VI. SALIENT FEATURES OF THE SCHEME

The Demerged undertaking was transferred to and vested in the Company with effect from the Appointed Date in terms of the Scheme.

The Appointed Date is 1st January, 2010.

Each member of the Demerged Company, viz.  M/s Binny Limited, whose name is recorded in the register of members of the Demerged Company on the Record Date have been allotted shares in the Company in the following manner –

i) 1 (one) equity share in the Resulting Company of face value of Rs.10/- each credited as fully paid up for every 7 (seven) equity shares of Rs.5/- (Rupees five) each fully paid-up

ii) 15 (Fifteen) 9.75% Cumulative Redeemable Preference Share of face value of Rs.5/- (Rupees five) each credited as fully paid up for every 30 (Thirty) 9.75% Cumulative Redeemable Preference Shares of Rs.5/- (Rupees five) each fully paid-up

iii) 1,631 (One thousand six hundred and thirty one) 9% Cumulative Redeemable Preference Share of face value of Rs.5/- each credited as fully paid up for every 3,125 (Three thousand one hundred and twenty five) 9% Cumulative Redeemable Preference Shares of Rs.5/- each fully paid-up

 

The New Equity Shares and New Preference Shares issued and allotted by the Company in terms of the Scheme shall be subject to the provisions of the Memorandum and Articles of Association of the Company and shall inter-se rank pari-passu in all respects with the existing shares of the Company.

VII. STATEMENT OF POSSIBLE TAX BENEFITS


Based on the understanding of current laws applicable, the following tax benefits shall be available to the Company and the Equity Shareholders / prospective Equity Shareholders under the current direct tax laws.

A. Under the Income Tax Act, 1961
I. Benefits available to the Company:

The Company will be entitled to deduction, under the Sections mentioned hereunder, from its total income chargeable to Income Tax. Subject to fulfillment of conditions, the Company will be eligible, inter alia, for the following specified deductions in computing its business income:-

1.Subject to compliance with certain conditions laid down in Section 32 of the IT Act, the company will be entitled to deduction for depreciation:
a. In respect of tangible assets and intangible assets in the nature of know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature acquired on or after 1st day of April, 1998 at the rates prescribed under the Income Tax Rules, 1962;
b. In respect of specified new plant and machinery which has been acquired and installed after 31st March, 2005 for manufacturing facilities an additional depreciation u/s 32(1)(ii a) at 20% of the actual cost of such plant and machinery in the year in which the new plant and machinery is first put to use.

2. In accordance with and subject to the provisions of Section 35 of the IT Act, the Company would be entitled to deduction in respect of expenditure laid out or expended on scientific research related to the business and on any amount paid to any scientific research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research.

3. In accordance with the provisions of Section 35DD of the IT Act, expenditure incurred wholly or exclusively for the purpose of amalgamation or demerger of an undertaking, after 1st April 1999 the Company shall be allowed a deduction of an amount equal to one fifth of such expenses for each of the five consecutive previous years beginning with the previous year in which the amalgamation or demerger takes place.

4. As per the provisions of Section 35DDA of the I T Act, any expenditure incurred in any previous year by way of payment of any sum to an employee in connection with his voluntary retirement, in accordance with any scheme or schemes of voluntary retirement, 1/5th of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance shall be deducted in equal installments for each of the four immediately succeeding previous years.

5. Under Section 115JAA(1A) of the IT Act, where any amount of tax is paid under sub-Section (1) of Section 115JB, by an assessee, being a Company, for the assessment year commencing on the 1st day of April 2006, and any subsequent assessment year, then, credit in respect of tax so paid shall be allowed to the company in accordance with the provisions of this Section. The tax credit to be allowed under sub-Section (1A) shall be the difference of the tax paid for any assessment year under sub-Section (1) of Section 115 JB and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act. Such MAT credit is allowed to be carried forward for set off purposes for up to 7 years succeeding the year in which the tax was paid under MAT.


II. Benefits available to resident shareholders

The Company will be entitled to deduction, under the Sections mentioned hereunder, from its total income chargeable to Income Tax. Subject to fulfillment of conditions, the Company will be eligible, inter alia, for the following specified deductions in computing its business income:-

1. Under Section 10(34) of the IT Act, income by way of dividends referred to in Section 115-O of the IT Act received on the shares of the Company is exempt from income tax in the hands of shareholders.
2.     (a). The long-term Capital Gains accruing to the members of the Company on sale of the Company’s shares in         a transaction entered into in a recognized stock exchange in India, and where such transaction is chargeable         to Securities Transaction Tax, shall be exempt from tax as per provisions of Section 10(38) of the IT Act.
       (b). The short-term Capital Gains accruing to the members of the Company on sale of the Company’s shares         in a transaction entered into in a recognized stock exchange in India,and where such transaction is                      chargeable to Securities Transaction Tax, tax will be chargeable @ 15% plus applicable surcharge and               education cess as per provisions of Section 111A of the IT Act.
       (c). As per the provisions of Section 74 of the IT Act, any short-term capital losses suffered by the               members of the Company on transfer of shares can be set off against the short-term/long-term Capital Gain         earned in that year and in the case of long-term Capital Loss it can be set-off against long-term Capital Gains         earned in that year. If the loss cannot be wholly set-off the amount of loss not so set-off can be carried         forward to the following eight assessment years immediately succeeding the assessment year in which the         loss was first incurred, subject to the fulfillment of conditions specified in the Section.
       (d). As per the provisions of Section 112 of the IT Act, long term gains accruing to the members of the        Company from the transfer of shares of the Company, which have not suffered Securities Transaction Tax shall        be charged to tax @ 20% (plus applicable surcharge and education cess) after deducting from the sale        proceeds the indexed cost of acquisition or at 10% (plus applicable surcharge and education cess) after        deducting from the sale proceeds the cost of acquisition without indexation.
       (e). The members are entitled to claim exemption in respect of tax on long term capital gains under Section        54EC of the IT Act, if the amount of capital gains is invested in certain specified bonds / securities subject to        the fulfillment of the conditions specified in those Sections.
       (f). Individuals or HUF members can avail exemption under Section 54F of the IT Act by utilization of the sales        consideration for purchase / construction of a residential house within the specified time period and subject to        the fulfillment of the conditions specified therein.
3.    (a). As per the provisions of Section 115G of the IT Act, Non-Resident Indians are not obliged to file a return of        income under Section 139(1) of the Act, if their only source of income is eligible investment income or long        term capital gains, provided tax has been deducted at source from such income as per the provisions of        Chapter XVII-B of the Act.
      (b). Under Section 115H of the IT Act, where the Non-Resident Indian becomes assessable as a resident in        India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that        year under Section 139 of the IT Act to the effect that the provisions of the Chapter XII-A shall continue to        apply to him in relation to such investment income derived from the specified assets for that year and        subsequent assessment years until transfer or conversion of such assets into money.
      (c). As per the provisions of Section 115-I of the IT Act, a Non-Resident Indian may elect not to be governed by       the provisions of Chapter XII-A for any assessment year by furnishing his return of income for that assessment       year under Section 139 of the IT Act, declaring therein that the provisions of Chapter XII-A shall not apply to       him for that assessment year and accordingly his total income for that assessment year will be computed in       accordance with the other provisions of the IT Act.
      (d). As per the provisions of Section 115F of the IT Act and subject to the fulfillment of the conditions specified       therein, the Long Term Capital Gains arising on the transfer of Company’s shares shall be exempted from       income tax entirely / proportionately if all or a portion of the net consideration is invested within 6 months of       the date of transfer in specified asset as defined in Section 115C (f) or any savings certificates referred to in       Section 10(4B) of the IT Act. The amount so exempted shall, however, be chargeable to tax as long term              capital gains under the provisions of Section 115F (2) if the specified assets are transferred or converted in to       money within 3 years from the date of acquisition as specified in the said Section.


III. Benefits available to Non-Resident shareholders

1. Dividends (whether interim or final) declared, distributed or paid by the Company are exempt in the hands of shareholders as per the provisions of Section 10(34) of the IT Act.
2. Under the provisions of Section 90(2) of the IT Act, if the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of the non- resident are more beneficial, then the provisions of the DTAA shall be applicable.
       (a). Non Resident Indians (as defined in Section 115C (e) of the IT Act), being shareholders of an Indian        Company, have the option of being governed by the provisions of Chapter XII-A of the IT Act, which inter-alia        entitles them to the following benefits in respect of income from shares of an Indian Company acquired,        purchased or subscribed to in convertible foreign exchange. As per the provisions of Section 115 E of the IT        Act, and subject to the conditions specified therein, long-term capital gains arising on the transfer of        Company’s shares will be charged to income Tax @ 10% (plus applicable surcharge and education cess).        However, long-term Capital Gains accruing to the members of the Company on sale of the Company’s shares        in a transaction entered into in a recognized stock exchange in India, and where such transaction is        chargeable to Securities Transaction Tax, shall be exempt from tax as per provisions of Section 10(38) of the        IT Act.
3.    (a). As per the provisions of Section 115G of the IT Act, Non-Resident Indians are not obliged to file a return of        income under Section 139(1) of the Act, if their only source of income is eligible investment income or long        term capital gains, provided tax has been deducted at source from such income as per the provisions of        Chapter XVII-B of the Act.
      (b). Under Section 115H of the IT Act, where the Non-Resident Indian becomes assessable as a resident in        India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that        year under Section 139 of the IT Act to the effect that the provisions of the Chapter XII-A shall continue to        apply to him in relation to such investment income derived from the specified assets for that year and        subsequent assessment years until transfer or conversion of such assets into money.
       (c) As per the provisions of Section 115-I of the IT Act, a Non-Resident Indian may elect not to be governed by        the provisions of Chapter XII-A for any assessment year by furnishing his return of income for that assessment        year under Section 139 of the IT Act, declaring therein that the provisions of Chapter XII-A shall not apply to        him for that assessment year and accordingly his total income for that assessment year will be computed in        accordance with the other provisions of the IT Act.
       (d) As per the provisions of Section 115F of the IT Act and subject to the fulfillment of the conditions specified        therein, the Long Term Capital Gains arising on the transfer of Company’s shares shall be exempted from        income tax entirely / proportionately if all or a portion of the net consideration is invested within 6 months of        the date of transfer in specified asset as defined in Section 115C (f) or any savings certificates referred to in        Section 10(4B) of the IT Act. The amount so exempted shall, however, be chargeable to tax as long term        capital gains under the provisions of Section 115F (2) if the specified assets are transferred or converted in to        money within 3 years from the date of acquisition as specified in the said Section.

IV. Benefits available to FII’s

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 1st April 2003 by the Company) received on the shares of the Company is exempt from tax.
2. The long-term Capital Gains accruing to the members of the Company on sale of the Company’s shares in a transaction entered into in a recognized stock exchange in India, and where such transaction is chargeable to Securities Transaction Tax, shall be exempt from tax as per provisions of Section 10(38) of the IT Act.(1) of Section 115 JB and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act. Such MAT credit is allowed to be carried forward for set off purposes for up to 7 years succeeding the year in which the tax was paid under MAT.
3. The tax rates and consequent taxation mentioned above will be further subject to
4. 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)
5. 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.

B. Benefits available under the Wealth-tax Act, 1957

Shares of company held by the shareholder will not be treated as an asset within the meaning of Section 2(ea) of Wealth Tax Act, 1957. Hence no Wealth Tax will be payable on the market value of shares of the Company held by the shareholder of the company.


C. Benefits available under The Gift Tax Act, 1958

Gift Tax is not leviable in respect of any gifts made on or after 1st October, 1998. Therefore, any gift of shares of the company will not attract gift tax.
Notes:
        1. All the aforesaid tax benefits available to the company and to the shareholders are under the current tax laws presently in force in India. Several of these benefits are dependent on the company or its shareholders fulfilling the conditions prescribed under the relevant tax laws. Shareholders are advised to consider in their own cases, the tax implications of any new enactments which may change / modify the law.
       2. In view of the nature of tax consequences, being based on all the facts, in totality, of the investors, each investor is advised to consult his/her tax advisor with respect to specific tax consequences.
       3. All the above benefits will be available only to the first named holder in case of the shares held by joint holders.

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