GAMMON INDIA LIMITED

15. In respect of non-residents, 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 non-resident is resident. As per the provisions of Section 90(2) of the ITA, the
provisions of the ITA would prevail over the provisions of the Tax Treaty to the extent they are
more beneficial to the non-resident.
B.2 Non-Resident Shareholders – Foreign Institutional Investors
1. We are required to pay a “dividend distribution tax” currently at the rate of 16.995% (including
applicable surcharge and education cess) on the total amount distributed or declared or paid as
dividend. Under Section 10(34) of the IT Act, income by way of dividend referred to in Section
115-O received on our Equity Shares is exempt from income tax in the hands of shareholders.
However it is pertinent to note that Section 14A of the IT Act restricts claim for deduction of
expenses incurred in relation to exempt income.
2. As per Section 10(34) read with Section 115-O of the ITA, 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 domestic companies) received on the Equity Shares is exempt from tax.
3. As per Section 2(29A) read with Section 2(42A), Equity Shares held in a company are treated as
long term capital asset if the same are held by the assessee for more than twelve months period
immediately preceding the date of its transfer. Accordingly, the benefits enumerated below in
respect of long term capital assets would be available if the Equity Shares are held for more than
twelve months.
4. As per Section 10(38) of the ITA, long term capital gains arising from the transfer of long term
capital asset being Equity Shares, where such transaction is chargeable to securities transaction
tax, will be exempt to tax in the hands of the FIIs.
5. As per Section 54EC of the ITA 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 ITA) arising on the
transfer of a long-term capital asset will be exempt from capital gains tax to the extent such capital
gains are invested in a “long term specified asset” within a period of 6 months after the date of
such transfer. It may be noted that investment made on or after April 1, 2007 in the long term
specified asset by an assessee during any financial year cannot exceed Rs. 50 Lacs.
However, if the assessee transfers or converts (otherwise than by transfer) 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.
A “long term specified asset” for making investment under this Section on or after 1st April 2007
means any bond, redeemable after three years and issued on or after the 1st April 2007 by:
National Highways Authority of India constituted under Section 3 of the National
Highways Authority of India Act, 1988; or
Rural Electrification Corporation Limited, a company formed and registered under the
Companies Act, 1956.
6. 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 longterm
capital gains. Long-term capital loss suffered during the year is allowed to be set-off against
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