Purchases and sales made by exchange bureaux of authorised dealers should be incorporated in the R Returns submitted by their link offices.

[ANX-I] ANNEXURE

Copy of CBDTs circular No.759 dated 18th November 1997
(Paragraph 3B10)

F.No. 500/152/96-FTD

Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
-----------------------------
Circular No. 759 New Delhi Dated: 18th November 1997

To

All the Chief Commissioners of Income-tax
Directors General of Income-tax

Sir,

Subject: Remittance to a non-resident - deduction of tax at source -Submission of No Objection Certificate - Dispensing with - Regarding

1. Section 196 of the Income-tax Act, 1961 provides that any person responsible or paying to a non-resident any sum chargeable under the Act shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by cheque or draft or any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.

2. The Reserve Bank of India have provided in their Office Manual that no remittance shall be allowed unless a No Objection Certificate has been obtained from the Income-tax Department. It has since been decided that henceforth remittances may be allowed by the Reserve Bank of India without insisting upon a No Objection Certificate from the Income-tax Department and on the person making the remittance furnishing an undertaking (in duplicate) addressed to the Assessing Officer accompanied by a certificate from an Accountant (other than an employee) as defined in the explanation below Section 288 of the Income-tax Act 1961 in the form annexed to this circular. The person making he remittances shall submit the undertaking along with the said certificate of the Accountant to the Reserve Bank of India, who in turn shall forward a copy thereof to the Assessing Officer

3. The contents of this Circular may be brought to the notice of all the officers working in your charge.

Yours faithfully,

sd/- (Rajat Bansal)
Under Secretary (FTD)

Form of Undertaking and Accountants certificate regarding payment of Income-tax to be submitted to authorised dealers while making remittances to non-residents vide CBDT circular No.759 dated 18th November 1997

UNDERTAKING

To________________________________________
(Designation of the Assessing Officer)
________________________________________

I/We ____________________________________ propose to make a remittance of ________
(Name, address and Permanent Account Number) (Amount)
being ________________________________________________________________________
(Nature of payment) to ___________________________________________________________________________
(name and complete address of the person to whom the remittance has been made)
after deducting a sum of Rs.________ being the tax @_____________, which is the appropriate rate of tax deductible at source on the said amount of remittance.

2. A certificate from the Accountant as defined in Explanation below Section 288 of the Income-tax Act certifying the nature and amount of income, amount of tax payable and the amount actually paid, is also annexed.

3. In case it is found that the tax actually payable on the amount of remittance made has either not been paid or has not been paid in full I/we undertake to pay the said amount of tax alongwith interest found due in accordance with the provision of the Income-tax Act.

4. I/We will also be subject to the provisions of penalty and prosecution for the said default as per the Income-tax Act.

5. I/We also undertake to submit the requisite documents etc. for enabling the Income-tax Department to determine the nature and amount of income and tax, interest, penalty etc. payable hereon.

__________________________
(Name & Signature)

Date:

Place:

(The undertaking shall be signed by the person authorised to sign the return of income of the person making the payment).

CERTIFICATE

I/We have examined the books of accounts of M/s._____________________________________
(Name, address and Permanent Account Number
of person making the remittance)
for ascertaining the nature of the remittance, of________________________________________
(Amount of remittance) to ___________________________________________________________________________
(Name and complete address of the person to whom the remittance is being made)

and the rate at which the tax is deductible at source thereon and hereby certify that a sum of Rs at the.______ has been deducted as tax appropriate rate and has been paid to the credit of the Government.

________________ Accountant Place:

Date:

[ANX-II] Guidelines for hedging of commodity price exposures
These guidelines cover Indian entities who are exposed to commodity price risk. The operative procedure is aimed at ensuring hedging of genuine exposures. Indian corporates who seek to hedge commodity price exposures (excluding oil and petroleum products) should submit their applications to the International Banking Division of an authorised dealer giving the following details.
i) Name and address of the organisation.

ii) A brief description of the hedging strategy proposed:
a) description of business activity and nature of risk.
b) instruments proposed to be used for hedging.
c) exchanges and brokers through whom the risk is proposed to be hedged and credit lines proposed to be availed. The name and address of the regulatory authority in the country concerned may also be given.
d) Size/average tenure of exposure/total turnover in a year expected with peak positions thereof and the basis of calculation.

iii) Copy of the Risk Management Policy approved by the Board of Directors covering:
a) risk identification
b) risk measurements
c) guidelines and procedures to be followed with respect to revaluation/monitoring of positions
d) names and designations of the officials authorised to undertake transactions and limits.

iv) Any other relevant information

2. The authorised dealer will forward the application to Reserve Bank together with its recommendations for consideration. While forwarding the proposal, the authorised dealer should ensure that it is supported by a copy of the Memorandum on the Risk Management Policy placed before the Board of Directors with specific reference to hedging of commodity price exposure. The Memorandum should, inter alia, incorporate details relating to

i) Risk identification i.e. mis-match between purchases and sales in respect of the commodity concerned, producers risk etc.

ii) Estimate of maximum exposure in physical positions.

iii) Estimate of maximum exposure to future positions.

iv) Risk monitoring and reporting.

3. i) The focus will be on risk containment. Only off-set hedge will be permitted.

ii) All standard exchange traded futures will be permitted. If the risk profile warrants, Corporates may also use futures contracts based on average prices.

iii) As regards options, only purchases will be allowed. However, it is open to the corporates to use combinations of option strategies involving a simultaneous purchase and sale of options as long as there is no net inflow of premium, direct or implied. Corporates are also allowed to cancel an option position with an opposite transaction with the same broker.

iv) Tenure of exposure shall be limited to 6 months. Tenure beyond 6 months would require Reserve Banks specific approval.

v) Corporates who wish to hedge commodity price exposure shall have to ensure that there are no restrictions on import/export of the commodity hedged under the Exim Policy in force.

4. In respect of gold, corporates may hedge the exposures arising from export commitments on the international exchanges as also through London Bullion Market Association (LBMA) approved brokers in the London market.

5. After grant of approval by Reserve Bank, the corporate concerned should negotiate with off-shore Exchange brokers subject, inter alia, to the following:-

i) Brokers must be clearing members of the Exchanges, with good financial track record.

ii) Brokers should be furnished with a list of the corporates authorised traders/officers along with copies of their specimen signatures.

iii) Trading will only be in standard Exchange-traded futures contracts/options (purchases only).

iv) Brokers shall be contractually obliged to confirm each and every deal on the same day.
6. The corporate should open a Special Account with the authorised dealer. All payments/receipts incidental to hedging may be effected by the authorised dealer through this account without further reference to the Reserve Bank.

7. A copy of the Brokers Month-end Report(s), duly confirmed/ countersigned by the corporates Financial Controller along with confirmation that all off-shore positions are/were backed by physical exposures should be submitted monthly, to Reserve Bank through the authorised dealer within 15 days of the close of the month.

8. The periodic statements submitted by Brokers, particularly those furnishing details of transactions booked and contracts closed out and the amount due/payable in settlement, should be checked by the corporate. Unreconciled items should be followed up with the Broker and reconciliation completed within three months.

9. The corporates should not undertake any arbitraging/speculative transactions. The responsibility of monitoring transactions in this regard will be that of the authorised dealer.

10. An annual certificate from Statutory Auditors should be submitted by the company to the authorised dealer. The certificate should confirm that the prescribed terms and conditions have been complied with and that the corporates internal controls are satisfactory. Authorised dealers may forward a copy thereof to the Reserve Bank.
______________________________________________________________________________

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