As per Sections 48 & 49 of the PMLA, the officers of the Directorate of Enforcement have been given powers to investigate cases of Money Laundering. The officers have also been authorised to initiate proceedings for attachment of property and to launch prosecution in the designated Special Court.

Q17. What are the possible actions which can be taken against persons/properties involved in Money Laundering?

Following actions can be taken against the persons involved in Money Laundering:-

(a) Attachment of property derived or obtained as a result of a scheduled offence. The attached properties may be confiscated and disposed off. ( Sections 5 & 8 of the Act).

(b) Persons found guilty of an offence of Money Laundering are punishable with imprisonment for a term which shall not be less than three years but may extend up to seven years and shall also be liable to a fine up to Rupees 5 Lakhs (Section 4 of the Act). When the scheduled offence is committed under the Narcotic and Psychotropic Substances Act, 1985, the punishment shall be imprisonment for a term which shall not be less than three years but may extend upto ten years and liable to a fine of upto Rs.5 lakhs.

Q18. What are the powers available to the Investigating Officers under the Act ?

The Investigating Officers have the powers :-

(a) To conduct survey of a place (Section 16)
(b) To conduct search of building, place, vessel, vehicle or aircraft & seize records & property (Section 17)
(c) To conduct personal search (Section 18)
(d) To summon and record the statements of persons concerned (Sec. 50);
(e) To arrest persons accused of committing the offence of Money Laundering (Section (f) To provisionally attach any property suspected to be derived from the proceeds of crime (Section 5)

Q19. What are the powers of authority during survey?

An authority during the survey may—

(i) place marks of identification on the records inspected by him and make or cause to be made extracts or copies there from

(ii) make an inventory of any property checked or verified by him, and

(iii) record the statement of any person present in the place which may be useful for, or relevant to, any proceeding under this Act.(Section 16)

Q20. What are the powers of officers / authority during search & seizure?

Authorised officer may

(a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept;

(b) break open the lock of any door, box, locker, safe, almirah or other receptacle where the keys thereof are not available;

(c) seize any record or property found as a result of such search;

(d) place marks of identification on such record or make or cause to be made extracts or copies there from;

(e) make a note or an inventory of such record or property;

(f) examine on oath any person, who is found to be in possession or control of any record or property, in respect of all matters relevant for the purposes of any investigation under this Act. (Section 17)

Q21. What is the time limit for retention of records and property seized during search & seizure?

Three months from the end of the month in which such records & property were seized. On the expiry of the said three months period, the records & property shall be returned to the person from whom such records & property was seized unless the Adjudicating Authority permits retention of such property beyond the said period. (Sections 20 & 21)

Q22. What are the rights of persons being searched during search?

(i) Where an authority is about to search any person, he shall, if such person so requires, take such person within twenty-four hours to the nearest Gazetted Officer, superior in rank to him, or a Magistrate.

(ii) If the requisition is made, the authority shall not detain the person for more than twenty-four hours prior to taking him before the Gazetted Officer, superior in rank to him, or the Magistrate referred to in that sub-section.

(iii) The Gazetted Officer or the Magistrate before whom any such person is brought shall, if he sees no reasonable ground for search, forthwith discharge such person but otherwise shall direct that search be made.

(iv) Search shall be made in the presence of two or more persons.

(v) No female shall be searched by any one except a female. (Section 18)

Q23. What are the rights of persons during arrest?

(i) Person making arrest shall, as soon as may be, inform him of the grounds for such arrest to the arrestee.

(ii) Every person arrested shall, within twenty-four hours, be taken to a Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction (Section 19)

Q24. What are the powers of authorities regarding issuing summons, enforcing production of documents and to give evidence etc.?

(i) The Director, Additional Director, Joint Director, Deputy Director or Assistant Director of the Directorate of Enforcement have the power to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under this Act.

(ii) All the persons so summoned are bound to attend in person or through authorised agents, as such officer may direct, and are bound to state the truth upon any subject respecting which they are examined or make statements, and produce such documents as may be required.

(iii) Such proceedings are deemed to be judicial proceedings within the meaning of section 193 and section 228 of the Indian Penal Code. (Section 50)

Q25. What is the time limit for retention of record impounded during the proceedings conducted under the PMLA?

Authority empowered to issue summons may impound and retain in his custody for such period, as he thinks fit, any records produced before him in any proceedings under this Act :

Provided that an Assistant Director or a Deputy Director cannot
(a) impound any records without recording his reasons for so doing; or
(b) retain in his custody any such records for a period exceeding three months, without obtaining the previous approval of the Director. (Section 50)

Q26. What are the presumptions in interconnected transactions?

Where money-laundering involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation under section 8, it shall, unless otherwise proved to the satisfaction of the Adjudicating Authority, be presumed that the remaining transactions form part of such inter-connected transactions. (Section 23)

Q27. Whether the statement recorded before the Investigating Officer under PMLA is admissible evidence under the Law?

Yes, the statement recorded before the Investigating Officer under PMLA is admissible evidence in the Court as such proceeding under Section 50(2) and 50(3) of the Act is a judicial proceeding within the meaning of Section 193 and 228 of IPC.

Q28. Who has burden to prove the commission of offence under PMLA?

When a person is accused of having committed the offence under section 3, the burden of proving that proceeds of crime are untainted property shall be on the accused. (Section 24)

Q29. What is meant by the term "Property" appearing in the Prevention of Money Laundering Act, 2002?

"Property" means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located [Section 2(v)]

Q30.What is "attachment" ?

"Attachment" means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III of the Act. [Section 2(d)]

Q31. What are the circumstances under which properties involved in money laundering can be attached?

(i) Where the Director, or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reasons to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that

(a) any person is in possession of any proceeds of crime;

(b) such person has been charged of having committed a scheduled offence; and

(c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by an order in writing, provisionally attach such property for a period not exceeding 150 days from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961).

(ii) No such order of attachment shall be made unless in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 157 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorized to investigate the offence mentioned in the Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be. (Section 5)

Q32. How long will this order of provisional attachment of property remain valid?

Every order of provisional attachment shall cease to have effect after 150 days from the date of the order, if no order is passed by the Adjudicating Authority in this regard. However, within the said 150 days, if the Adjudicating Authority, by an order, records a finding that all or any of the properties are not involved in money laundering, then order of provisional attachment shall cease to have effect from the date of such order of the Adjudicating Authority. [Section 3(5)]

Q33. Whether the persons claiming or entitled to claim any interest in the enjoyment of immovable property can enjoy the property during the period of provisional attachment?

Yes. [Section 5 (4)]

Q34. What is the remedy available to aggrieved person, where property is provisionally attached?

It has been provided in the Act that before recording the finding that all or any of the properties are involved in money laundering, the Adjudicating Authority has to issue a show cause notice of not less than thirty days to the aggrieved person. The aggrieved person at this stage can submit his reply and attend the hearing, either by himself or through his authorized representative, before the Adjudicating Authority to present his standpoint. [Section 8(1)]

Q35. What will happen if the Adjudicating Authority records the finding that all or any of the properties are involved in money laundering?

(i) Where the Adjudicating Authority decides that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property. Such attachment shall

(a) continue during the pendency of the proceedings relating to any scheduled offence before a court; and

(b) become final after the guilt of the person is proved in the trial court and order of such trial court becomes final

(iii) After the confirmation of provisional order of attachment, the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the attached property.

Q36. What will happen if the Adjudicating Authority records the finding that all or any of the properties are not involved in money laundering?

In such cases, the Adjudicating Authority shall direct the release of all properties other than the properties involved in money-laundering to the person from whom such properties were seized. [Section 20 (5)

However, the Director or any other officer authorised by him in this behalf, may withhold the release of any property until filing of appeal under section 26 or forty-five days from the date of order under sub-section (5), whichever is earlier, if he is of the opinion that such property is relevant for the proceedings before the Appellate Tribunal. [Section 20 (6)]

Q37. What will happen to the seized records after passing of the order by the adjudicating authority?

The Adjudicating Authority shall direct the release of the records to the person from whom such records were seized. However, the Director or any officer authorized by him in this behalf may withhold the release of any records until filing of appeal under section 26 or after forty-five days from the date of order under sub-section (5), whichever is earlier, if he is of the opinion that such records are relevant for the proceedings before the Appellate Tribunal.[Section 21)]

Q38. What will happen to the attached properties after conclusion of trial for the scheduled offence?

(i) Where on conclusion of a trial for any scheduled offence, the person concerned is acquitted, the attachment of the property and net income, if any, shall cease to have effect. [Section 8(5)]

(ii) Where on conclusion of a trial for any scheduled offence, the guilt of the person is proved in the trial
court and order of such trial court becomes final, the order of attachment of property will become final. [Section 8 (3)]

(iii) Where the attachment of any property becomes final, the Adjudicating Authority shall, after giving an
opportunity of being heard to the person concerned, make an order confiscating such property. [Section 8(6)]

(iv) After an order of confiscation, all the rights and title in such property shall vest absolutely in the Central
Government free from all encumbrances. (Section 9)

Q39. Which is the Appellate Authority against the order passed by Adjudicating Authority and what is the time limit to file appeal?

The Director or any person aggrieved by an order made by the Adjudicating Authority under this Act, may prefer an appeal to the Appellate Tribunal. Appeal has to be filed within a period of forty-five days from the date of receipt of a copy of the order made by the Adjudicating Authority. Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period. (Section 26)

Q40. Which is the Appellate Authority against the order passed by Appellate Tribunal and what is the time limit to file appeal?

Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law or fact arising out of such order. Thus appeal can be filed before High Court on any question of law or fact.
High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. (Section 42)

Q41. How do you describe the expression, "person" appearing in the Prevention of Money Laundering Act, 2002?

"Person" includes

1. an individual,
2. a Hindu undivided family,
3. a company,
4. a firm,
5 an association of persons or a body of individuals, whether incorporated or not,
6. every artificial juridical person not falling within any of the preceding sub-clauses, and
7. any agency, office or branch owned or controlled by any of the above persons mentioned in the preceding
sub-clauses.

Thus, besides the natural person, even legal entities are also covered under the expression "person" as per the Act.

Q42. What are the offences specified under Part "A" of the schedule?

Para 1: The Indian Penal Code (Section 121,121A,489A, 489B)

Para 2: The Narcotics Drugs & Psychotropic Substances Act, 1985 (Section 15,16,17,18, 19,20,21, 22,23, 24, 25A,27A,29)

Para 3: The Explosives Substances Act, 1908 (Section 3,4,5)

Para 4: Unlawful Activities (Prevention) Act, 1967 (Section 10 read with 3, 11 read with 3&7, 13 read with 3,16 with 15, 16A, 17,18,18A, 18B,19,20,21, 38,39 & 40)

Q43. What are the offences specified under Part "B" of the schedule?

Para 1: The Indian Penal Code (Section 120B,255, 257, 258, 259, 260, 302,304, 307, 308, 327, 329, 364A, 384 to 389, 392 to 402, 411, 412, 413, 414, 417, 418, 419, 420, 421, 422, 423, 424, 467, 471, 472&473, 475 & 476, 481, 482, 483,484,485, 486,487,488) .

Para 2: The Arms Act, 1959 (Section 25,26,27,28, 29 &30)

Para 3 The Wildlife (Protection) Act, 1972 (Section 51 read with 9, 51 read with 17A, 51 read with 39, 51 read with 44, 51 read with 48, 51 read with 49B).

Para 4 : Immoral Traffic (Prevention) Act, 1956 (Section 5,6,8,9 )

Para 5 : The Prevention of Corruption Act, 1988 (Section 7,8,9,10 & 13)

Para 6 : The Explosives Act, 1884. (Section 9B, 9C)

Para 7 : The Antiquities and Arts Treasures Act, 1972 (Section 25 read with 3, 28 )

Para 8 : The Securities and Exchange Board of India Act, 1992 (Section 12A read with 24))

Para 9 : The Customs Act, 1962. (Section 135)

Para 10: The Bonded Labour System (Abolition) Act, 1976 (Section 16,18,20)

Para 11: The Child Labour (Prohibition and Regulation) Act, 1986 (Section 14)

Para 12: The Transplantation of Human Organs Act, 1994 (Section 18,19,20)

Para 13: The Juvenile Justice (Care and Protection of children) Act, 2000. (Section 23,24,25,26)

Para 14: The Emigration Act, 1983 (Section 24)

Para 15: The Passports Act. 1967 (Section 12)

Para 16: The Foreigners Act, 1946 (Section 14,14B,14C)

Para 17: The Copy Right Act, 1957 (Section 63,63A,63B,68A)

Para 18: The Trade Marks Act, 1999. (Section 103,104,105, 107,120)

Para 19: The Information Technology Act, 2000. (Section 72,75)

Para 20: The Biological Diversity act, 2002. (Section 55 read with 6)

Para 21: The Protection of Plant varieties and farmers' Rights Act, 2001. (Section 70,71,72,73 all read with 68)

Para 22: The Environment Protection Act, 1986. (Section 15 read with 7 & 8)

Para 23: The Water (Prevention and Control of Pollution) Act, 1974 [Section 41(2), 43]

Para 24: The Air (Prevention and Control of Pollution) Act, 1981. (Section 37)

Para 25: The Suppression of Unlawful Acts against Safety of Maritime Navigation and Fixed Platforms on Continental Shelf Act, 2002. (Section 3)

Q44. What are the offences specified under Part "C" of the schedule?

An offence which is the offence of cross border implications and is specified in, -

1. Part A; or
2. Part B without any monetary threshold; or
3. The offences against property under Chapter XVII of the Indian Penal Code.

Q45. What is "offence of cross border implication" ?

Any conduct by a person at a place outside India which constitutes an offence at that place and which would have constituted an offence specified in Part A, Part B, or Part C of the Schedule, had it been committed in India and if such person remits the proceeds of such conduct or part thereof to India; or

Any offence specified in Part A, Part B, or Part C of the Schedule which has been committed in India and the proceeds of crime, or part thereof have been transferred to a place outside India or any attempt has been made to transfer the proceeds of crime, or part thereof from India to a place outside India. [Section 2 (ra)]

OBLIGATIONS OF BANKING COMPANIES, FINANCIAL INSTITUTIONS AND INTERMEDIARIES

Q46. What are the obligations of Banking Companies, Financial Institutions and Intermediaries of securities market in terms of the provisions of PMLA,2002?

Every banking company, financial institution and intermediary has to maintain a record of all transactions, the nature and value of which may be prescribed, whether such transactions comprise a single transaction or a series of transactions integrally connected to each other and furnish such information to the Director within such time as prescribed. They are also to verify and maintain the records of the identity of all its clients, in prescribed manner. These records are to be maintained for a period of ten years. (Section 12)

Q47.What are the penalties that can be imposed on banking company, financial institution and intermediary for non maintenance of records or non submission of aforesaid information?

Fine can be levied on such banking company or financial institution or intermediary which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure. (Section 13)
Q48. Who is the appellate authority against the order passed by Director?
Any banking company, financial institution or intermediary aggrieved by any order of the Director made under section 13, may prefer an appeal to the Appellate Tribunal. (Section 26)

SPECIAL COURTS

Q49. What are special Courts under PMLA?

For the trial of an offence punishable under section 4 of PMLA, the Central Government, in consultation with the Chief Justice of the High Court, by notification, has designated one or more Courts of Session as Special Court or Special Courts for such area or areas or for such case or class or group of cases as specified in the notifications.

While trying an offence under PMLA, a Special Court has also to try an offence, other than an offence of money laundering, with which the accused may, under the Code of Criminal Procedure, 1973, be charged at the same trial. (Section 43)

Q50. What are offences trial able by special Courts under PMLA?

Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the scheduled offence and the offence punishable under section 4 of PMLA, shall be triable only by the Special Court constituted for the area in which the offence has been committed. (Section 44)

Q51. Which is the Appellate Authority against the order passed by Special Court?

The High Court may exercise, so far as may be applicable, all the powers conferred by Chapter XXIX or Chapter XXX of the Code of Criminal Procedure, 1973, on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court. (Section 47)

RECIPROCAL ARRANGEMENT FOR ASSISTANCE IN CERTAIN MATTERS AND PROCEDURE FOR ATTACHMENT AND CONFISCATION OF PROPERTY

Q52. What is meant by term "Contracting State"?

"Contracting State" means any country or place outside India in respect of which arrangements have been made by the Central Government with the Government of such country through a treaty or otherwise. (Section 55)

Q53. What is the mechanism to obtain evidence required in connection with investigation into an offence or proceedings under the Act if such evidence may be available in any place in a contracting State?

An application is to be made to a Special Court by the Investigating Officer or any officer superior in rank to the Investigating Officer and the Special Court, on being satisfied, may issue a Letter of Request to a court or an authority in the contracting State competent to deal with such request to

(i) examine facts and circumstances of the case,

(ii) take such steps as the Special Court may specify in such letter of request, and

(iii) forward all the evidence so taken or collected to the Special Court issuing such letter of request.

Every statement recorded or document or thing received from contracting state shall be deemed to be the evidence collected during the course of investigation. (Section 57).

Q54. What is the mechanism to provide assistance to a contracting State?

Where a Letter of Request is received by the Central Government from a court or authority in a contracting State requesting for investigation into an offence or proceedings under PMLA and forwarding to such court or authority any evidence connected therewith, the Central Government may forward such Letter of Request to the Special Court or to any authority under the Act for execution of such request. (Section 58)

Q55. What are the Reciprocal arrangements for processes and assistance for transfer of accused persons?

(1) A Special Court, in relation to an offence punishable under section 4 for the service or execution of a summons, a warrant or a search warrant in a contracting state shall send such summons or warrant in duplicate in prescribed form to the Court, Judge or Magistrate through specified authorities.

(2) Similarly summons, a warrant or a search warrant in relation to an offence punishable under section 4 received for service or execution from a contracting state shall be served or executed as if it were a summons or warrant received by it from another Court in the said territories for service or execution.

After execution of summon or search warrant received from a contracting State, the documents or other things produced or things found in the search shall be forwarded to the Court issuing the summons or search-warrant through the specified authority. (Section 59)

Q56. Whether the property involved in money laundering and located in the contracting State can also be attached?

Yes. In such cases, after issue of an order for attachment of any property made under section 5 or an order confirming such attachment made by an Adjudicating Authority, the Special Court, on an application by the Director or the Administrator may issue a Letter of Request to a court or an authority in the contracting State for execution of such order.(Section 60)

Q57. Whether the request received from contracting state requesting attachment or confiscation of the property in India (derived or obtained, directly or indirectly, by any person from the commission of an offence under section 3 committed in that contracting State) can be executed?

Yes.

MISCELLANEOUS

Q58. What is the punishment for vexatious search?

Imprisonment for a term which may extend to two years or fine which may extend to fifty thousand rupees or both.(Section 62)

Q59. What is the punishment for false information or failure to give information, etc.?

Any person willfully and maliciously giving false information and so causing an arrest or a search to be made under this Act shall on conviction be liable for imprisonment for a term which may extend to two years or with fine which may extend to fifty thousand rupees or both. (Section 63)

Q60.What is the punishment if a person being legally bound to state the truth of any matter refuses to answer any question put to him, refuses to sign any statement made by him, or omits to attend or produce books of account or documents at the place or time in compliance of summon issued under section 50?

Penalty of a sum which shall not be less than five hundred rupees but which may extend to ten thousand rupees for each such default or failure can be imposed. (Section 63)

Q61. Whether a suit can be brought in civil court to set aside or modify any proceedings taken or made under PMLA?

No suit shall be brought in any civil court to set aside or modify any proceeding taken or order made under PMLA and no prosecution, suit or other proceeding shall lie against the Government or any officer of the Government for anything done or intended to be done in good faith under PMLA. (Section 67)

Q62. What is the mechanism to recover the fine imposed on any person under Section 13 or Section 63?

Where any fine imposed on any person under section 13 or section 63 is not paid within six months from the day of imposition of fine, the Director or any other officer authorised by him in this behalf may proceed to recover the amount from the said person in the same manner as prescribed in Schedule II of the Income-tax Act, 1961 for the recovery of arrears and he or any officer authorised by him in this behalf shall have all the powers of the Tax Recovery Officer mentioned in the said Schedule for the said purpose.(Section 69)

Q63. What are the provisions when the offence of money laundering is committed by companies?

(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made there under is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to the company, for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly :
Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made there under has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of any company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. (Section 70)

Q64. What will happen if there is conflict between the provisions of PMLA, and other Acts / laws?

The provisions of PMLA have over-riding effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. (Section 71)

Q65. What will happen to the proceedings initiated under PMLA in the event of death or insolvency of the person?

In cases where any property of a person has been attached under section 8 and no appeal against the order attaching such property has been preferred, then, the legal representatives or the official assignee or the official receiver may prefer an appeal to the Appellate Tribunal / High Court or to continue the appeal before the Appellate Tribunal / High Court, in place of such person. (Section 72)

INVESTOR EDUCATION AND PROTECTION FUND (UPLOADING OF INFORMATION REGARDING UNPAID AND UNCLAIMED AMOUNTS LYING WITH COMPANIES) RULES, 2012

NOTIFICATION NO. G.S.R. 352(E), DATED 10-5-2012

In exercise of the powers conferred by clauses (a) and (b) of sub-section (1) of Section 642 of the Companies Act, 1956 (1 of 1956), read with sub-section (3) of Section 205C of that Act, the Central Government hereby makes the following rules, namely:-

Short title and Commencement

1. (1) These rules may be called the Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012.

(2) They shall come into force with effect from 20th May, 2012.

Definitions

2. In these rules, unless the context otherwise requires-

(a) 'Act' means the Companies Act, 1956;

(b) 'eForm' means eform specified in the rules;

(d) Words and expressions used in these rules and not defined herein but defined in the Act shall have the meaning as assigned to them in the Act;

Filing of information regarding unpaid and unclaimed amounts

3. Every Company (including Non-banking Financial Companies and Residuary Non-banking Companies) shall, within a period of 90 days after the holding of Annual General Meeting or the date on which it should have been held as per the provisions of section 166 of the Act and every year thereafter till completion of the seven years period, identify the unclaimed amounts as referred to in sub-section (2) of section 205C of the Act, separately furnish and upload on its own website as also on the Ministry's website or any other website as may be specified by the Government a statement or information through eForm 5 INV, separately for each year, containing following information, namely:-

(a) the names and last known addresses of the persons entitled to receive the sum;

(b) the nature of amount;

(d) the due date for transfer into the Investor Education and Protection Fund; and

(e) such other information as considered relevant for the purpose;

Provided that, for the financial year ended March 31, 2011, the information shall be filed, latest by the July 31, 2012.

Verification of eForm

4. The information referred to in rule 3 shall be duly verified and certified by a chartered accountant or a company secretary or a cost accountant practicing in India or by the statutory auditors of the company.

Default in filing of information

5. If a company fails to furnish and upload information or furnishes and uploads false information on the website, the company, and every officer of the company who is in default, shall be liable and in such case the provisions of Section 629A of the Companies Act, 1956 shall be applicable.

SECTION 610 OF THE COMPANIES ACT, 1956 - INSPECTION, PRODUCTION AND EVIDENCE OF DOCUMENTS KEPT BY REGISTRAR - COMPLIANCE OF PROVISIONS OF THE COMPANIES ACT, 1956 AND RULES MADE THEREUNDER - ACCEPTANCE OF SPECIFIED E-FORMS FILED BY DIRECTORS OF DEFAULTING COMPANIES

GENERAL CIRCULAR NO. 09/2012, DATED 15-5-2012

The Ministry had issued general circular no. 33/2011, dated 1-6-2011 wherein it was, inter alia, stated that in order to ensure corporate governance and proper compliances of the provisions of the Companies Act, 1956, it had been decided that no request, whether oral, in writing or through e-Forms, for recording any event based information/changes shall be accepted by the Registrar of companies from such defaulting companies, unless they file their updated balance sheets and annual returns with the office of the Registrar of Companies. Further, the Ministry has issued General Circular No. 63/2011, dated 6-9-2011, wherein it was stated that in the interest of stakeholders certain event based information/changes were allowed to be filed and accepted by the Registrar of companies from such Defaulting Companies.

2. Now on requests received from various Corporates & Professionals and difficulties experienced by the stakeholders in filing Form No.8 and Form No.10 (for modification of charges under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), it has now been decided to accept filing of the followings Forms:-

(a)	Form No.8 and Form No.10	Particulars of modification of charge(s) under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
(b)	Form 17	Particulars of Satisfaction of Charge(s) from defaulting companies also.

3. This circular shall be effective from 20-5-2012.

PR No. 62/2012

SEBI NOTIFIES SEBI (ALTERNATIVE INVESTMENT FUNDS) REGULATIONS 2012

The SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) have been notified today. The AIF Regulations are available on the SEBI website http://www.sebi.gov.in.
AIFs Regulations endeavour to extend the perimeter of regulation to unregulated funds with a view to systemic stability, increasing market efficiency, encouraging formation of new capital and consumer protection. Salient features of the AIF Regulations, inter alia, include the following:

Scope of the Regulations and applicability to existing funds

All AIFs whether operating as Private Equity Funds, Real Estate Funds, Hedge Funds, etc. must register with SEBI under the AIF Regulations.
SEBI (Venture Capital Funds) Regulations, 1996 (“VCF Regulations”) have been repealed. However, existing VCFs shall continue to be regulated by the VCF Regulations till the existing fund or scheme managed by the fund is wound up. Existing VCFs, however, shall not increase the targeted corpus of the fund or scheme as it stands on the day of Notification of these Regulations. Such VCFs may also seek re-registration under AIF regulations subject to approval of 66.67% of their investors by value.
Existing funds not registered under the VCF Regulations will not be allowed to float any new scheme without registration under AIF Regulations. However, schemes floated by such funds before coming into force of AIF Regulations, shall be allowed to continue to be governed till maturity by the contractual terms, except that no rollover/ extension or raising of any fresh funds shall be allowed.
Existing funds not registered under the VCF Regulations which seek registration but are not able to comply with all provisions of AIF Regulations may seek exemption from the Board from strict compliance with the AIF Regulations.

Categories of funds

The Regulation seeks to cover all types of funds broadly under 3 categories. An application can be made to SEBI for registration as an AIF under one of the following 3 categories:-

i. Category I AIF – those AIFs with positive spillover effects on the economy, for which certain incentives or concessions might be considered by SEBI or Government of India or other regulators in India; and which shall include Venture Capital Funds, SME Funds, Social Venture Funds, Infrastructure Funds and such other Alternative Investment Funds as may be specified. These funds shall be close ended, shall not engage in leverage and shall follow investment restrictions as prescribed for each category. Investment restrictions for VCFs are similar to restrictions in the existing VCF Regulations.

ii. Category II AIF – those AIFs for which no specific incentives or concessions are given by the government or any other Regulator; which shall not undertake leverage other than to meet day-to-day operational requirements as permitted in these Regulations; and which shall include Private Equity Funds, Debt Funds, Fund of Funds and such other funds that are not classified as category I or III. These funds shall be close ended, shall not engage in leverage and have no other investment restrictions.

iii. Category III AIF – those AIFs including hedge funds which trade with a view to make short term returns; which employs diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. These funds can be open ended or close ended. Category III funds shall be regulated through issuance of directions regarding areas such as operational standards, conduct of business rules, prudential requirements, and restrictions on redemption, conflict of interest as may be specified by the Board.

Other salient features

The Alternative Investment Fund shall not accept from an investor an investment of value less than rupees one crore. Further, the AIF shall have a minimum corpus of Rs. 20 crore.
The fund or any scheme of the fund shall not have more than 1000 investors.
The manager or sponsor for a Category I and II AIF shall have a continuing interest in the AIF of not less than 2.5% of the initial corpus or Rs.5 crore whichever is lower and such interest shall not be through the waiver of management fees.
For Category III Alternative Investment Fund, the continuing interest shall be not less that 5% of the corpus or rupees ten crore, whichever is lower.
Category I and II AIFs shall be close-ended and shall have a minimum tenure of 3 years. However, Category III AIF may either be close-ended or open-ended.
Schemes may be launched under an AIF subject to filing of information memorandum with the Board along with applicable fees.
Units of AIF may be listed on stock exchange subject to a minimum tradable lot of rupees one crore. However, AIF shall not raise funds through Stock Exchange mechanism.
Category I and II AIFs shall not be permitted to invest more than 25% of the investible funds in one Investee Company. Category III AIFs shall invest not more than 10% of the corpus in one Investee Company.
AIF shall not invest in associates except with the approval of 75% of investors by value of their investment in the Alternative Investment Fund.
All AIFs shall have QIB status as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.
The Regulations provide for transparency and disclosures and mechanism for avoidance of conflict of interest.

5 comments:

CS MANOJ KUMAR BHAGAT12 May 2012 at 06:28
UPDATES:

1. GAAR paranoia: FII funds fear Vodafone like tax. The government's strident stand on Vodafone and its decision to tax indirect transfers have raised concerns among foreign institutional investors. While the deferment of General Anti-Avoidance Rules (GAAR ) has come as a relief to offshore portfolio managers, many FIIs fear foreign investors may be caught on the taxman's radar.

2. Budget Update: Goverment extends Tax Exemption for all unrecognized Private PF Trusts till March 2013. Amendment to this effect incorporated in Finance Bill.
CS MANOJ KUMAR BHAGAT12 May 2012 at 14:01
Saving Scheme Amendment Rules, 2012

1. Post Office Time Deposit (Amendment) Rules, 2012

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10628

2) Post Office Recurring Deposit (Amendment) Rules, 2012

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10625

3) Post Office (Monthly Income Account) Amendment Rules, 2012

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10627

4) Senior Citizens Savings Scheme (Amendment) Rules, 2012

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10626

5) National Savings Certificates (IX Issue) (Amendment) Rules, 2012

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10624

6) National Savings Certificates (VIII Issue) (Amendment) Rules, 2012

http://www.taxmann.com/taxmannflashes/whatsnew.aspx?stype=1&sid=10623
CS MANOJ KUMAR BHAGAT14 May 2012 at 00:11
UPDATES:

1. Ensure you have Windows XP (SP3)/Vista/Windows7 on your system if you use Digital Certificate issued after 01-01-2012 (SHA2Certificate) on MCA Portal.

2. E Waste (Management and Handling) Rules, 2011 under Environment Protection, Act 1986 w.e.f. 01-05-2012 for reducinge-waste by producers and consumers.
CS MANOJ KUMAR BHAGAT26 May 2012 at 12:25
I TAX = NEW INSTRUCTION 4/2012- MISMATCH IN TDS

Instruction No. 4/2012 [F. No. 225/34/2011-ITA.II], dated 25-5-2012

The Board has decided to withdraw Instruction no. 01/2012 issued on 2nd February, 2012 on the subject above with immediate effect. The following decisions have been taken in this regard:

(i) In all returns (ITR-1 to ITR-6), where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs. Five thousands, the TDS claim may be accepted without verification.
(ii) Where there is zero TDS matching, TDS credit shall be allowed only after due verification.
(iii) Where there are TDS claims with invalid TAN, the TDS credit for such claims is not to be allowed.
(iv) In all other cases TDS credit shall be allowed after due verification.
CS MANOJ KUMAR BHAGAT28 May 2012 at 07:36
RECENT CIRCULAR

Income-tax (sixth Amendment) Rules, 2012 - Insertion of rule 10AB
Notification No. 18/2012 [F. No. 142/5/2012-TPL], dated 23-5-2012
In exercise of the powers conferred by 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 (6th Amendment) Rules, 2012.
(2) They shall come into force on the 1st day of April, 2012 and shall apply to Assessment year 2012-13 and subsequent years.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), after rules 10A, the following rule shall be inserted, namely:-
"Other method of determination of arm's length price
10AB. For the purposes of clause (f) of sub-section (1) of section 92C, the other method for determination of the arms' length price in relation to an international transaction shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts."
3. In rule 10B of the said rules, in sub-rule (1) after clause (e), the following clause shall be inserted, namely:-
"(f) Any other method as provided in rule 10AB."

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Aashi Jain got 22nd Rank in All India in CS Foundation