WABCO-TVS (INDIA) LIMITED INFORMATION MEMORANDUM ...

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WABCO-TVS (INDIA) LIMITED INFORMATION MEMORANDUM part of capital gains in the Long Term Specified Asset, the capital gain shall be dealt with in accordance with the following provisions of this section: if the cost of the Long Term Specified Asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gains shall not be charged u/s 45 and if the cost of the long term capital asset is less than the capital gains arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long term capital asset bears to the whole of the capital gain, shall not be charged u/s 45. Provided that the investment made on or after the 1 st day of April 2007, in the Long Term Specified Asset by an assessee during any financial year does not exceed fifty-lakh rupees. Where the Long Term Specified Asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such Long Term Specified Asset shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital asset of the previous year in which the Long Term Specified Asset is transferred or converted (otherwise than by transfer) into money. 4) As per section 54F of the IT Act, long term capital gains (in cases not covered under section 10(38)) arising on the transfer of the Equity Shares held by an individual or Hindu Undivided Family (HUF) will be exempt from capital gains tax if the net consideration is utilised, within a period of one year before, or two years after the date of transfer, in the purchase of a residential house, or for construction of a residential house within three years. Such benefit will not be available: i) if the individual or Hindu Undivided Family owns more than one residential house, other than the new residential house, on the date of transfer of the shares; or purchases another residential house , other than the new residential house within a period of one year after the date of transfer of the Equity Shares; or constructs another residential house , other than the new residential house within a period of three years after the date of transfer of the Equity shares; and ii) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”. If only a part of the net consideration is so invested, so much of the capital gain as bears to the whole of the capital gain, the same proportion as the cost of the new residential house bears to the net consideration, will be exempt. If the new residential house is transferred within a period of three years from the date of purchase or construction, the amount of capital gains on which tax was not charged earlier, will be deemed to be income chargeable under the head “Capital Gains” of the year in which the residential house is transferred. 5) As per section 74 of the IT Act, Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and in so far as such loss relates to a short-term capital asset, it shall be set off against income, if any, under the head “Capital gains” assessable for that assessment year in respect of any other capital asset; in so far as such loss relates to a long-term capital asset, it shall be set off against income, if any, under the head “Capital gains” assessable for that assessment year in respect of any other capital asset not being a short-term capital asset; if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment Page 22 of 95
WABCO-TVS (INDIA) LIMITED INFORMATION MEMORANDUM year and so on. No loss shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed. 6) As per section 111A of the IT Act, where the total income of an assessee includes any income chargeable under the head “capital gains” arising from the transfer of a short term capital asset, being an equity share in a Company or a unit of an equity oriented fund and the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance Act, 2004 comes into force and such transaction is chargeable to securities transaction tax under that chapter, then the tax payable by the assessee shall be the amount of income tax calculated on such short term capital gains at the rate of 15%. 7) As per section 112 of the IT Act, taxable long-term capital gains, if any, on sale of listed securities or units or zero coupon bonds which have not suffered Securities transaction tax will be charged to tax at the rate of 20% (plus applicable surcharge and education cess) after considering indexation benefits or at 10% (plus applicable surcharge and education cess) without indexation benefits, whichever is beneficial to the assessee. Under section 48 of the IT Act, the long term capital gains arising out of sale of capital assets excluding bonds and debentures (except Capital Indexed Bonds issued by the Government) will be computed after indexing the cost of acquisition/ improvement. III. Benefits available to Non-Resident Indians/Non-Resident Shareholders (Other than FIIs and Venture Capital Companies / Funds): 1. As per section 10(34) of the IT Act, any income by way of dividends referred to in section 115-O (i.e. dividends declared, distributed or paid on or after 1 April 2003 by the Company) received on the Equity Shares of the Company is exempt from tax. 2. As per section 10(38) of the IT Act, any income arising from the transfer of a long term capital asset, being an equity share in a Company or a unit of an equity oriented fund where the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance Act, 2004 comes into force and such transaction is chargeable to securities transaction tax under that chapter shall not be included in the total income of the assessee. 3. As per first proviso to section 48 of the IT Act, in case of a non resident shareholder, the capital gain/loss arising from transfer of shares of the Company, acquired in convertible foreign exchange, is to be computed by converting the cost of acquisition, sales consideration and expenditure incurred wholly and exclusively incurred in connection with such transfer, into the same foreign currency which was initially utilized in the purchase of shares. Cost Indexation benefit will not be available in such a case. As per section 112 of the IT Act, taxable long-term capital gains, if any, on sale of long term capital assets of the Company will be charged to tax at the rate of 20% (plus applicable surcharge and education cess). 4. As per section 54EC of the IT Act and subject to the conditions and to the extent specified therein, where the capital gain arises from the transfer of a long term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the Long Term Specified Asset, the capital gain shall be dealt with in accordance with the following provisions of this section: if the cost of the Long Term Specified Asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gains shall not be charged Page 23 of 95
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