RAYMOND LIMITED Vs. DEPUTY COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee in these appeals is Raymond Ltd., a public limited company engaged in the manufacture of suitings, engineers' steel files and rasps and cement in India. In order to muster funds for the purpose of putting BD facilities for the production of cold-rolled steel products including sillicon products, the Greenfield Textile project and the normal capital expenditure requirements, the company proposed to issue Global Depositary Receipts (GDRs) in the international market. Two types of GDRs were contemplated--(1) International GDRs which were offered to investors outside the United States of America (USA) and India restricted to offshore transactions, and (2) GDRs under Rule 144A of the Securities Regulations of the USA, offered in the USA to "qualified institutional buyers" (QIBs). THE total number of GDRs issued was 37,68,844. THE issue price of each GDR was US $ 15.92. Each GDR represented 2 shares of the company of the face value of Rs. 10 per share. Approximately US $58 million were expected to be collected by the issue of the GDRs.

(2.) On 9th Nov., 1994, certain documentation took place in connection with the issue of GDRs. Firstly, an agreement styled "subscription agreement" was entered into between the assessee-company on the one hand and (1) Merrill Lynch International Ltd. (2) Goldman Sachs (Asia) Ltd. and (3) DSP Financial Consultants Ltd., on the other. Copies of this agreement are placed at pp. 107 to 149 of the paper book filed by the assessee. This agreement provided in detail for the rights and duties of the concerned partners vis-a-vis the GDR issue, warranties, approvals to be obtained, delivery of GDRs, payment, opinions to be obtained, commission payable to the managers of the issue and so on and so forth.

(3.) THIRDLY, on the same day, an agreement was entered into between the assessee-company and Citibank N.A. which acted as the Depositary. This agreement was styled "deposit agreement" and copies of the same are at pp. 14 to 29 of the Department's paper book No. 1. Nothing much in this agreement is important for the purpose of this case.