'No Objection Certificate' for remittance abroad. - Income Tax - 1051/CBDT

INSTRUCTION NO. 1051/CBDT Dated : April 4, 1977 It has been brought to the notice of the Board that in some cases 'No Objection Certificate' for remittance abroad of royalty, technical know-how fees, etc. have been issued by Income tax Officers after obtaining a guarantee from the Indian concern on behalf of the foreign collaborator even though the former had not obtained prior permission of the Reserve Bank of India u/s 26(6) of the Foreign Exchange Regulation Act, 1973, to give such a guarantee. 2. Section 26(6) of the Foreign Exchange Regulation Act, 1973 reads as under: "Except with general or special permission of the Central Government, or the Reserve Bank, no person resident in India shall give a guarantee in respect of any debt or other obligation or liability- (i) of a person resident in India, and due or owing to a person resident outside India, or (ii) of a person resident outside India". 3. In view of the above legal provision, before accepting a guarantee in such cases The Income tax officers should ensure that the Indian concerns have obtained the Reserve Bank's prior permission under section 26(6) of Foreign Exchange Regulation Act, 1973 for giving the guarantee on behalf of their foreign collaborators.