Specify time frame for Disposal of loan applicable -RBI to banks
RBI/2014-15/199
DBOD.No.BP.BC. 35/21.04.048/2014-15
DBOD.No.BP.BC. 35/21.04.048/2014-15
September 1, 2014
The Chairman and Managing Director/Chief Executive Officer
All Scheduled Commercial Banks
(Excluding Local Area Banks and Regional Rural Banks)
All Scheduled Commercial Banks
(Excluding Local Area Banks and Regional Rural Banks)
Dear Sir/Madam,
Timelines for Credit Decisions
Please refer to our circulars IECD.No.24/08.13.08/96-97 dated April 15, 1997 and IECD.No.12/08.13.08/96-97 dated October 29, 1996 in terms of which instructions relating to formation of consortium by banks beyond a threshold limit were withdrawn. Banks were allowed to evolve appropriate mechanism for adoption of sole bank/multiple bank/consortium or syndication approach, by framing necessary ground rules on operational aspects. The objective of granting operational freedom was to expedite the process of credit decisions.
2. It has, however, been brought to our notice that there have been inordinate delays on part of banks in conveying their credit decisions leading to delays in project implementation. While banks are required to carry out necessary due diligence before arriving at credit decisions, timely and adequate availability of credit is a pre-requisite for successful implementation of large projects. In this connection, banks' attention is drawn to the guidelines contained in circular DBOD.Leg.No.BC.104/ 09.07.007/2002-03 dated May 5, 2003 on 'Guidelines on Fair Practices Code for Lenders', wherein we have stipulated that the time frame within which loan applications up to Rs.2 lakh will be disposed of should be indicated at the time of acceptance of loan applications. It is felt that a similar practice of time bound decision making may be required in the case of other loans too.
3. It is, therefore, advised that banks should clearly delineate the procedure for disposal of loan proposals, with appropriate timelines, and institute a suitable monitoring mechanism for reviewing applications pending beyond the specified period. It is, however, reiterated that there should not be any compromise on due diligence requirements. Banks may also make suitable disclosures on the timelines for conveying credit decisions through their websites, notice-boards, product literature, etc.
4. Banks may put in place the above system within 30 days from the date of this circular.
Yours faithfully,
(Sudarshan Sen)
Chief General Manager-in-Charge
Chief General Manager-in-Charge
Account cannot be classified at Inoperative if Dividend been credited to such account
RBI /2014-15/200
DBOD.No. Leg. BC. 36/09.07.005/2014-15
DBOD.No. Leg. BC. 36/09.07.005/2014-15
September 1, 2014
All Scheduled Commercial Banks
(excluding RRBs)
(excluding RRBs)
Dear Sir/Madam,
Inoperative Accounts
Please refer to paragraph 2(iv) of our Circular DBOD.No.Leg.BC.34/09.07.005/2008-09 dated August 22, 2008 on Unclaimed Deposits/Inoperative Accounts in Banks in terms of which a savings as well as current account should be treated as inoperative/dormant if there are no transactions in the account for over a period of two years. Further, in terms of paragraph 2(vi), for the purpose of classifying an account as inoperative, both the types of transactions i.e. debit as well as credit transactions induced at the instance of customers as well as third party should be considered.
2. There may be instances where the customer has given a mandate for crediting dividend on shares to Savings Bank account and there are no other operations in the Savings Bank account. Some doubts have arisen whether such an account is to be treated as inoperative account after two years.
3. In this connection, we clarify that since dividend on shares is credited to Savings Bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the dividend is credited to the Savings Bank account. The Savings Bank account can be treated as inoperative account only after two years from the date of the last credit entry of the dividend, provided there is no other customer induced transaction.
Yours faithfully,
(Sudarshan Sen)
Chief General Manager– in–Charge
Chief General Manager– in–Charge
NEW DELHI, SEPT 02, 2014: THE issue before the Bench is - Whether provisions of Sec 43A will apply even if FCNR loan is taken not for acquisition of capital assets but to repay debentures. And NO is the answer of the High Court.
Facts of the case
The assessee Climate Systems Pvt Ltd had issued 15% unsecured redeemable non-convertible debentures carrying interest @15% per annum. In order to repay the debentures, the assessee borrowed money. The loan was taken against Foreign Currency Non-Resident Loan Account [FCNR(B) Loan]. The advantage was that the loan was availed at a lower rate of interest as compared to interest payable on the normal loan account. In order to hedge against foreign exchange fluctuations, the assessee had entered into forward contracts with banks in India. The assessee incurred loss of Rs. 49,98,072/- on account of foreign exchange fluctuation on account of FCNR(B) Loan. The said amount was paid during the previous year relevant to the assessment year.
In the Assessment Order under Section 143(3), income of the assessee was assessed at Rs.2,76,29,016/- as against return income of Rs.2,46,94,573/-. No enquiry or questions were raised regarding expenditure of Rs.49,98,072/- during the original assessment proceedings.
In the Assessment Order under Section 143(3), income of the assessee was assessed at Rs.2,76,29,016/- as against return income of Rs.2,46,94,573/-. No enquiry or questions were raised regarding expenditure of Rs.49,98,072/- during the original assessment proceedings.
Commissioner of Income Tax under Section 263 of the Act, required the Assessing Officer to examine the issue of applicability of provisions of Section 43A after verifying the nature and source of expenditure relating to the foreign exchange fluctuations. This order passed by the Commissioner of Income Tax was not challenged and has attained finality.
In the assessment order passed u/s 263 read with Section 143, the Assessing Officer observed that decisions of the Delhi High Court in the case of CIT Vs. Woodward Governor India Pvt. Ltd. and Oil and Natural Gas Corporation Vs. DVIT had not been accepted by the Revenue and appeals stood preferred before the Supreme Court. He further observed that the assessees contention on Section 43A was not acceptable, though no asset had been acquired from the said loan, as assets were acquired in the earlier years for purpose of business or profession. Thus, the provisions of Section 43A were applicable.
On appeal, the HC held that,
++ reference to Section 43A would be redundant and not necessary as the revenue has not been able to point out that the loan taken under the heading FCNR(B) loan was for purpose of acquisition of any capital asset. The Assessing Officer has accepted that the loan was not for acquisition of an asset but he observed that assets had been acquired in the earlier period. He did not specify or hold that an asset was acquired;
++ finding of the Commissioner of Income Tax (Appeals) is clear and categorical that the loan was not for acquisition of an asset, payment for which was to be made in foreign currency. Rs. 49,98,072/- was the actual expenditure incurred by the assessee as per the terms negotiated. The payment was to save and protect the assessee from foreign exchange fluctuation loss. The payment of Rs.49,98,072/- was made during the previous year relevant to the assessment year in question. This is not disputed. Keeping in view the aforesaid aspects, it is clear that the payment of Rs. 49,98,072/- would be of revenue nature i.e. virtually in nature of payment of interest for the loan taken having regard to the nature and type of loan which was taken i.e. FCNR(B) Loan Account. It is part and parcel of payment towards debt servicing.
Income Tax
Whether when assessee being manufacturer of beer and liquor, advances loan to sister concern for setting up new line of business, such assistance can be characterised as expenditure incurred wholly and exclusively for business of assessee - NO: HC
THE assessee is a public limited company carrying on the business of manufacture and sale of beer and liquor. The case of the asessee is that it established a subsidiary company M/s.U.B.Resorts Ltd. which was also incorporated as a Company and registered with the Registrar of Companies, with a view to extend the business of the assessee-Company. In 2001, they informed the Registrar of Companies to strike off the name of M/s.U.B.Resorts Ltd. under Section 560 of the Companies Act, 1956 for the reasons that the subsidiary Company could not do any business or commercial activity as laid down in the memorandum of association and that the same had become defunct. M/s.U.B.Resorts Ltd. was a wholly owned subsidiary of the assessee. Till the financial year 1997-98, all the expenditure incurred on the executives of the subsidiary Company were absorbed by the assessee as the employees were on the rolls of the assessee Company.
The issue before the Bench is - Whether when assessee being a manufacturer of beer and liquor, advances loan to sister concern for setting up a new line of business, such assistance can be characterised as expenditure incurred wholly and exclusively for business of assessee. And the verdict goes against the assessee.
Non-consideration of ruling of High Court or Supreme Court by ITAT is an apparent mistake and rectifiable
September 2, 2014[2014] 48 taxmann.com 58 (Punjab & Haryana)/[2014] 264 CTR 206 (Punjab & Haryana)
IT : Where Tribunal had sustained addition in hands of assessee under section 43B on account of delay in contribution towards ESI and PF, though various judicial precedents were available which held same to be allowable, it was a mistake apparent from record to be rectified under section 254
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