sriram (CA Final) (203 Points)
30 May 2012Friends,
The company has got approval for external commercial borrowings from RBI on 1st May. The receipt of such loan was on 26th May. In mid, there was expenditure incurrred for project for which ECB was sanctioned (14th May).The same was satisfied from working capital. Now on receiving the funds from abroad, can we reimburse the amound spent for the project which the company has taken from the working capital.??
Pls help.
Sriram Venkatesan
Nitin Jogad
(Audit & Assurance)
(52 Points)
Replied 30 May 2012
Hi Sriram,
As per RBI/2011-12/ 9 Master Circular No.9 /2011-12 :
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/09MCEC300611.pdf
It has been clearly mentioned under ECB of part 1 ( End uses not permitted )
(c) For working capital, general corporate purpose and repayment of existing Rupee loans not permitted.
In your case we would consider the reimbursement of expenditure incurred on new project as "Repayment of existing rupee loans" - hence not permitted.
My view - But since the expenditure is on New project of the company and expended from the company - reimbursement of such amount would not be considered as a serious contravention and can be supported with reasonable explanation.
For further information you can go through the above master circular.
Due to lack of information I am unable to comment further.
Thank you.
CA Yogesh Chaturvedi
(Y K Chaturvedi & Co. Vasai West)
(29 Points)
Replied 30 May 2012
Dear Sriram
ECB can be utilise for the purpose as mentioned in sanction letter provided by the bank.
And the company incurred some amount for taking ECB Disbursement / drawdown and other
type of expenses which incurred during the time when company started processsing of loan and upto
disbursement of loan are eligible for reimbursement.
Thanks
Yogesh Chaturvedi
sriram
(CA Final)
(203 Points)
Replied 31 May 2012
Thank you for your valuable suggestion sir's.
Thanks,
Sriram.
CAclubindia
