Weekly Updates 30-05-2011 to 05-06-2011

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

INDEX S.NO.

PARTICULARS

PAGE NO.

COMPLIANCE CALENDER

3

SEBI 1. 2. 3. 4.

Liquidity Enhancement Schemes for Illiquid Securities in Equity Derivatives Segment Redemption of Indian Depository Receipts (IDRs) into Underlying Equity Shares Periodical Report – Grant of prior approval to members of stock exchanges/sub-brokers Processing of investor complaints against listed companies in SEBI Complaints Redress System (SCORES)

4-5 6-7 8-9 10

RBI 1.

Resolution of issues regarding allocation of villages under Electronic Benefit Transfer (EBT) scheme and roadmap for providing banking services in villages with population above 2000 under Financial Inclusion Plan (FIP) Guidelines for Accounting of Repo / Reverse Repo TransactionsClarification Inclusion in the Second Schedule to the Reserve Bank of India Act, 1934 – Credit Suisse A.G Inclusion in the Second Schedule to the Reserve Bank of India Act, 1934 – Sberbank

11

5.

Findings of Forensic Scrutiny- Guidelines for prevention of frauds

15-17

6.

Financing of Self Help Groups (SHGs) and Joint Liability Groups (JLGs) by Primary (Urban) Co-operative Banks (UCBs)

18-19

2. 3. 4.

12 13 14

CUSTOM 1.

Amendment of Notification No. 36/2001 – Customs (N.T.), dated, the 3rd August, 2001

20

2.

Revision in the powers of adjudication of the officers of Customs

21-22

MCA

23

CORPORATE ANNOUNCEMETNS

24

CASE LAWS

25-27

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

COMPLIANCE CALENDER

07th June, 2011

TDS remittance for the previous month

07th June, 2011

STPI Monthly return for the previous month

10th June, 2011

Monthly Contribution to AP Labour Welfare Fund under AP Labour Welfare Act

10th June, 2011

Monthly Excise return by all assessees (except SSIs & EOUs) coming under CEA in Form ER-1

10th June, 2011

Monthly Excise return by EOU assessees coming under CEA in Form ER ‐ 2

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

SEBI UPDATES CIRCULAR CIR/DNPD/5/2011

June 2, 2011

To Managing Director/ Chief Executive Officer Recognized Stock Exchanges Dear Sir/Madam, Sub: Liquidity Enhancement Schemes for Illiquid Securities in Equity Derivatives Segment 1. In consultation with BSE, MCX-SX, NSE and USE, it has been decided to permit Stock Exchanges to introduce one or more liquidity enhancement schemes (LES) to enhance liquidity of illiquid securities in their equity derivatives segments. 2. The Stock Exchange shall ensure that the LES, including any modification therein or its discontinuation,

• • • • • • •

has the prior approval of its Board and its implementation and outcome is monitored by the Board at quarterly intervals; prescribes and monitors the obligations of liquidity enhancers (liquidity provider, market maker, maker-taker or by whatever name called); disburses the incentives linked to performance; is objective, transparent, non-discretionary and non-discriminatory; does not compromise market integrity or risk management; complies with all the relevant laws; and is disclosed to market at least 15 days in advance and its outcome (incentives granted and volume achieved – liquidity enhancer wise and security wise) is disseminated monthly within a week of the close of the month.

3. The LES can be introduced in any of the following securities:

• • •

New securities permitted on the Stock Exchange after the date of this circular, Securities in case of a new Stock Exchange / new Segment, and Securities where the average trading volume for the last 60 trading days on the Stock Exchange is less than 0.1% of market capitalization of the underlying.

4. The LES can be discontinued at any time with an advance notice of 15 days. It shall, however, be discontinued as soon as the average trading volume on the Stock Exchange, during the last 60 trading days, reaches 1% of market capitalization of the underlying, or six months from introduction of the scheme, whichever is earlier. 5. If a Stock Exchange introduces LES on securities eligible under Para 3 above, other Stock Exchanges may introduce LES in the same / competing securities even if those are not eligible under Para 3 above. Such LES of the other Stock Exchanges cannot be continued beyond the period of LES of the former stock Exchange. 6. The incentives under LES shall be transparent and measurable. These may take either of the two forms:

• •

Discount in fees, adjustment in fees in other segments, cash payment; Shares, including options and warrants, of the Stock Exchange.

7. If a Stock Exchange chooses the form specified in Para ‘6a’ above, the incentives under all LES, during a financial year, shall not exceed 25% of the net profits or 25% of the free reserves of the Stock Exchange, whichever is higher, as per the audited financial statements of the preceding financial year. If, however, a Stock Exchange chooses the form specified in Para ‘6b’ above, the shares, including the shares that may accrue on exercise of warrants or options, given as incentives under all LES, during a financial year, shall not exceed 25% of the issued and outstanding shares of the Stock Exchange as on the last day of the preceding financial year. VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

8. The Stock Exchange shall submit half-yearly reports on the working of its LES for review of SEBI. 9. The implementation of this circular shall be covered in the inspection of the Stock Exchange. 10. This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. 11. The circular shall come into force from the date of the circular. 12. This circular is available on SEBI website at www.sebi.gov.in under the category “Derivatives- Circulars”. Yours faithfully, Sujit Prasad General Manager Derivatives and New Products Department 022-2644-9460 [email protected]

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

SEBI UPDATES CIRCULAR CIR/CFD/DIL/3/2011

June 03, 2011

To All Stock Exchanges All Depositories All Registered Merchant Bankers All Registered Registrars to an Issue/STA All Registered Custodians Dear Sir/Madam, Sub: Redemption of Indian Depository Receipts (IDRs) into Underlying Equity Shares 1. In order to facilitate foreign issuers to raise funds from the Indian capital markets through IDRs and enable investors in the domestic market to have investment opportunities in the securities of major multi-national companies listed on welldeveloped markets, a legal framework was created by the Ministry of Corporate Affairs (MCA), Reserve Bank of India (RBI) and SEBI. 2. Pursuant to the same, Standard Chartered PLC came out with its IDR issue in May 2010 and the said IDRs have been listed on BSE and NSE on June 11, 2010. In terms of disclosures in their offer document on ”ability to withdraw shares” from the IDR Facility and to deposit further shares into the IDR Facility, it has been stated as under:“Pursuant to the terms of the RBI Circular, IDRs are not redeemable into underlying equity shares before the expiry of a one-year period from the date of issue of the IDRs. The SEBI Regulations and the RBI Circular state that automatic fungibility of IDRs is not permitted. Therefore, fungibility of IDRs into the underlying Shares would be permitted only after the expiry of the one year period from the date of issue of the IDRs and subsequent to obtaining RBI approval on a case-by-case basis. Further, two-way fungibility (the ability to purchase existing Shares on the London Stock Exchange and/or the Hong Kong Stock Exchange and deposit them into the IDR programme) is not currently permitted. Additionally, in terms of the RBI Circular, at the time of redemption/conversion of IDRs into underlying shares, the Indian holders (persons resident in India) of IDRs are required to comply with the provisions of the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004.” 3. Since the one year period is nearing completion, it has become necessary to put in place, the framework for redemption of IDRs. 4. The relevant legal/regulatory provisions of fungibility of IDRs are as under:Rule 10 of Companies (Issue of Indian Depository Receipts) Rules, 2004:“Procedure for Transfer and redemption of IDRs:A holder of IDRs may transfer the IDRs or may ask the Domestic Depository to redeem these IDRs, subject to the provisions of the Foreign Exchange Management Act, 1999 and other laws for the time being in force.” RBI’s circular dated July 22, 2009:“Fungibility:Automatic fungibility of IDRs is not permitted. Period of redemption:IDRs shall not be redeemable into underlying equity shares before the expiry of one year period from the date of issue of IDRs.” VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

Regulation 100 of Chapter X of SEBI (ICDR) Regulations, 2009:“IDRs shall not be automatically fungible into underlying equity shares of issuing company.” 5. The extant regulatory frame work does not permit fungibility but only redemption. Therefore, allowing redemption freely in the absence of two way fungibility could result in reduction of number of IDRs listed, thereby impacting its liquidity in the domestic market. 6. In view of the above, it has been decided, in consultation with the RBI, that: a. After the completion of one year from the date of issuance of IDRs, redemption of the IDRs shall be permitted only if the IDRs are infrequently traded on the stock exchange(s) in India. Explanation- For this purpose, IDRs shall be deemed to be “infrequently traded” if the annualized trading turnover in IDRs during the six calendar months immediately preceding the month of redemption is less than five percent of the listed IDRs. b. The issuer company shall test the frequency of trading of IDRs on a half yearly basis ending on June and December of every year. c. When the IDRs are considered “infrequently traded” on the above basis, it shall be the trigger event for redemption. d. The issuer company shall make a public announcement in an English and Hindi language newspaper with wide circulation in the prescribed format (including brief details about the trigger of the redemption event, time period for submission of application and the approach for processing the applications) as well as notify the stock exchanges. Such announcement shall be made within seven days of closure of the half year ending on which the liquidity criteria is tested. A suitable format for this purpose shall be prescribed by the stock exchange (s). e. The IDR holders may submit their application to the domestic depository for redemption of IDRs within a period of thirty days from the date of such public announcement. f. The redemption of IDRs shall be completed within a period of thirty days from the date of receipt of application for redemption. g. Pursuant to such redemption, the domestic depository shall notify the revised shareholding pattern of the issuer company to the concerned stock exchanges within seven days of completion of the process of redemption. 7. All intermediaries are directed to comply with the instructions contained in this circular. 8. This circular shall be applicable with immediate effect. 9. This circular is issued in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992. 10. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”. Yours faithfully, Sunil Kadam General Manager +91-22-26449630 [email protected]

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

SEBI UPDATES CIRCULAR CIR/MIRSD/2/2011

June 3, 2011

To All Recognized Stock Exchanges Dear Sir/Madam, Sub: Periodical Report – Grant of prior approval to members of stock exchanges/sub-brokers 1) SEBI (Stock Brokers and Sub-brokers) Regulations, 1992 {hereinafter referred to as "the said Regulations"}, have been amended vide Notification No. LAD-NRO/GN/2011-12/03/12650 dated April 19, 2011 {hereinafter referred to as "the said amendment"}, a copy of which is available on SEBI website www.sebi.gov.in 2) With the said amendment, the requirement of members of the stock exchanges and sub-brokers to obtain prior approval from SEBI for change in status or constitution has been done away with. However, the members of the stock exchanges would be required to take prior approval from SEBI for change in control. 3) The stock exchanges will continue to grant prior approval to their members and sub-brokers for change in status or constitution, which would include the following; (a) in case of a body corporate — (i) amalgamation, demerger, consolidation or any other kind of corporate restructuring falling within the scope of section 391 of the Companies Act, 1956 (1 of 1956) or the corresponding provision of any other law for the time being in force; (ii) change in its managing director, whole-time director or director appointed in compliance with clause (v) of sub -rule (4A) of rule 8 of the Securities Contracts (Regulation) Rules, 1957; and (iii) any change in control over the body corporate; (b) any change between the following legal forms - individual, partnership firm, Hindu undivided family, private company, public company, unlimited company or statutory corporation and other similar changes; (c) in case of a partnership firm any change in partners not amounting to dissolution of the firm; (d) any other purpose as may be considered appropriate by the stock exchanges 4) The stock exchanges shall submit a periodical report with details of the changes in status or constitution of the members / sub-brokers, as per the format and in accordance with guidelines given at Annexure A. 5) The stock exchanges are directed to: (a) bring the provisions of this circular to the notice of the Stock Brokers and also disseminate the same on their websites. (b) make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in coordination with one another to achieve uniformity in approach. (c) communicate to SEBI, the status of the implementation of the provisions of this circular in their Monthly Development Reports. 6) This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

7) This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Circulars”. Yours faithfully, V.S.Sundaresan Chief General Manager 022-26449200 [email protected] Encl: Annexure A

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

SEBI UPDATES CIRCULAR CIR/OIAE/2/2011

June 3, 2011

All Companies whose securities are listed on Stock Exchanges (through Stock Exchanges) All recognized Stock Exchanges Dear Sir/Madam, Sub: Processing of investor complaints against listed companies in SEBI Complaints Redress System (SCORES) 1. SEBI has commenced processing of investor complaints in a centralized web based complaints redress system ‘SCORES’. The salient features of this system are: • Centralised database of all complaints, • Online movement of complaints to the concerned listed companies, • Online upload of Action Taken Reports (ATRs) by the concerned companies, and • Online viewing by investors of actions taken on the complaint and its current status. 2. All complaints pertaining to companies will be electronically sent through SCORES at http://scores.gov.in/Admin. The companies are required to view the complaints pending against them and submit ATRs alongwith supporting documents electronically in SCORES. Failure on the part of the company to update the ATR in SCORES will be treated as non redressal of investor complaints by the company. Submission of physical ATR will not be accepted for complaints lodged in SCORES. For complaints forwarded to companies on or before 20/05/2011, physical ATRs should be submitted. 3. The user id and password for logging into SCORES at http://scores.gov.in/Admin are being communicated separately to companies against whom complaints are lodged in SCORES. 4. In case the complaints are processed by the Registrar to Issue and Share Transfer Agent (RTI/STA) on behalf of the company, the company should indicate in the enclosed Annexure whether they require the facility to forward complaints to the RTI/STA, so that the ATRs can be uploaded by them. In such cases, the name of the RTI/STA, the name of the Compliance Officer and email id should be furnished, so that the user id and password can be provided accordingly. Further, failure on the part of the RTI/STA to update the ATR in SCORES will be treated as non redressal of investor complaints by the company. 5. This Circular supercedes the Circular No.OIAE/Cir-1/2009 dated November 25, 2009 so far as it relates to Annexure -C to the said Circular wherein the companies had to submit physical ATRs on the complaints forwarded by SEBI to them. 6. All companies whose securities are listed on Stock Exchanges are advised to comply with the aforesaid Circular. 7. The Stock Exchanges are accordingly advised to bring the provisions of this Circular to the notice of all the companies whose securities are listed in the exchange and also to disseminate the same on the website. 8. This Circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. 9. This Circular is available on SEBI website at www.sebi.gov.in. Yours faithfully, G.P.Garg Chief General Manager Office of Investor Assistance and Education Tel No.022-26449400 Email id - [email protected] VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

RBI UPDATES RBI/2010-11/550 RPCD.CO.LBS.BC.No. 74/02.19.010/2010-11 May 30, 2011 The Chairmen/Chairman and Managing Director, All SLBC Convenor banks Dear Sir/Madam, Resolution of issues regarding allocation of villages under Electronic Benefit Transfer (EBT) scheme and roadmap for providing banking services in villages with population above 2000 under Financial Inclusion Plan (FIP) It has been brought to our notice that in some States the State Governments are implementing the ICT based Electronic Benefit Transfer (EBT) for routing social security benefits (MNREGA, NOAPS, etc.) to beneficiaries through the banking channel using the 'one district one bank model'. In addition to this, as per the recommendations of the High Level Committee to review the Lead Bank Scheme, unbanked villages having population of more than 2000 have been allocated to various banks for providing of banking services by opening of banking outlets in these villages by March 2012. Some banks have represented to our Regional Offices that they are incurring costs to cover villages under the Roadmap for opening of banking outlets in villages with population of more than 2000, even as the other bank that is allotted the same village under EBT will also be required to do so eventually. The intention of allotting the unbanked villages, with population of more than 2000, amongst various banks was to ensure that these villages are provided with at least one banking outlet for extending banking facilities comprising of minimum four products i.e. Savings, Credit, Remittance and Insurance. The above initiative, however, does not deny the opportunity for any other bank to operate in these areas and extend banking services based on the available business potential. In view of the above it is felt that the SLBC, being the apex body in the State, should be used as a forum for settlement of such issues and for explaining to banks the intention of RBI in extending banking services to unbanked villages through various Financial Inclusion initiatives. Yours sincerely, (A. K. Misra) General Manager

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

RBI UPDATES RBI/2010-11/551 IDMD No./29 /11.08.043/2010-11 May 30, 2011 To All RBI regulated entities (Commercial Banks, Co-operative Banks, Primary Dealers, Financial Institutions, RRBs and NBFCs) Dear Sir/Madam, Guidelines for Accounting of Repo / Reverse Repo Transactions-Clarification Please refer to our circular RBI/2009-2010/356 IDMD/4135/11.08.043/2009-10 dated March 23, 2010. The para 7 of the circular under reference states that “to obviate the disputes arising out of repo transactions, the participants should enter into bilateral Master Repo Agreement as per the documentation finalized by Fixed Income Money Market and Derivatives Association of India (FIMMDA)”. 2. We have received queries from market participants whether the Master Repo Agreement finalised by FIMMDA is mandatory for repo transactions in Government Securities settled through CCIL. In this regard, it is clarified that the Master Repo Agreement finalised by FIMMDA is not mandatory for repo transactions in Government Securities settling through a Central Counter Party (CCP) [eg. Clearing Corporation of India Limited (CCIL)], having various safeguards like haircut, MTM price, margin, Multilateral netting, closing out, right to set off, settlement guarantee fund/ collaterals, defaults, risk management and dispute resolution/ arbitration etc. However, Master Repo Agreement is mandatory for repo transactions in Corporate Debt Securities, which is settled bilaterally without involving a CCP. 3. All other terms and conditions of the above mentioned circular will remain unchanged. Yours faithfully, (K K Vohra) Chief General Manager

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

RBI UPDATES RBI/2010-11/552 Ref: DBOD. No.Ret. BC. 97/12.06.128/2010-11 June 01, 2011 All Scheduled Commercial Banks Dear Sir, Inclusion in the Second Schedule to the Reserve Bank of India Act, 1934 – Credit Suisse A.G We advise that the name of “Credit Suisse A.G” has been included in the Second Schedule to the Reserve Bank of India Act, 1934 by notification DBOD IBD. No. 13983 / 23.03.025/2010-11 dated March 08, 2011, published in the Gazette of India (Part III – Section 4) dated April 02, 2011. Yours faithfully, (P.K. Mahapatra) General Manager

DBOD.IBD.No.13983/23.03.025/2010-11 March 8, 2011 Notification In pursuance of Clause (a) of sub-section (6) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), the Reserve Bank of India hereby directs the inclusion in the Second Schedule to the said Act of the following bank namely: “Credit Suisse A.G” (R. Gandhi) Executive Director

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

RBI UPDATES RBI/2010-11/553 Ref: DBOD. No.Ret. BC. 98/12.06.129/2010-11 June 01, 2011 All Scheduled Commercial Banks Dear Sir, Inclusion in the Second Schedule to the Reserve Bank of India Act, 1934 – Sberbank We advise that the name of “Sberbank” has been included in the Second Schedule to the Reserve Bank of India Act, 1934 by notification DBOD IBD. No. 13982 / 23.03.022/2010-11 dated March 08, 2011, published in the Gazette of India (Part III – Section 4) dated April 02, 2011. Yours faithfully, (P.K. Mahapatra) General Manager

DBOD.IBD.No.13982/23.03.022/2010-11 March 8, 2011 Notification In pursuance of Clause (a) of sub-section (6) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), the Reserve Bank of India hereby directs the inclusion in the Second Schedule to the said Act of the following bank namely: “Sberbank” (R. Gandhi) Executive Director

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

RBI UPDATES RBI/2010-11/555 DBS. CO.FrMC.BC.No. 10/23.04.001/2010-11 May 31, 2011 The Chairmen & Chief Executive Officers of All Scheduled Commercial Banks (excluding RRBs) and All India Select Financial Institutions Dear Sir, Findings of Forensic Scrutiny- Guidelines for prevention of frauds In the recent past, we had conducted forensic scrutinies at certain identified banks due to occurrence of large value frauds or sharp increase in number of frauds at such banks. The scrutinies were undertaken to primarily identify the policy gaps, if any, and adequacy of controls. During the scrutinies, systemic factors were also sought to be identified. 2. Based on the findings of the scrutinies, further study has been made across banks to ascertain the policy and operating framework in place for detection, reporting and monitoring of frauds as also the surveillance/ oversight process in operation so as to prevent the perpetration of frauds. The study has shown that while the banks do have certain policies and processes in this regard, they are not well structured and systematic to ensure proper focus on typical fraud events. Besides, there is lack of consistency in treatment of such transactions having characteristics of fraud as also in their reporting to the “Competent Authority”. The banks are, therefore, advised to suitably modify their policy and streamline the operating framework in the matter keeping in view certain indicative guidelines set out below : 3. The reported frauds show recurrence or rising trend in the following areas :• loans/ advances against hypothecation of stocks • housing loans cases • submission of forged documents including letters of credit • escalation of overall cost of the property to obtain higher loan amount • over valuation of mortgaged properties at the time of sanction • grant of loans against forged FDRs • over-invoicing of export bills resulting in concessional bank finance , exemptions from various duties etc. • frauds stemming from housekeeping deficiencies The above list is only illustrative and not exhaustive. The banks need to introduce closer monitoring and tighter controls in the above areas, as also in other such areas where there is typically certain degree of concentration of occurrence. In this connection, select list of circulars issued by RBI in the past in respect of frauds in the above areas is enclosed as Annex. 4. The operating framework for tracking frauds and dealing with them should be structured along the following three tracks: (i) Detection and reporting of frauds (ii) Corrective action and (iii) Preventive and punitive action Detection and reporting: The banks should have a set of prescribed procedures and criteria with which the events or transactions having serious irregularities are analysed and assessed to establish occurrence of fraud.

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

For this purpose, the banks may define a ‘fraud’ based on the guidelines issued by RBI. While doing so, they may clearly demarcate/ distinguish the occurrence of an event on account of negligence ‘in conduct of duty’ from ‘collusion’ by the bank staff (with the borrowers and with an intention to cheat the bank). Further, care may be exercised while dealing with instances of ‘willful default’. In this connection, a willful default would be deemed to have occurred if any of the following events is noted: (a) The unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honour the said obligations. (b) The unit has defaulted in meeting its payment / repayment obligations to the lender and has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes. (c) The unit has defaulted in meeting its payment / repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilised for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets. (d) The unit has defaulted in meeting its payment / repayment obligations to the lender and has also disposed off or removed the movable fixed assets or immovable property given by him or it for the purpose of securing a term loan without the knowledge of the bank / lender. Further, the banks may also examine the ‘intent’ to defraud, irrespective of whether or not actual loss takes place. Keeping these key factors in mind, any action taken in collusion to derive undue/ unjust benefit or advantage should be termed as fraud. Following such a protocol of identification, once a fraud is detected, a report must be prepared and submitted to the “Competent Authority”. As a part of their overall policy and operating framework, the banks should identify and designate the Competent Authority to whom such reports should be submitted. The fraud report should be a diagnostic assessment, clearly bringing out the causes of the fraud and identify whether the fraud occurred due to ‘system failure’ or ‘human failure’.

:

Corrective Action An important corrective step in a fraud is recovery of the amount siphoned off through the fraud. Often, during course of investigation and enquiry into the events/ transactions, the need to track the flow of defrauded amount does not get due priority or the exercise undertaken in that direction does not lead to material results. This may be primarily attributable to the following : • The lack of ability on the part of the operating staff to sift through the layered/ interlocked transactions, determine the ultimate destination of the defrauded amounts and track the investment of the amounts in assets/ properties and/ or use of the amounts for the expenditures. • In case where the operating staff is not in a position to do it, because of complexities involved, considerable time is spent in undertaking this type of investigation and often the task is completed in a routine manner. A structured scrutiny/ examination of events or transactions would lead to quick conclusion whether a fraud has occurred and the bank’s funds have been siphoned off. Therefore, this exercise is the first critical step towards corrective action in the sense that it would lead to expeditious filing of police complaints, blocking/ freezing of accounts and salvaging funds from the blocked/ frozen accounts in due course. Besides, once a set of transactions is explicitly identified as fraudulent, the mandate for seizing and taking possession of related documents, issuance of suspension order/ order to proceed on leave to identified/ suspected employees would be easier thereby preventing them from destroying/ manipulating evidences or obstruction of investigations. In this connection, attention is invited to our circular DBS.CO. FrMC.BC.No. 7/23.04.001/2009-10 dated September 16, 2009 wherein it has been advised that they should provide singular focus on the “Fraud Prevention and Management Function” to enable among others, effective investigation in fraud cases and prompt as well as accurate reporting of fraud cases to appropriate regulatory and law enforcement agencies.

:

Preventive and Punitive Action As per the diagnostic analysis, preventive action as deemed necessary to address the ‘system failure’ and/ or punitive action as prescribed internally for ‘human failure’ should be initiated immediately and completed expeditiously. VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

Generally, in the current system driven environment in banks, wherever transactions occur in breach of/ overriding “Controls”, they get reflected in the “end of day exception report”. Accordingly, all such exception reports should be perused by the designated officials and a post facto authorization for the transactions accorded. However, it has been observed in certain cases that the process often does not get duly implemented reflecting the poor internal control mechanisms. Therefore, banks should ensure that they bring in the needed refinement in this process and also specify the levels/ authority to whom the exception reports will be invariably submitted and the manner in which the authority will deal with the exception reports. The entire gamut of the manner in which the exception reports are generated, transactions contained in the reports are examined/ scrutinised, and the reports submitted to higher authorities for necessary authorizations for breaches should be periodically subjected to review and oversight by the bank’s management/ Board of Directors. 5. In addition to the above, banks should immediately take steps to put in place following controls and disincentives in their HR processes and internal inspection/ audit processes as part of their fraud risk management framework : • For key and sensitive posts such as those in dealing rooms, treasury, relationship managers for high value customers, heads of specialized branches, etc. the banks should select only such officers who satisfy the “Fit and Proper” criteria. For the purpose, the banks should draw up a list of critical as well as sensitive positions or areas of operation and evolve well defined “Fit and Proper” criteria for applying them to determine the suitability of the staff/ officers to those posts/ areas of operations. The appropriateness of such postings should be subjected to periodical review. • The banks should immediately put in place “staff rotation” policy and policy for “mandatory leave” for staff. The internal auditors as also the concurrent auditors must be specifically required to examine the implementation of these policies and point out instances of breaches irrespective of apparent justifications for noncompliance, if any. The decisions taken / transactions effected by officers and staff not rotated/ availing leave as per policy should be subjected to comprehensive examination by the internal auditors/ inspectors including concurrent auditors. The findings thereon should be documented in a separate section of the audit/ inspection reports. • The banks should build up a database of officers/ staff identified as those having aptitude for investigation, data analysis, forensic analysis, etc. and expose them to appropriate training in investigations and forensic audit. For investigation of frauds, only such officers/ staff should be deployed through the “fraud investigation unit/ outfit”. 6. Please acknowledge receipt. Yours faithfully, (A.Madasamy) Chief General Manager

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

RBI UPDATES RBI/2010-11/556 UBD.BPD.(PCB)CIR No. 50/13.05.000(B)/2010-11 June 2, 2011 The Chief Executive Officers All Primary (Urban) Co-operative Banks Madam / Dear Sir, Financing of Self Help Groups (SHGs) and Joint Liability Groups (JLGs) by Primary (Urban) Co-operative Banks (UCBs) As announced in the Monetary Policy 2011-12 [para 100 - appended], with a view to further expanding the outreach of UCBs and opening an additional channel for promoting financial inclusion, it has been decided to allow UCBs to lend to Self Help Groups (SHGs) and Joint Liability Groups (JLGs). UCBs may with the approval of their Board frame a policy in this regard based on the guidelines given in the Annex, before undertaking such activity. 2. Please acknowledge receipt of this Circular to the Regional Office concerned. Yours faithfully (Uma Shankar) Chief General Manager

Annex Guideline for Lending to Self Help Groups (SHGs) / Joint Liability Groups (JLGs) 1. Lending Policy Lending to SHGs / JLGs would be considered as normal business activity of the bank. UCBs will be required to frame, with the approval of their Board, a comprehensive policy on lending to SHGs / JLGs. This policy, including the maximum amount of loan, interest rate chargeable on loans etc. should form part of overall credit policy of the bank. 2. Method of Lending UCBs may follow the method of lending directly to SHGs / JLGs. Lending through intermediaries will not be permitted. 3. Enrollment of SHG / JLG as Member SHGs are small groups, formal/informal, of individuals promoting savings habit among members. These savings are then lent by the group to the members for income generating purposes. On the other hand, JLG is an informal group of individuals coming together for the purpose of availing of bank loan either singly or through the group mechanism against mutual guarantee in order to engage in similar type of economic activities. The SHG would normally consist of 10 to 20 members whereas a JLG would normally have between 4 and 10 members. Membership matters are governed by the bye laws adopted by the bank and provisions of respective State Co-operative Societies Acts or the Multi State Co-operative Societies Act, 2002. UCBs would, therefore, be required to be guided by the provisions contained in the respective Act and take prior approval of the RCS/CRCS, wherever required, while enrolling such members and granting loans to SHGs / JLGs. The bye-laws of UCBs also need to provide for such lending. VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

4. Share-linking Norms The extant instructions on share linking to borrowing would apply for lending to SHGs / JLGs. 5. Nature of Loan - Secured or Unsecured The extant limits (individual and total) on grant of unsecured loans and advances will not apply to loans granted to SHGs. However, loans granted by UCBs to JLGs, to the extent not backed by tangible security, will be treated as unsecured and will be subject to the extant limits on unsecured loans and advances. 6. Nature of Exposure - Individual or Group Loans granted to SHGs / JLGs would be governed by the extant guidelines on individual exposure limits. 7. Amount of Loan The maximum amount of loan to SHGs should not exceed four times of the savings of the group. The limit may be exceeded in case of well managed SHGs subject to a ceiling of ten times of savings of the group. The groups may be rated on the basis of certain objective parameters such as proven track record, savings pattern, recovery rate, housekeeping etc. JLGs are not obliged to keep deposits with the bank and hence the amount of loan granted to JLGs would be based on the credit needs of the JLG and the bank's assessment of the credit requirement. 8. Margin and Security for the Loan Margin / security requirement will be as per Board approved policy of the UCB concerned. 9. Documentation UCBs may prescribe simple documentation for loans to be granted to SHGs / JLGs keeping in view the purpose of the loan and the status of the borrower. 10. Priority Sector Loans to SHGs / JLGs for agricultural and allied activities would be considered as priority sector advance. Further, other loans to SHGs / JLGs up to Rs. 50,000 would be considered as Micro Credit and hence treated as priority sector advances. Lending to SHGs, which qualify as loans to priority sector, would also be treated as part of lending to weaker sections. 11. Opening of Savings Bank Account The SHGs / JLGs would be eligible to open Savings Bank account with UCBs. 12. KYC Norms The UCBs need to adhere to the KYC guidelines in respect of each member of the SHG / JLG before opening savings bank account / grant of loans.

Monetary Policy 2011-12 - Extract of Para 100 100. With a view to further expanding the outreach of UCBs and opening an additional channel for promoting financial inclusion, which would also help the UCBs in achieving the sub-target of lending to weaker sections, it is proposed: • to permit UCBs to lend to SHGs/JLGs; and • to keep lending to SHGs out of the norm on unsecured advances

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

CUSTOM UPDATES Government of India Ministry of Finance (Department of Revenue) (Central Board of Excise and Customs) Notification No. 37/2011 – Customs (N. T.) New Delhi, 31st May, 2011 10 Jyaistha, 1933 (SAKA) S. O… (E) – In exercise of the powers conferred by sub-section (2) of section 14 of the Customs Act, 1962 (52 of 1962), the Board, being satisfied that it is necessary and expedient so to do, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 36/2001-Cus (N. T.), dated, the 3rd August 2001, namely: In the said notification, for the Table, the following Table shall be substituted namely:“T A B L E S. No.

Chapter/ heading/ subheading/tariff item

Description of goods

Tariff value US $ (Per Metric Tonne)

(1)

(2)

(3)

(4)

1

1511 10 00

Crude Palm Oil

447 (i.e. no change)

2

1511 90 10

RBD Palm Oil

476 (i.e. no change)

3

1511 90 90

Others – Palm Oil

462 (i.e. no change)

4

1511 10 00

Crude Palmolein

481 (i.e. no change)

5

1511 90 20

RBD Palmolein

484 (i.e. no change)

6

1511 90 90

Others – Palmolein

483 (i.e. no change)

7

1507 10 00

Crude Soyabean Oil

580 (i.e. no change)

8

7404 00 22

Brass Scrap (all grades)

4346

9

1207 91 00

Poppy seeds

2520

[F. No. 467/2/2011-Cus.V] (Abhinav Gupta) Under Secretary to the Government of India Note: - The Principal notification was published in the Gazette of India, Extraordinary, vide Notification No. 36/2001 – Customs (N.T.), dated, the 3rd August, 2001 (S. O. 748 (E), dated, the 3rd August, 2001) and was last amended vide Notification No. 34/2011-Customs (N.T.), dated, the 13th May, 2011 (S. O. 1047 (E) dated 13th May, 2011).

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

CUSTOM UPDATES Circular No.24/2011-Customs F.No.450/117/2009-Cus.IV Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs 227-B, North Block, New Delhi-110001 31st May, 2011. To All Chief Commissioners of Customs / Customs (Prev.). All Chief Commissioners of Customs & Central Excise. All Commissioners of Customs / Customs (Prev.). All Commissioners of Customs (Appeals). All Commissioners of Customs & Central Excise. All Commissioners of Customs & Central Excise (Appeals). All Directors General under CBEC. Subject: Revision in the powers of adjudication of the officers of Customs. *** Sir / Madam, Attention is invited to Board Circular No.23/2009-Customs dated 1.9.2009 which provides for monetary limits of adjudication of cases by officers of various grades where SCNs are issued under section 28 of the Customs Act, 1962. 2. References have been received from the field formations for specifying the ‘proper officer’ for issuance of show cause Notice and adjudication of cases of export under the drawback and Export Promotion Schemes. 3. Further, as per Board’s Circular No.23/2009-Customs dated 1.09.2009, whereas the monetary limits of adjudication are prescribed in terms of duty involved, in respect of notices involving extended period of limitation, the monetary limit is specified based on the value of goods involved. This when worked out in accordance with the duty rates prescribed gives rise to an anomalous situation. 4. The matter has been examined in the Board. In order to streamline guidelines on monetary limit for adjudication of cases by different grades of Customs Officers, it has been decided that henceforth, cases where SCNs are issued under section 28 of the Customs Act, 1962, these will be adjudicated as per following norms: Level of Adjudication officer Customs Commissioner

Nature of cases

Amount of duty involved

All cases

Without limit

ADC/JC

All Cases

Upto Rs.50 lakhs

AC/DC

All cases

Upto Rs. 5 lakhs

5. Further, it has been decided that the proper officer for the issuance of Show Cause Notice and adjudication of cases under the provisions of Rule 16 of the Customs, Central Excise and Service Tax Drawback Rules, 1995 shall, henceforth, be as under:

•

In case of simple demand of erroneously paid drawback, the present practice of issuing Show Cause Notice and adjudication of case without any limit by Assistant / Deputy Commissioner of Customs shall continue. VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

(ii) In cases involving collusion, wilful misstatement or suppression of facts etc., the adjudication powers will be as under: Level of Adjudication Officer

Amount of Drawback

Additional / Joint Commissioner of Customs

Without any limit

Deputy / Assistant Commissioner of Customs

Upto Rs.5 lakhs

6. In case of Export Promotion Schemes i.e. DEPB / Advance Authorization / DFIA / Reward Schemes etc. the adjudication powers shall be as under:Level of Adjudication officer Commissioner of Customs.

Duty Incentive amount Without any limit.

Additional / Joint Commissioner of Customs.

Upto Rs.50 lakhs.

Deputy / Assistant Commissioner of Customs.

Upto Rs.5 lakhs.

7. It is clarified that notwithstanding this revision, in all cases where personal hearing has been completed, orders will be passed by adjudicating authority before whom the personal hearing has been held. Such orders will normally be issued within a month of date of completion of the personal hearing. In all cases where personal hearing is yet to be commenced, the adjudications should be done by the appropriate level of officers as per the revised instructions. An immediate exercise should be undertaken to take stock of the present pendency and transfer of relevant files and records to respective adjudicating authorities and the exercise of transfer of case records should be completed by 15.06.2011 under proper receipt. 8. Board Circular No.23/2009 – Customs dated 1.9.2009 stands amended to the above extent. 9. Difficulty faced, if any, may be brought to the notice of the Board immediately. Yours faithfully, (R. P. Singh) Director (Customs)

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

MCA UPDATES A) The Central Government has framed following criteria for declaring any financial institution as PFI under section 4A of the Companies Act, 1956:-

• • • • • •

A Company or corporation should be established under a special Act or the Companies Act being Central Act; Main business of the company should be industrial/infrastructural financing; The Company must be in existence for at least 3 years and their financial statement should show that their income form industrial/infrastructural financing exceeds 50% of their income; The net worth of the Company should be Rs. One thousand Crore; Company is registered as Infrastructure Finance Company (IFC) with RBI or as an Housing Finance Company (HFC) with National Housing Bank; In case of CPSUs/SPSUs, no restriction shall apply with respect to financing specific sector(s) and net worth.

B) The Ministry of Corporate Affairs vide its General Circular No. 11/2011 dated 07.04.201 has already informed that the Ministry is considering to allot all DIN applications online and to examine the DIN-1 and DIN-4 e-form through the system, following fields in the DIN e-form will be mandatory:-

• • • • •

Name of Applicant Father’s Name of the Applicant Date of Birth Income Tax Permanent Account Number (PAN) in case of all Indian Nationals. Passport in case of all Foreign Nationals.

At present, the PAN of the Applicant is not a mandatory field in DIN eform-1. In order to examine DIN e-forms through the system and to avoid duplicate DIN, it has been decided that all existing DIN holders who have not furnished their PAN earlier at te time of obtaining DIN, are required to furnish their PAN by filing DIN-4 e-form by 30th September, 2011 failing which their DIN will be disabled and they shall also be liable for heavy penalty.

C) There is clear provision in section 616 (C) of the Companies Act, 1956, the companies engaged in the generation or supply of electricity are approaching Ministry of Corporate Affairs for fixing rate of depreciation in individual cases. The Ministry has, considered the whole matter and it is hereby clarified that Section 616 (C) the Companies Act, 1956 provides that the same shall apply to companies engaged in the generation or supply of electricity, except in so far as the said provision is inconsistent with the provisions of the Indian Electricity Act, 1910 or the Electricity Supply Act, 1948 as repealed by enactment of the Electricity Act, 2003.

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

CORPORATE ANNOUNCEMETNS • British consumer goods firm Reckitt Benckiser, which bought privately-held Indian ointments and personal care company Paras Pharmaceuticals for about USD 726 million last year, is planning to sell the latter's personal care business. Reckitt has appointed JP Morgan to find a buyer for the business. The British firm is keen to focus on Paras' healthcare business which has annual sales of Rs 300 crore to Rs 350 crore while the personal care business has annual sales of Rs 100 crore. Indian personal care makers Emami and Dabur have expressed interest in buying the business if it up for sale.

• Communications products maker Geodesic is in talks to acquire a US-based mobile payments firm and hopes to close a deal by August. The company has been scouting for acquisitions worth about USD 15-20 million, particularly in areas of content delivery to supplement its communication vertical. The company intends to double revenue from the government segment in FY12 from Rs 150 crore this fiscal, as it strengthens its presence in egovernance and forays into the power segment with a new product.

• Godrej Properties, the real estate development arm of Godrej Group, launched its YouTube Channel with an aim to offer viewers an easy access to videos of its upcoming and ongoing projects pan-India. Walkthroughs of projects including apartments will be posted to highlight various amenities and facilities that the project would provide thus giving viewers a chance to get an actual feel of the property. The company will be updating the bulletin board to notify viewers on any new videos uploaded on the channel and will gradually allow viewers to post any queries with the company thus making it an interactive experience.

• Camlin, maker of stationery materials, said Japan's Kokuyo Co would buy up to a 50.3% stake in the company and form a joint venture in India to expand and modernise Camlin's present business. Under the terms of the agreement, Kokuyo would buy 10% in Camlin via a preferential allotment at Rs 85 a share. The Japanese firm would further buy 20.3% of Camlin from founders on fully diluted basis at Rs 110 a share and later would make an open offer for another 20% at the same price. The joint venture would introduce Kokuyo's products, primarily paper and office stationery, in India and would open export opportunities for Camlin products. Kokuyo has an annual turnover of about USD 3.2 billion. Camlin generates annual revenue of USD 80 million. After the stake buy, Dilip Dandekar would continue as chairman and managing director. Kokuyo would have the right to nominate four directors to Camlin's board.

• State-run lender IDBI Bank may consider raising funds through a follow-on share sale in the current financial year to boost its capital base. "At present, government shareholding is at 65% so we do have some leeway. If at all we raise it, it may be an FPO kind of thing," he said, adding it could be in the second half of the year. Last week, Bank of India's board approved raising funds selling shares while Indian Bank hopes to hit the market with its follow-on offer by the end of August or early September. In March, Canara Bank raised USD 443 million by selling shares to institutional investors. IDBI itself has plans to raise USD 1 billion through medium term notes in the fiscal year that ends in March 2012.

• Infrastructure Leasing and Financial Services (IL&FS) is likely to sell its entire stake in Orix Auto Infra services, a joint venture company with Japanese financial service firm Orix Corporation and IL&FS to Hertz. The said deal is to be valued around Rs 300-400 crore. Orix Corporation has a 24% stake in IL&FS for about USD 1.2 billion (Rs 120 crore), which Indian giant Reliance Industries was interested in buying. At present, Orix is also eyeing to buy US-based private equity firm TPG Capital’s stake in India’s Shriram Transport Finance in a deal valued at more than Rs 3,000 crore (USD 664 million).

• Coromandel International, a part of the USD 3.8 billion-Murugappa Group, is going to acquire 42.2% stake in Sabero Organics Gujarat, a Mumbai-based agrochemical manufacturer, for Rs 250 crore in an all cash deal. The company will make an open offer to purchase another 31% stake at Rs 160 per share from the market. After the open offer, the total acquisition cost will be over Rs 400 crore that will be met through internal accruals. The product profile of both the companies complements each other and the combined entity will have unmatched range of 16 technical grade pesticides catering to diverse needs of Indian and international customers, Mehan told reporters. Sabero earned Rs 413 crore in revenue and a net profit of nearly Rs 11 crore last fiscal, ended March 31, 2011. "This is a strategic acquisition done by the Coromandel. After the acquisition, the combined entity will be in top two or three players of Agrochemicals makers, with Rs 1,000 crore in revenue from plant protection chemicals in this fiscal. VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

CASE LAWS HIGH COURTS

•

Business expenditure --Capital or revenue expenditure--Company--Expenditure on raising convertible debentures--Revenue expenditure--Income-tax Act, 1961, s. 37-- CIT v. ITC Hotels Ltd. (Karn) . . . 109

•

--Deduction only on actual payment--Contribution to employees' State insurance--Disallowed as deposited beyond due date--Amendment to first proviso to section 43B by Finance Act, 2003 with retrospective effect--Applicable--Assessee entitled to deduction--Income-tax Act, 1961, s. 43B-- CIT v. Rai Agro Industries Ltd. (P&H) . . . 122

•

--Deduction only on actual payment--Disallowance on ground that expenses related to prior period and not present assessment year--Tribunal finding all expenses settled in current year and covered under section 43B(d)--Justified--Income-tax Act, 1961, s. 43B(d)-- CIT v. Modipon Ltd. (No. 1 ) (Delhi) . . . 102

•

--Deduction only on actual payment--Excise duty paid in advance--Assessing Officer holding that deduction can be claimed only on removal of goods from factories--Not proper--Assessee entitled to deduction-Income-tax Act, 1961, s. 43B-- CIT v. Modipon Ltd. (No. 2 ) (Delhi) . . . 106

•

Capital gains --Company--Sale of property by company--Company not in liquidation--Section 49 not applicable--Capital gains assessable in hands of company--Income-tax Act, 1961, ss. 45, 49-- CIT v. Shashi Charla (Delhi) . . . 129

•

--Exemption--Long-term capital gains--Investment of net consideration from transfer of depreciable asset under Capital Gains Deposit Account Scheme--Assessee entitled to exemption--Income-tax Act, 1961, s. 54F-CIT v. Rajiv Shukla (Delhi) . . . 138

•

Company --Computation of book profits under section 115JB--Depreciation--Change in method of computation of depreciation from straight line method to written down value method--Change reflected in profit and loss account audited and certified by registering authority under company law--Change valid--Incometax Act, 1961, s. 115JB-- CIT v. Tidel Park Ltd. (Mad) . . . 126

•

Exemption --Export oriented industry--Conditions precedent for exemption--Conditions should be satisfied in initial year of manufacture or production--Value of machinery and plant in initial year of manufacture more than 20 per cent. of total value of machinery and plant--Purchase of new machinery and value reduced to less than 20 per cent. in a subsequent year--Assessee not entitled to exemption under section 10B--Income-tax Act, 1961, s. 10B-- Sami Labs Ltd. v. Asst. CIT (Karn) . . . 157

•

Export --Special deduction--Computation--Income from duty drawback, duty entitlement pass book and duty-free remission scheme--To be treated as business income--Income-tax Act, 1961, s. 80HHC-- CIT v. F. C. Sondhi and Co. P. Ltd. (P&H) . . . 141

•

Income from undisclosed sources --Purchasers found to be fictitious--Addition to income valid--Purchases by account payee cheques--Inability to produce purchaser after three years--Not material--Addition not justified--Income-tax Act, 1961-- Diagnostics v. CIT (Cal) . . . 111

•

--Order of Tribunal--Where facts not disputed, no additional arguments advanced and Tribunal fully agreeing with reasons given by Commissioner (Appeals), Tribunal need not repeat reasons given by him--Order of Tribunal not illegal on that ground--Income-tax Act, 1961-- Asst. CIT v. Safe Enterprises (Mumbai) . . . 533

•

--Disallowance--Entire bad debts written off in books of account maintained under Income-tax Act-Separate books maintained under Companies Act not relevant--Assessee claiming only that sum which has been written off--To be allowed--Income-tax Act, 1961, s. 36(1)(vii)-- Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) . . . 543 VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

•

Business expenditure --Disallowance--Payments subject to tax deduction at source --Amendment of section 40(a)(ia) by Finance Act, 2010--Amendment retrospective--Tax deducted at source from freight charges during period 1-4-2005 to 28-2-2006 and paid in July and August 2006 i.e. before due date for filing return--Freight charges could not be disallowed in assessment for 2006-07--Income-tax Act, 1961, s. 40(a)(ia) -- Bansal Parivahan (India) P. Ltd. v. ITO (Mumbai) . . . 565

•

--Disallowance--Payments to non-resident subject to deduction of tax at source--Interest--Difference between definition of interest in Interest-tax Act and that in Income-tax Act--Discounting charges not interest for purposes of Income-tax Act--Tax not deductible at source on discounting charges--Incometax Act, 1961, ss. 2(28A), 40(a)(i)--Circular No. 647, dated 22-3-1993-- Asst. CIT v. Cargill Global Trading (I) P. Ltd. (Delhi) . . . 558

•

Business loss--Corporate guarantee given to subsidiary company--Granting of guarantee part of business of assessee--Guarantee given for commercial purposes--Loss due to such guarantee--Deductible as business loss--Income-tax Act, 1961-- Asst. CIT v. W. S. Industries (India) Ltd. (Chennai) . . . 596

•

Capital gains --Computation of capital gains--Two fictions in sections 50 and 50C--Section 50 modifies expression "cost of acquisition"--Section 50C modifies expression "full value of consideration"--Both operate in different fields--Both can be applied simultaneously--Sale of block of assets including land-Stamp duty valuation of land can be taken into consideration for computing capital gains--Income-tax Act, 1961, ss. 45, 50, 50C-- ITO v. United Marine Academy [SB] (Mumbai) . . . 639

•

Charitable purposes --Definition--Change of law--"Object of general public utility" not to include activity of rendering service in relation to trade, commerce or business--Board constituted under law as regulatory board for environment protection and pollution control--Not rendering service in relation to trade, commerce or business--Registration not to be cancelled--Income-tax Act, 1961, ss. 2(15), 12AA-- Himachal Pradesh Environment Protection and Pollution Control Board v. CIT (Chandigarh) . . . 604

•

Non-banking financial company --Long-term capital loss--Carry forward--Assessee compelled to divest shares in accordance with RBI directions--Assessing Officer not doubting genuineness of transactions--Similar issue decided in favour of assessee in previous years--To be allowed--Income-tax Act, 1961-- Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) . . . 543

•

--Securities--Diminution in value--Classified as investment and income earned in nature of dividends-Investments in securities a statutory direction which has to be necessarily complied with assessee-Classification under "investments" immaterial--Assessee entitled to claim of diminution in value of securities which held for purpose of its business--Income-tax Act, 1961-- Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) . . . 543

•

Non-resident --Double taxation avoidance--Interest on refund of tax deducted at source from receipts of permanent establishment--Provisions of Double Taxation Avoidance Agreement more beneficial and applicable--Payment of tax responsibility of foreign company--Collection of tax at source not effective connection of indebtedness with permanent establishment in India--Amount taxable under article 11(2) of Double Taxation Avoidance Agreement--Income-tax Act, 1961, s. 90--Double Taxation Avoidance Agreement between Australia and India, art. 11(2)-- Asst. CIT v. Clough Engineering Ltd. [SB] (Delhi) . . . 618

SUPREME COURT

•

Offences and prosecution --Dishonour of cheque--Firm--Liability of partners--How far ratio in S. M. S. Pharmaceuticals applicable--Averment in complaint that all partners looking after day to day affairs of firm--Whether accused persons were partners at relevant time--Matter for trial--Discharge of accused persons not proper--Negotiable Instruments Act, 1881, ss. 138, 141-- Rallis India Ltd. v. Poduru Vidya Bhusan . . . 54

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]

HIGH COURTS

•

Banks and financial institutions --Enforcement of security interest--Acquisition of rights in security interest-Can be by asset reconstruction company or bank--Assignment of security interest by asset reconstruction company to bank and in turn by bank to another asset reconstruction company--Permissible--Writ--Writ petition against possession notice by asset reconstruction company--Court will not entertain-Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, ss. 2(1)(ha), (l), (zd), (ze), (zf), 5, 9, 10, 13, 17(1)--Recovery of Debts Due to Banks and Financial Institutions Act, 1993, s. 2(g)-Security Interest (Enforcement) Rules, 2002--Constitution of India, art. 226-- BPL Ltd. v. Pegasus Assets Reconstruction (Ker) . . . 1

•

Contempt of court --Winding up--Realisation of assets--Sale of assets in auction--Offer to purchase property and subsequent withdrawal of offer--Cheque issued for earnest money deposit dishonoured on presentation--Court proceedings treated casually causing avoidable delay--Failure to deposit earnest money by way of demand draft despite court's directions--Conduct unacceptable and demeaning dignity of court-Direction for initiation of contempt proceedings and proceedings under Negotiable Instruments Act, 1881-Appeal--Directions modified--Negotiable Instruments Act, 1881, s. 138-- Jay-Kanan Build Con P. Ltd. v. Official Liquidator, Omex Investors Ltd. (in liquidation) (No. 2 ) (Guj) . . . 34

•

Winding up --Petition for winding up--Petition based on recommendation of BIFR--Company judge not bound by recommendation but free to apply mind to facts and circumstances of case--Subsequent events showing claim of lone secured creditor satisfied and electricity dues yet to concretise in pending civil suit-Company judge dismissing petition--Order does not suffer from legal infirmity--No interference warranted-Companies Act, 1956-- Vashisht Industries Products v. Official Liquidator (P & H) . . . 96

•

--Realisation of assets--Auction sale--Successful bidders seeking confirmation of sale in favour of their nominees--Terms and conditions of sale prohibiting nominee from making offer but not excluding right to demand conveyance in favour of nominee--Direction to join nominees as co-purchaser for executing conveyance--Companies Act, 1956, s. 433-- Sudipta Traders P. Ltd. v . Official Liquidator (Cal) . . . 61

•

--Realisation of assets--Land held on lease by company with condition that consent of lessor to be obtained for further assignment--Property sold in liquidation to auction purchaser without notice to or consent of lessor--Transfer of leasehold right by official liquidator defective--Purchaser to have made diligent enquiry --Ex post facto consent of lessor to be obtained by paying consideration required by them--Both official liquidator and purchaser equally responsible for not discharging their respective duties and to pay compensation equally--Companies Act, 1956-- Jamshedpur Cements Ltd. (in liquidation), In re (Cal) . . . 72

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--Realisation of assets--Powers of court--Sale of assets in auction--One-time settlement scheme between company in liquidation and creditor--Creditor having received substantial amount estopped from denying one-time settlement and not competent to revoke--Company court empowered to decide enforcement of one-time settlement scheme--Companies Act, 1956, s. 446-- Pradeshiya Industrial and Investment Corporation of Uttar Pradesh Ltd. v . C. M. Jain, Ex. Managing Director, M/s. La Medical Devices Ltd. (P & H) . . . 85

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--Realisation of assets--Sale of assets in auction--Offer to purchase property of company at value more than market price--Time sought for depositing demand draft--Demand draft not deposited--Offer withdrawn after several adjournments and unconditional apology tendered to court--Applicant resiling from commitment to court--Offer made neither genuine nor bona fide and apology tendered not trustworthy--Contempt of court--Direction issued for initiation of suo motu contempt proceedings and under section 138 of Negotiable Instruments Act, 1881 for dishonour of cheque--Companies (Court) Rules, 1959--Companies Act, 1956-Negotiable Instruments Act, 1881, s. 138--Contempt of Courts Act, 1971-- Jay-Kanan Build Con P. Ltd. v. Official Liquidator, Omex Investors Ltd. (in liquidation) (No. 1 ) (Guj) . . . 23

VIKAS GUPTA, COMPANY SECRETARY, SHREE KRISHNA PAPER MILLS & INDUSTRIES LTD. PH. NO. 9953620278 E-MAIL ID– [email protected], [email protected]