Government has allowed erstwhile public sector companies to carry forward losses to be set off against future profits. This was done to make divestment deals of state-owned firms which are ailing and make it more attractive for strategic investors. In a clarification, the Central Board of Direct Taxes (CBDT) said that Section 79 of the Income Tax Act shall not apply to an erstwhile public sector company which has become so as a result of strategic disinvestment.
It added that the relaxation will cease to apply from the previous year in which the company which was the ultimate holding company of such erstwhile public sector company immediately after completion of the strategic disinvestment, will hold 51% of the voting power of the erstwhile company.
The statement said that in due course of time, necessary legislative amendments for the above decision shall be proposed.
According to the finance act 2021, section 72A of the Income-tax Act, 1961 was amended to deal with the amalgamation of a public sector company (PSU) which ceases to be a PSU (erstwhile public sector company), as part of strategic disinvestment, with one or more company or companies and carry forward of losses in case of change in shareholding following sale by the government.
Loss making national carrier Air India will also be part of the ambitious divestment pipeline, for which the deadline for submission of financial bids is September 15.
Apart from offloading its entire stake in loss-making Air India, the government will be selling the budget airline Air India Express and Air India’s 50% stake in Air India SATS Airport Services Private Limited (AISATS).
The deadline for submission of Expressions of Interest (EoI) or preliminary bids was extended five times earlier before closing it in December last year.
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