Dear Shareholder,
Re: Split of Cost of Acquisition of shares
in Television Eighteen India Limited
Pursuant to the Scheme of Arrangement (“Scheme”) between
Television Eighteen India Limited (“TV18”), Network 18 Fincap Private Limited
(“NW18”) and SGA News Limited, your Company had fixed November 24th, 2006
as the Record Date for determining your entitlements in terms of the said
Scheme. Accordingly, against your
holding in TV18, new shares of TV18 and NW18 (“New Shares”) are being issued.
In this regard, please note the
following:
1.
There
would be no Capital Gains implications on the shareholders of TV18 in view of
the exemption granted under Section 47(vid) of the Income Tax Act, 1961 (“the
Act”).
2.
In
respect of the New Shares, the Date of Acquisition for the purpose of Capital
Gains in case of a shareholder will be the Date of Acquisition of the original
shares of TV18 for each shareholder as per Clause (g) in Explanation 1 to
Section 2 (42A) of the Act.
3.
With
regard to the Cost of Acquisition of New Shares in NW18, Section 49(2C) of the
Act provides the formula for splitting the original Cost of Acquisition of
shares of TV18 between New Shares allotted in TV18 and NW18. An extract of the provisions of Section 49(2C)
is reproduced below for your reference:
“…the
cost of acquisition of shares in the resulting company shall be the amount
which bears to the cost of acquisition of the shares held by the assessee in
the demegered company the same proportion as the net book value of the assets transferred in a demerger bears to the net
worth of the demerged company immediately before such demerger…”
“...Explanation
– for the purpose of this section, net worth shall mean the aggregate of the
paid up share capital and general reserves as appearing in the books of
accounts of the demerged company immediately before the demerger…”
4.
With
regard to the Cost of Acquisition of New Shares in TV18, Section 49(2D) of the
Act provides the formula for splitting the original Cost of Acquisition of
shares of TV18 between New Shares allotted in TV18 and NW18. An extract of the provisions of Section
49(2D) is reproduced below for your reference:
“…the
cost of acquisition of the original shares held by the shareholder in the
demerged company shall be deemed to have been reduced by the amount so arrived
at under sub-section (2C)…”
5.
The
Cost of Acquisition of the New Shares in TV18 and NW18 may be determined on the
basis of the above provisions. For this purpose, a summary balance sheet of
TV18 as at September 30th, 2005 and the summary of the assets
transferred in Demerger A of the Scheme is attached herewith as Annexure.
The information in Para 3 above
should be preserved carefully, as it will be relevant for calculating taxable
Capital Gains under the Act on any transfer of shares in future.
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TELEVISION
EIGHTEEN INDIA LIMITED |
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SUMMARY
BALANCE SHEET AS AT 30 SEPTEMBER, 2005
(DATE IMMEDIATELY BEFORE THE DEMERGER) |
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Schedule |
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As at
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Reference |
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30.09.2005 |
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(Rs.) |
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SOURCES OF FUNDS |
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1.
SHAREHOLDERS' FUNDS |
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Share
capital |
1 |
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210,297,630 |
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Reserves
and surplus* |
2 |
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1,848,832,399 |
* |
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2. LOAN
FUNDS |
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1,488,669,859 |
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3. DEFERRED TAX LIABILITY |
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12,296,074 |
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3,560,095,962 |
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APPLICATION OF FUNDS |
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4. FIXED
ASSETS ( Net block) |
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720,517,847 |
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5.
INVESTMENTS |
6 |
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-In
Mutual Funds |
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632,936,391 |
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-In
Unquoted (Equity Shares) |
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625,796,981 |
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1,258,733,372 |
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6.
CURRENT ASSETS, LOANS & ADVANCES
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1,991,302,366 |
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7. LESS:
CURRENT LIABILITIES AND PROVISIONS |
8 |
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426,935,919 |
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8. NET
CURRENT ASSETS |
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1,564,366,447 |
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9.
MISCELLANEOUS EXPENDITURE |
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(To
the extent not written off or adjusted) |
9 |
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16,478,296 |
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3,560,095,962 |
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*RESERVES
AND SURPLUS DETAILS |
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1. Securities Premium |
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1,401,559,053 |
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2. General reserve |
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163,859,394 |
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3. Reserve for technological upgradation |
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11,960,000 |
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4. Reserve for contingencies |
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10,900,000 |
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5. Debenture redumption reserve |
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50,954,114 |
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6. Employees stock options |
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21,495,208 |
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7. Profit & loss account |
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188,104,630 |
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