Circular No. [F. NO. 9/3/2009-ECB] — Circular/press Note

What this is

Circular No. [F. NO. 9/3/2009-ECB] was issued by the Central Board of Direct Taxes on 15 March 2010. Its subject is Circular/press Note.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Clarifies one point on the revision of the conversion price of foreign currency convertible bonds, following the press note of 15 February 2010 which amended the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 to permit such revision. For the purpose of revising the conversion price on the conditions in that press note, the "relevant date" under the pricing norms in clause 5(4)(D) of the Scheme means the date of the meeting at which the board of the company, or a committee of directors duly authorised by it, decides to revise the conversion price of the existing bonds. For every other purpose the definition of relevant date remains as prescribed in the press note of 27 November 2008.

Why it was issued

The clarification is issued in continuation of the press note of 15 February 2010, to fix the reference date for pricing a revised conversion.

Who it reaches

Indian companies with outstanding foreign currency convertible bonds seeking to reset the conversion price
Bondholders whose conversion terms are being revised
Advisers pricing a revision under the Scheme

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

CIRCULAR/PRESS NOTE
INCOME-TAX ACT
Clarification regarding revision of conversion price of Foreign Currency Convertible Bonds
PRESS NOTE [F. NO. 9/3/2009-ECB], DATED 15-3-2010
In continuation to the Press Note dated 15th February, 2010 regarding the amendment to the "Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993," (the Scheme) permitting revision of conversion price of FCCBs, it is clarified that for the purpose of revision of conversion price in accordance with the conditions mentioned in Press Note dated 15th February, 2010, the ‘relevant date’ mentioned under the pricing norms in clause 5(4)(D ) of the Scheme would mean the date of the meeting in which the Board of the company or the committee of Directors duly authorized by the Board of the company decides to revise the conversion price of the existing FCCBs.
2. However, for all other purposes the definition of ‘relevant date’ would remain as prescribed in Press Note dated 27th November, 2008.
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What to watch

This is a press note of the external commercial borrowing wing on the 1993 Scheme, not a circular of the Central Board of Direct Taxes, and it is not Board authority on any question under the Income-tax Act.
The special meaning of relevant date is confined to a revision of the conversion price; for all other purposes the older definition governs.
The conditions permitting revision come from the press note of 15 February 2010, which this document does not reproduce.
It states the position as at March 2010 and the Scheme has since been amended.

Where you meet it

In documenting a conversion price reset on outstanding bonds; it has no direct bearing on an income-tax proceeding.

← Circular No. BY/KP/GN-151/10 · Circular No. 3/JS(FT&TR-II)/2010 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.