New Delhi. In order to make the disinvestment of debt-ridden public sector undertakings attractive, the government has decided to allow such undertakings to adjust their past losses for future profits after they go into private hands. This will benefit the buyers of such ventures. Issuing a clarification in this regard, the Central Board of Direct Taxes (CBDT) has said that Section 79 of the Income Tax Act will not apply to PSUs that have gone into private hands after such disinvestment.
The CBDT, which comes under the Ministry of Finance, has said, in this context, the losses incurred in the previous year of strategic disinvestment and the year before that can be adjusted in the next year by the PSUs that have gone into private hands.
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Section 79 of the Income Tax Act deals with matters relating to carry forward and set-off of losses in case of companies. The board has said, in order to facilitate strategic disinvestment, it has been decided that section 79 of the Income Tax Act, 1961 will not apply to such former PSUs which have gone into private hands due to strategic disinvestment.
The CBDT statement said that necessary amendments to the law in this regard would be done in the coming times. In this regard, Suraj Nangia, Head (Government and Public Sector Adviser), Nangia Andersen LLP said, “The government has permitted that The loss of such PSUs shall be allowed to be carried forward for adjustment against future profits after the change in the holding of sick PSUs on account of transfer of shares in such PSUs to strategic investors.
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He said that this would make the disinvestment of the decaying PSUs more attractive. Under normal tax provision, without this exemption, the loss of a company in the previous year cannot be adjusted in the subsequent years. It is noteworthy that national carrier Air India is the most important in the government’s disinvestment pipeline, for which the last date for submission of financial bids is September 15. Along with this, 50 percent stake of Air India in Airport Services Pvt Ltd of Air India Express and Air India SATS will also be disinvested.
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