NIRMA LTD. Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This tax appeal was admitted for consideration of the following substantial question of law :

(2.) The question arises in the following background. The appellant assessee M/s. Nirma Ltd (hereinafter referred to as "the assessee or Nirma") is a public limited company and is engaged in the business of manufacturing of detergent powder, detergent cake, toilet soap, shampoo and other consumer products. The assessee also manufactures some of the intermediary chemicals for its end products. The assessee has several manufacturing plants situated across the State.

(3.) During the financial year 1996-1997, the assessee had decided to set up a soda ash manufacturing plant at Bhavnagar, a product which would be used for the manufacture of soaps and detergents. For setting up the said plant, the assessee would require sizeable capital investment estimated at Rs. 1037.28 crores. The assessee would raise such amount through various sources such as the Rupee Term loan and Foreign Currency loan from IFCI, internal accruals and funds raised from shareholders of one NCL upon the scheme of amalgamation coming into effect. All these sources would still leave a residue of Rs. 162.83 crores which the assessee decided to raise through the rights issue of Non Convertible Debentures ('NCD' for short) and Secured Premium Notes('SPN' for short) with share warrants.