Air India: Govt says past losses of PSUs can be carried forward
Days before the deadline ends for Air India's financial bids, the government on Friday clarified that the past losses of such PSUs can be carried forward to be set off against future profits.
Tax analysts said the rule change will make Air India more attractive to bidders.
The Central Board of Direct Taxes (CBDT) issued the clarification regarding the carry-forward of losses in case of a change in shareholding because of strategic disinvestment.
The relaxation, it added, will cease to apply from the previous year in which the company, that was the ultimate holding company of such erstwhile public sector company immediately after completion of the strategic disinvestment, ceases to hold 51 per cent of the voting power of the erstwhile company.
“It may be noted that such relaxation will be available, only till the strategic investor retains at least 51 per cent in the PSU after it takes over. In case the strategic investor’s shareholding falls below 51 per cent, such relaxation will be withdrawn,” Shailesh Kumar, partner, Nangia & Co LLP, said.
At present such losses must be set forward within eight years.
The government has said it will stick to the September 15 deadline for the financial bids for Air India.
The 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.
“Accordingly, loss incurred in any previous year prior to, and including, the previous year of strategic disinvestment shall be carried forward and set off by the erstwhile public sector company,” the CBDT said.
Section 79 of the Income Tax Act deals with carry forward and set off of losses in case of companies.