• RESERVE BANK OF INDIA

Circular No.DBOD.No.FSD.BC. 29 /24.01.001/2008-09 Dated 06.08.2008- Introduction of Currency Futures - Permitting banks to become trading /clearing members of SEBI-approved exchanges

As per the recommendations of the Internal Working Group set up by the Reserve Bank of India to study the international experience and suggest a suitable framework to operationalise the proposal to introduce exchange traded Currency Futures in India, it has been decided to permit scheduled commercial banks (AD Category I) to become trading / clearing members of the currency derivatives segment to be set up by the Stock Exchanges recognized by SEBI, subject to their fulfilling the following prudential requirements like minimum networth of Rs. 500 crores; minimum CRAR of 10%; net NPA not exceeding 3% and net Profit for last 3 years.

A.P. (DIR Series) Circular No. 05 Dated 06.08.2008- Guidelines on trading of Currency Futures in Recognised Stock / New Exchanges

It has been decided by RBI to introduce currency futures in recognized stock exchanges or new exchanges recognized by the Securities and Exchange Board of India (SEBI) expanding the hedging opportunities available to the residents, in order to enhance the flexibility for the residents to manage their currency risk dynamically. The functions of currency futures market would be subjected to the directions, guidelines, instructions issued by the Reserve Bank and the SEBI, from time to time.

A. P. (DIR Series) Circular No. 04 Dated 04.08.2008 - Exchange Earner's Foreign Currency (EEFC) Account

RBI has decided to withdraw the facility permitting to earn interest on Exchange Earners' Foreign Currency (EEFC) accounts to the extent of outstanding balances of USD 1 million per exporter from November 01, 2008. Consequently, all EEFC accounts will only be permitted to be opened and maintained in the form of non-interest bearing current accounts from November 01, 2008,

A. P. (DIR Series) Circular No. 03 Dated 04.08.2008 - Advance Remittance for Import of Rough Diamonds

AD Category - I banks are permitted to make advance remittance without any limit and without bank guarantee or standby letter of credit, by an importer for import of rough diamonds into India from the specified mining companies, subject to certain conditions. In consonance with recommendations made by the Gems and Jewellery Export Promotion Council (GJEPC), RBI Decides to include RIO TINTO, Belgium, and BHP Billiton, Belgium in addition to the list of six mining companies. All terms and conditions including format for submission of report will remain unchanged.

FEMA Notification No. GSR577(E) Dated 01.08.2008 -Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2008

Reserve Bank of India amends the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000. Accordingly, include 'Currency Futures' definition and directions dealing with grant of Permission to a person resident in India to enter into currency futures.

• SECURITIES AND EXCHANGE BOARD OF INDIA

PMD Circular No. SEBI/CFD/DIL/ESOP/4/2008/04/08 Dated 04.08.2008- Amendments to SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

The SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 has been amended. Accordingly, the Eligibility of nominee directors for ESOS has amended to the effect that a director, nominated by an institution as its representative on the Board of Directors of a company, is eligible to participate in the ESOS of the company, if the contract / agreement entered into between the nominating institution and the director so 2 appointed specifically provides for acceptance of ESOS of the company by such director and a copy thereof is filed with the company. Further, the Institute of Chartered Accountants of India (ICAI), which also prescribes the accounting treatment for employee stock options through its Guidance Note on "Employee Shared Based Payments", has revised the accounting treatment, reorganisation and measurement of options granted under graded vesting schedule. Accordingly, it has been decided to amend SEBI (ESOS & ESPS) Guidelines to bring the accounting treatment prescribed by SEBI, for options granted under graded vesting, in line with the accounting treatment provided by ICAI in this regard.

Derivatives Circular No. SEBI/DNPD/Cir- 38 /2008 Dated 06.08.2008 - Exchange Traded Currency Derivatives

RBI-SEBI Standing Technical Committee ("Committee") constituted to evolve norms and oversee implementation of Exchange Traded Currency and Interest Rate Derivatives has submitted a Report on Exchange Traded Currency Futures ("Report"). It lays down the framework for the launch of Exchange Traded Currency Futures in terms of the eligibility norms for existing and new Exchanges and their Clearing Corporations/Houses, eligibility criteria for members of such Exchanges/Clearing Corporations/Houses, product design, risk management measures, surveillance mechanism and other related issues.

SEBI issues circular dealing with terms and conditions regarding eligibility criteria for trading in Exchange Traded Currency Derivatives, participation of banks as Clearing Member or Trading Member of the Currency Derivatives Segment of an Exchange, certification and position limit.

• DIRECT TAXATION

Circular No. 7/2008 Dated 01.08.2008 -Order under section 119(1) of the Income-tax Act, 1961 regarding exemption from the TDS provisions under Section 197 read in conjunction with Section 10(26BBB) of Income Tax Act, 1961

The Central Board of Direct Taxes has directed that corporations which are established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen and whose income qualifies for exemption from Income-tax u/s. 10(26 BBB) of the Income Tax Act, 1961, are given exemption from Tax Deduction/Collection at Source on their receipts. However, this exemption shall not absolve such organisations from their statutory obligations of deducting TDS on all contractual payments made by them to other parties including sub-contractors etc and this exemption shall be valid for 3 years from the date of issue of this order.

Instruction No. 10/2008 Dated 31.07.2008 -Assessment of Banks -Allowance of Deduction to Rural Branches

While computing the income under the head 'Profit and Gains of Business & Profession' a scheduled bank or a non scheduled bank or a cooperate bank other than a primary agricultural credit society or a primary co-operative agricultural and rural bank is entitled to claim deduction of provision for bad debt of an amount not exceeding ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. It has, however, been noticed that in many instances, claims made by banks for deduction u/s 36(1)(viia) of the I.T. Act, 1961 are being allowed without verification as to whether the concerned branches come with the definition of 'rural branch' and this has resulted in large under-assessment of income. The Assessing Officers should, therefore, ensure that the claims of deduction towards advances given by rural branches of banks are allowed only after verifying as to whether such branches are eligible to be treated as a 'rural branch' according to the definition given in Explanation (ia) to section 36(1)(viia) of the I.T. Act, 1961.

Instruction No. 9/2008 Dated 31.07.2008 - Appreciation of Audit Report/Certification in Assessment Proceedings

With effect from 10th August, 2006, 'Accountants' are required to indicate in Form 3CD as to whether a certificate has been obtained from the respective assessees regarding payments relating to any expenditure/ taking or accepting of loans or deposits or repayment of the same through account payee cheque/bank draft . In cases of any factual misrepresentation by the Accountants, suitable action can be taken against them as provided u/s. 288 of the I.T. Act, 1961. Instead of simply relying on the said certificates given by the assessees, the assessing officers should undertake a test check of such transactions while completing the assessments under scrutiny. Results of such test check should also be kept on record. In case, any violation is noticed, follow up action as per the I.T. Act including invoking of penal provisions should be taken.

Press Release From File No. 402/92/2006-MC (34 of 2008) Dated 30.07.2008-Electronic Filing of Income Tax Returns

The facility for electronic filing of income tax returns is available through the website http//:incometaxindiaefiling.gov.in Filing income-tax returns electronically has several advantages - cost of filing is low, ease of filing is high, it can be filed anytime from anywhere, there is no need to visit the tax office, return filed is more accurate, there is no fear of losing tax records, returns can be processed faster and refunds issued faster and more accurately. E-filing of returns can be done even if taxes are paid at bank without e-payment. The Income tax e-filing website is highly secured and the income-tax return details filed by the taxpayer cannot be accessed on the website.

• DIRECTORATE GENERAL OF FOREIGN TRADE

Public Notice No. 57(RE-08)/2004-2009 Dated 01.08.2008 -Notify All Industry Rate of Deemed export Drawback for both HSD and Furnace Oil

The Director General of Foreign Trade has informed that the All Industry Rate of Deemed export Drawback for both HSD and Furnace Oil is Rs."NIL" per MT, supplied by Domestic Oil Companies to EOU/SEZ Units under various schemes under Chapters 4, 6, 7 and 8 of the Foreign Trade Policy, with effect from 24.6.2008 and until further orders.

• PRESS INFORMATION BUREAU

Dated 31.07.2008 -Amendment to the Payment of Gratuity Act, 1972

The Union Cabinet gave its approval to accept one recommendation of the Standing Committee of giving effect to the amendments retrospectively with effect from 3rd April, 1997 and to move Payment of Gratuity (Amendment) Bill, 2008 in the Parliament. The Cabinet also gave its approval for withdrawal the Payment of Gratuity (Amendment) Bill, 2007 from the parliament. This will result in coverage of teachers in the educational institutions under the Payment of Gratuity Act, 1972 with effect from 3rd April, 1997.

Dated 31.07.2008- Additional Term of Reference for the Thirteenth Finance Commission

The Union Cabinet today gave its approval for insertion of the following Additional Term of Reference in the Term of Reference of the Thirteenth Finance Commission :-" Having regard to the need to bring the liabilities of the Central Government on account of oil, food and fertilizer bonds into fiscal accounting, and the impact of various other obligations of the Central Government on the deficit targets, the Commission may review the road map for fiscal adjustment and suggest a suitably revised roadmap with a view to maintaining the gains of fiscal consolidation through 2010 to 2015".

• TELECOM REGULATION AUTHORITY OF INDIA

Press Release No. 69/2008 Dated 06.08.2008 - TRAI opens doors for Mobile Virtual Network Operator (MVNO)

TRAI has released recommendations on Mobile Virtual Network Operator (MVNO) facilitating the introduction of MVNOs in the Indian Telecom network. According to recommended definition of the MVNO is a licensee in any service area that does not have spectrum of its own for access service, but can provide wireless (mobile) access services to its own customers through an agreement with the licensed access provider, UAS/CMTS Licensee. It is seen as a natural progression towards enhancing free market principles and contributing to the efficient use of existing telecommunication infrastructure. Recommendations formulated by the TRAI concentrate on the need and timing for introduction of MVNO, at the same time it covers terms and conditions of the license to be granted to such operators.

• INDIRECT TAXATION

Service Tax

Circular No. 104 /7/2008-ST Dated 06.08.2008 - Service tax levy on goods transport by road services -reg

CBEC issues clarifications while responding to the issues raised by AIMTC regarding the difficulties being faced by the goods transport agency in respect of service tax levy on goods transport by road service. It clarifies that ancillary/intermediate service provided in relation to transportation of goods and the charges for which are included in the invoice issued by the GTA will form part of GTA service therefore, the abatement of 75% would be available on it.

CBEC also clarifies that Cargo handling service provided by a person who is registered as GTA service provider would be treated as GTA service and not cargo handling service, if consignment note is issued for transportation of goods by road in a goods carriage and the amount charged for the service provided is inclusive of packing and 'GTA Service' would include entire transportation of goods by road, where person transporting the goods issues a consignment note.