norms for SEZs eased

Social infrastructure norms for SEZs eased

New Delhi: In a move that would help developers of special economic zones, particularly of IT/ITeS SEZs, enhance the commercial viability of projects, the government has allowed them to build more and larger housing facilities, offices and other required social infrastructure in the ‘non-processing area’ and avail tax benefits for it.
Half the total area of each SEZ comprises the non-processing area that houses only social amenities, while the other half is the processing area where industrial units are located.
The ceilings on housing and office space in the non-processing area of SEZs were imposed to prevent SEZs from becoming a pure-play realty business. But the curbs were affecting the commercial viability of SEZs, according to the commerce ministry.
The ministry had even mooted amendments to the rules saying developers should be permitted to build over and above the ceiling limits, but by forgoing the tax and duty exemptions for such extra constructions.
After several rounds of inter-ministerial deliberations and Empowered Group of Ministers (EGoM) meetings in August and October this year, the government has now decided that the Board of Approval (BoA) for SEZs can approve the construction of social amenities according to the enlarged overall ceilings in each category of social infrastructure. As per the new norms, developers would even be able to claim the duty drawback, and benefits of tax exemption or concessions, sources said.
However, there are some riders. Construction of social amenities as per the relaxed norms would be permitted only in a phased manner and would depend on the employment generation, increased focus on exports and building of infrastructure in the area housing industrial units.
Besides, the BoA will apply the new norms on a case-by-case basis, depending on the location of the zone and the projected number of employees. Earlier, due to the differences between the commerce and finance ministries on the easing of such norms, the government had asked Delhi Development Authority (DDA) for its expert opinion to help in arriving at a consensus.
As per the suggestions of the DDA, the overall ceilings in each category will be revised upwards in proportion with the available area of land and the floor area ratio as well as the norms prescribed by the local town planning authorities.
The ceiling on social amenities has been causing problems to SEZ developers. For instance, an IT/ITeS SEZ, with a minimum area of 10 hectares, could allocate only...

10,000 square metres (sq m) for housing and 1,000 sq m for office space. Since most IT/ITeS SEZ have around 15,000-20,000 employees, they would need much more floor area than these limits.
The scene was no different for sector specific (with a minimum area of 100 hectares) and multi-product SEZs (minimum area of 1,000 hectares). While sector specific SEZs could allocate only a maximum of 750,000 sq.m (or 7,500 units) of housing space and 50,000 sq m of office space, for multi-product SEZs it was 25 lakh sq m (or 25,000 units) for housing and 200,000 sq m for office space.
“If all the employees of SEZ were to be settled inside the zone, then the permitted floor area for housing and other facilities should be much higher. These ceilings on the number and size of social amenities are limiting factors. Many employees who cannot be accommodated inside the zone will settle outside, creating a burden on the existing housing and infrastructure facilities,” a representative of the Export Promotion Council for EOUs and SEZs Panel for SEZ Developers.
The commerce ministry had said the curbs on social amenities would prevent developers from fully using the permissible construction on the SEZ land as per individual state policies. More over, such restrictions would also result in higher prices of the available built up space, the ministry had said.
But the revenue department had objected to allowing developers to build social amenities (like entertainment and recreational facilities, shopping malls, hotels, business and residential complexes, hospitals and educational institutions) in excess of what is permitted. The department had said removal of these restrictions would lead to increased real estate development activities in SEZs, which are mainly meant for boosting exports and generating employment....

disclose info on processing fees

Banks must disclose info on processing fees: RBI

Mumbai, Nov. 26
The Reserve Bank of India has asked all banks/ financial institutions to ensure that all information relating to charges/fees for processing are always disclosed in the loan application forms.
Further, banks must inform ‘all-in-cost’ to the customer to enable him compare the rates charged with other sources of finance.
Under its guidelines on ‘Fair Practices Code for Lenders — Disclosing all information relating to processing fees / charges,’ the RBI said, loan application forms should include information about the fees/charges, if any, payable for processing; the amount of such fees refundable in the case of non-acceptance of application; pre-payment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.
The RBI’s directive comes in the wake of it coming across some banks levying, in addition to a processing fee, certain charges which are not initially disclosed to the borrower.

warrant conversion norm

RBI to ease warrant conversion norm
NEW DELHI: Companies looking to raise funds from foreign investors by way of convertible warrants may soon be allowed to issue shares against these
instruments at any time up to 18 months, under a relaxation of rules being considered by the Reserve Bank of India (RBI). Convertible warrants are loans that are subsequently exchanged for shares on pre-agreed terms. Like an option, a warrant gives its holder or buyer the choice to purchase a fixed quantity of shares of the issuing company at an agreed price at or before a future date. The central bank had, last December, made it mandatory for companies to issue shares within 180 days of receiving money from foreign investors. Its move was aimed at plugging a loophole in foreign exchange regulations which was being misused by mainly real estate companies. RBI’s decision, however, created confusion for companies that planned to issue convertible warrants. This is because the stock market
regulator Sebi’s guidelines allowed warrants to be converted into shares in 18 months. Some companies had requested the finance ministry to clarify the rules following the RBI order. The finance ministry has written to the central bank asking it to make an exception in the case of convertible warrants, a ministry official said, adding the central bank was expected to issue a clarification. “The matter requires clarification. In fact, the government or RBI should come out with separate guidelines dealing with the issue,” said Punit Shah, executive director, tax and regulatory services for PricewaterhouseCoopers’ financial services practice. Mr Shah said clear rules on the conversion of warrants into shares were absent under current foreign direct investment (FDI) regulations or under Foreign Exchange Management Act (FEMA) rules. The RBI move was primarily aimed at plugging a loophole in the FEMA regulations being misused by real estate firms to raise funds abroad when the government’s rules clearly barred real estate companies from raising foreign debt.

guidelines for smaller exchanges

Sebi to unveil guidelines for smaller exchanges in Dec
Chandigarh: The guidelines and procedures for setting up of smaller exchanges to cater the financial requirement of small and medium enterprises are being given final touches by the Sebi and are likely to be announced towards middle of December 2008 to actively provide alternate finance window.
Addressing the Assocham Conference on “Financing the Future Giants” on Wednesday in Chandigarh, T C Nair, wholetime member, Sebi said in the initial phase, three-four licences will be provided to the companies who have the net worth income of Rs100 crore.
He said the BSE and NSE have evinced their desire to set up such exchanges and the objective would be to mobilise resources from the public on the lines of the Alternate Investment Market (AIM) set up in London.
Nair further said, “The downswing in the stock market is an high opportunity for the investors and there was no reason to have panic. In last October, there were 1,100 FIIs operating in India which had raised to 1,500 FIIs in October 2008. It is true that they have withdrawn their money to meet their global requirements, yet keeping in view the strong fundamentals of the Indian economy, the stock markets are bound to be recovering sooner than later.”
However, he said the biggest threat due to global meltdown is to the small and medium enterprises whose contribution has been as high as 47% of the manufacturing sector and 8% of the progress are truly innovative.

Job Working Activity

Service Tax on Job Working Activity
November 27, 2008

For the purpose of "Business Auxiliary Service" the definition of section 65(19)(v) of Finance Act, 1994 (Service Tax) provides that an activity of "production or processing of goods for, or on behalf of, the client" is a taxable activity. However an activity which is amounting to manufacture within the meaning of section 2(f) of Central Excise Act, 1944 is excluded from the scope of service tax under "Business Auxiliary Service"
There is a wide confusion over applicability and taxability of job working activity because, there is wide gap in different interpretation of provisions of the provisions of service tax relating to Job working activity under Business Auxiliary Service.
It happens in generally that a principle who buys excise duty paid material (goods) and send the same to job worker for further processing. Many times the activity undertaken by the job worker is not amounting to manufacture.
In the present case the job worker was engaged in the following FBE Coating activities:
The process of FBE coating undertaken by the appellant is as under:
(a) Duty paid bars received from the customers, are cleaned in Short Blasting Machine using steel shot of abrasives.
(b) Bars are heated to around 220 to 240 C in induction heater.
(c) Epoxy powder is sprayed over the heated bars by Electrostatic Spray guns housed inside the Coating Booth.
(d) Epoxy powder on contact with hot bars melts and fuses with the shot blasted heated bar surface making a strong corrosion protection bond with bars.
(e) Bars are then cooled in a free flowing water quench tunnel.
(f) Thereafter Coated Bars are inspected to check quality of Coating and then dispatched back to the respective customers.
The FBE coated bars are returned to their customers and used in civil construction job like construction of dams, bridges, canals, channels, pipelines etc. The said coating is essentially carried out on the bars for the purpose of protecting them from corrosion.
After hearing the arguments and analyzing the provisions in details with reference to amendments made in the provisions with effect from June 2005, honorable CESTAT held that:
"…..In the present case, the appellant is a company having expertise in the FBE coating and are professional in the fields. Their services are being used by the main contractors in furtherance of providing their service to the State Road Development Corporation Ltd. As such, the said main contractors instead of themselves doing the job of epoxy coating are getting the same done from the appellants by utilizing their services.
….Having discussed the various issues in the preceding paragraphs, we hold that the appellants are liable to pay service tax in respect of the activity undertaken by them during the relevant period."
However, having the facts of the case, CESTAT gave the following reliefs to the appellant:
1 Benefit of Cenvat credit as per Cenvat Credit Rules, 2004 allowed on inputs and input services.
2 Penalty is waived by invoking the provisions of section 80

PARTNERSHIP

INCORPORATION OF LIMITED LIABILITY PARTNERSHIP

INTRODUCTION:
Sec.2 (d) of the Limited Liability Partnership Bill 2008 ('Bill' for short) includes the limited liability partnership registered under the Limited Liability Partnership Act in the definition of a body corporate. Chapter III of the bill provides for the incorporation of the limited liability partnership.
INCORPORATION DOCUMENT:
Sec. 11(1) provides that for incorporation of a limited liability partnership, two or more persons associated for carrying on a lawful business with a view to profit shall subscribe their names to an incorporation document. The incorporation document shall-
Be in a form as may be prescribed;
· State the name of the limited liability partnership;
· State the proposed business of the limited liability partnership;
· State the address of the registered office of the limited liability partnership;
· State the name and address of each of the persons who are to be partners of the limited liability partnership of incorporation;
· State the name and address of the persons who are to be designated partners of the limited liability partnership on incorporation;
· Contain such other information concerning the proposed limited liability partnership as may be prescribed.
Besides there shall be filed along with the incorporation document, a statement in the prescribed form, made by either an advocate or a Company Secretary or a Chartered Accountant or a Cost Accountant, who is engaged in the formation of the limited liability partnership and by any one who subscribed his name to the incorporation document, that all requirements of this Act and the rules made there under have been complied with, in respect of incorporation and matters precedent and incidental thereto. The incorporation document is similar that of the document prescribed for the companies to be registered under the Companies Act, 1956. The Companies Act provides that the Memorandum and Articles of the Association shall be accompanied along with the incorporation document. Even though the bill provides for the limited liability partnership agreement, the same is not made compulsory to file along with the incorporation document. The partnership agreement is necessarily to be filed along with the incorporation document. The Government has to consider this aspect while giving shape this bill as an act.
NAME OF LIMITED LIABILITY PARTNERSHIP:
Every limited liability partnership shall have either the words 'limited liability partnership' or the acronym 'LLP' as the last words of its name. No limited liability partnership shall be registered by a name which, in the opinion of the Central Government is-
Undesirable; or
· Identical or too nearly resembles to that of any other partnership firm or limited liability partnership or body corporate or a registered trade mark, or a trade mark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999.
As like in the Companies Act, the name is to be reserved for limited liability partnership. A person may apply in such form and manner and accompanied by such fee as may be prescribed to the Registrar for the reservation of a name set out in the application as-
The name of a proposed limited liability partnership; or
· The name to which a limited liability partnership proposes to change its name.
Upon receipt of an application and on payment of prescribed fee, the Registrar may, if he is satisfied, subject to the rules prescribed by the Central Government in the matter, that the name to be reserved is not one which may be rejected on any ground reserve the name for a period of three months from the date of intimation by the Registrar.
REGISTERED OFFICE:
Every limited liability partnership shall have a registered office to which all communications and notices may be addressed and where they shall be received. A document may be served on a limited liability partnership or a partner or designated partner thereof by sending it by post under a certificate of posting or by registered post or by any other manner, as may be prescribed, at the registered office and any other address specifically declared by the limited liability partnership for the purpose in such form and manner as may be prescribed.
DESIGNATED PARTNERS:
Every limited liability partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India. In case of a limited liability partnership in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such limited liability partnership or nominees of such bodies corporate shall act as designated partners. If the incorporation document specifies who are to be designated partners, such person shall be designated partners on incorporation, or states that each of the partners from time to time of limited liability partnership is to be designated partner, every partner shall be a designated partner.
An individual shall not become a designated partner unless he has given his prior consent to act as such to the limited liability partnership in such form and manner as may be prescribed. His consent shall be filed with the Registrar by the limited liability partnership in such form and manner as may be prescribed within thirty days of his appointment. An individual eligible to be a designated partner shall satisfy such conditions and requirements as may be prescribed.
INCORPORATION:
The incorporation document shall be filed in such manner and with such fees, as may be prescribed with the Registrar or the State in which the registered office of the limited liability partnership is to be situated. The incorporation document may also be filed electronically. The Registrar under the Companies Act shall be Registrar for this purpose.
When all the requirements have been complied with the Registrar shall retain the incorporation document and register the incorporation document and give a certificate that the limited liability partnership is incorporated by the name specified therein. The Registrar may accept the statement filed along with the incorporation document as sufficient evidence that the requirements have been complied with. The certificate shall be signed by the Registrar and authenticated by his official seal. The certificate shall be conclusive evidence that the limited liability partnership is incorporated by the name specified therein.
EFFECT OF REGISTRATION:
On registration, a limited liability partnership shall by its name, be capable of-
Suing and being sued;
· Acquiring, owning, holding and developing or disposing of property, whether moveable or immovable, tangible or intangible;
· Having a common seal, if it decides to have one; and
· Doing and suffering such other acts and things as bodies corporate may lawfully do and suffer.
CONCLUSION:
The process of incorporation of a limited liability partnership is the simplified one and the professionals may play a vital role in this work. The professionals are to be careful in making the statement which is to be attached with the incorporation document since the bill provides for punishment. The bill provides that if a person makes a statement which he knows to be false or does not believe to be true shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than ten thousand rupees but which may extend to five lakh rupees.

replacement cost

Term of the Day - replacement cost
The amount it would cost to replace an asset at current prices. If the cost of replacing an asset in its current physical condition is lower than the cost of replacing the asset so as to obtain the level of services enjoyed when the asset was bought, then the asset is in poor condition and the firm would probably not want to replace it.

GOLDEN QUOTE

Be brave. Even if you’re not, pretend to be. No one can tell the difference.

GOLDEN QUOTE

Be brave. Even if you’re not, pretend to be. No one can tell the difference.