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

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WABCO-TVS (INDIA) LIMITED INFORMATION MEMORANDUM 2003 by the Company) received on the shares of the Company is exempt from tax. 2. As per section 10(38) of the IT Act, long-term capital gains arising from the transfer of long-term capital asset being an equity share of the Company, where such transaction is chargeable to securities transaction tax, will be exempt to tax in the hands of the FIIs. 3. As per section 54EC of the IT Act and subject to the conditions and to the extent specified therein, long-term capital gains (in cases not covered under section 10(38) of the IT Act) arising upto a maximum of 50 Lakhs on the transfer of a long-term capital asset will be exempt from capital gains tax if the capital gains are invested in a “Long Term Specified Asset” within a period of 6 months after the date of such transfer. However, if the assessee transfers or converts the Long Term Specified Asset into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long-term capital gains in the year in which the Long Term Specified Asset is transferred or converted into money. 4. As per section 74 Short-term capital loss suffered during the year is allowed to be set-off against short-term as well as long-term capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years’ short-term as well as long-term capital gains. Longterm capital loss suffered during the year is allowed to be set-off against longterm capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years’ long-term capital gains. 5. The tax rates and consequent taxation mentioned above will be further subject to any benefits available under the Tax Treaty, if any, between India and the country in which the FII has fiscal domicile. As per the provisions of section 90(2) of the IT Act, the provisions of the IT Act would prevail over the provisions of the Tax Treaty to the extent they are more beneficial to the FII. 6. As per section 111A of the IT Act, short-term capital gains arising from the sale of Equity Shares transacted through a recognized stock exchange in India, where such transaction is chargeable to securities transaction tax, will be taxable at the rate of 15% (plus applicable surcharge and education cess). 7. As per section 115AD of the IT Act, FIIs will be taxed on the capital gains in respect of securities that are not exempt under the provision of section 10(38) of the IT Act, at the following rates: Nature of income Rate of tax (%) Long term capital gains 10 Short term capital gains – Non STT Suffered 30 Short Term Capital Gains – STT Suffered 15 The above tax rates have to be increased by the applicable surcharge and education cess. In case of long term capital gains, (in cases not covered under section 10(38) of the IT Act), the tax is levied on the capital gains computed without considering the cost indexation and without considering foreign exchange fluctuation. V. Benefits available to Mutual Funds: As per section 10(23D) of the IT Act, any income of Mutual Funds registered under the SEBI Act or Regulations made thereunder, Mutual Funds set up by Page 26 of 95
WABCO-TVS (INDIA) LIMITED INFORMATION MEMORANDUM public sector banks or public financial institutions and Mutual Funds authorised by the RBI will be exempt from income tax, subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf. VI. Benefits available to Venture Capital Companies / Funds: As per section 10(23FB) of the IT Act, all Venture Capital Companies / Funds registered with the SEBI, subject to the conditions specified, are eligible for exemption from income tax on their entire income, including income from the sale of Equity Shares. However, income received by a person out of investment made in a venture capital Company or in a venture capital fund shall be chargeable to tax in the hands of such person. B. Benefits available under the Wealth Tax Act, 1957: Asset as defined under section 2(ea) of the above Act, does not include shares in companies and hence, Equity Shares are not liable to wealth tax. C. Benefits available under the Gift Tax Act: Gift tax is not leviable in respect of any gifts made on or after October 1, 1998. Therefore, any gift of Equity Shares will not attract gift tax. The above Statement of Possible Direct Tax Benefits sets out the provisions of law in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of shares. NOTES: i. All the above benefits are as per the current tax laws. ii. In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax advisor with respect to specific tax consequences of his/her investment in the Equity Shares. VIII. ABOUT THE COMPANY: Industry Overview: The Indian auto component industry can grow to USD 33 – 40 billion by 2015 (Source: Vision 2015 for Indian Auto-components Industry prepared by ACMA – McKinsey). The industry generated sales of USD18 billion in the fiscal year 2007-08 (Source: ACMA), including USD 3.6 billion worth of exports. Figures of 2008-09 are also likely to be this magnitude. The three main factors providing impetus to this industry are – • Growing domestic automobile industry (two-wheelers, commercial vehicles, tractors and passenger cars), • Aftermarket sales and servicing industry, and • Outsourcing of component manufacturing to India and China by the vehicle manufacturers in the western hemisphere. Even as the Indian auto component industry is making its presence felt in the global markets, Chinese component makers are also making a significant entry into all markets including India. Increase in input costs and constant appreciation of the rupee against the US dollar have put the margins under pressure for several Indian auto component manufacturers. Page 27 of 95
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