Strategic Disinvestment: CBDT Makes Clarification Regarding Carry Forward of Losses

The Central Board of Direct Taxes (CBDT) has launched clarification on September 10, 2021 relating to the carry ahead of losses within the occasion of a modification in shareholding because of strategic disinvestment. Within the occasion of a merger of a public sector firm (PSU) as a part of strategic disinvestment with a number of firm or corporations, CBDT has clarified that “the gathered loss and the unabsorbed depreciation of the amalgamating firm shall be deemed to be the loss, or because the case could also be, allowance for unabsorbed depreciation of the amalgamated firm for the earlier yr by which the amalgamation was effected.”

CBDT stated within the assertion that “Finance Act, 2021 has amended part 72A of the Revenue-tax Act, 1961 (the Act) to inter alia present that in case of an amalgamation of a public sector firm (PSU) which ceases to be a PSU (erstwhile public sector firm), as a part of strategic disinvestment, with a number of firm or corporations, then, topic to the situations laid therein, the gathered loss and the unabsorbed depreciation of the amalgamating firm shall be deemed to be the loss, or because the case could also be, allowance for unabsorbed depreciation of the amalgamated firm for the earlier yr by which the amalgamation was effected.”

The CBDT has additionally stated that, as a way to facilitate strategic disinvestment, it has been decided that Part 79 of the Revenue-tax Act, 1961, wouldn’t apply to a previously public sector firm that has change into in order a consequence of strategic disinvestment.
“Accordingly, loss incurred in any earlier yr previous to, and together with, the earlier yr of strategic disinvestment shall be carried ahead and set off by the erstwhile public sector firm,” added CBDT within the assertion.

CBDT has additional clarified that “The above rest shall stop to use from the earlier yr by which the corporate, that was the last word holding firm of such erstwhile public sector firm instantly after completion of the strategic disinvestment, ceases to carry, straight or by means of its subsidiary or subsidiaries, fifty-one per cent of the voting energy of the erstwhile public sector firm.”

In keeping with CBDT, the time period “erstwhile public sector firm” and “strategic disinvestment” shall have the which means in Rationalization to clause (d) of sub-section (1) of Part 72A of the Revenue-tax Act, 1961.