CBDT has issued 5 Notifications (Notification No. 104/2021, Notification No. 105/2021, Notification No. 106/2021, Notification No. 107/2021 and Notification No. 108/2021) on 10th September 2021 to provide tax concessions to Air India ahead of its disinvestment. These include series of tax benefits in the form of tax exemption on capital gains on transfer capital assets by Air India Limited to Air India Assets Holding Limited, exemption from deemed income from section 56(2)(x), exemption from TDS u/s 194-IA, and no TDS u/s 194Q and TCS u/s 206C(1H).
The list of 5 (Five) Notifications issued by the CBDT on 10.09.2021 to grant tax exemptions to Air India Limited is given below-
1. Notification No. 104/2021 dated 10.09.2021: Exemption from Capital Gains
Finance Act, 2021 has inserted a clause (viiaf) in section 47 to exempt capital gains on transfer of capital assets by a public sector company to another public sector company notified by the Central Government for the purpose of this clause under a plan approved by the Central Government.
This clause was not there in the Finance Bill, 2021 when it was introduced on 1st February 2021 in LokSabha. This clause was inserted as a government amendment in the Finance Bill.
Section 47 provides that certain transfers are not regarded as a transfer for the purpose of imposing capital gains tax. Thus, when a transfer is not regarded as a transfer under section 47, any capital gains arising therefrom does not attract capitals gains tax and thus the transfer enjoys tax exemption.
The government has now vide Notification No. 104/2021 dated 10.09.2021 notified that the transfer of capital assets under a plan approved by Central Government from Air India Limited having PAN: AACCN6194P (transferor public sector company) to Air India Assets Holding Limited having PAN: AAQCA4703M (transferee public sector company) shall not be regarded as transfer.
Read the full text of Notification No. 104/2021 dated 10.09.2021 on Exemption to Air India from Capital Gains
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 10th September, 2021
INCOME-TAX
S.O. 3678(E).—In exercise of the powers conferred by clause (viiaf) of the section 47 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the transfer of capital asset under plan approved by Central Government from Air India Limited (PAN: AACCN6194P), being transferor public sector company, to Air India Assets Holding Limited (PAN: AAQCA4703M), being transferee public sector company, for the purposes of the said clause.
2. This notification shall come into force with effect from 1st day of April, 2022 and shall, accordingly, apply in relation to the assessment year 2022-2023 and subsequent assessment years.
[Notification No. 104 /2021/F. No. 370149/158/2021-TPL]
ANKIT JAIN, Under Secy. (Tax Policy and Legislation)
Download CBDT Notification No. 104/2021 dated 10.09.2021 on Exemption to Air India from Capital Gains in pdf format
2. Notification No. 105/2021 dated 10.09.2021: Exemption from Section 56(2)(x)
The provisions of section 56(2)(x) inter-alia provides for charging of the consideration received for issue of shares by certain companies, where such consideration exceeds the fair market value of such shares. However, the Central Government is empowered to notify that the provisions of this section shall not be applicable to consideration received by a notified company.
For this purpose, the government has notified Rule 11UAC in the Income-tax Rules, 1962. Rule 11UAC prescribes the class of persons to whom the provisions of section 56(2)(x) shall not apply.
This Rule 11UAC has now been amended vide Income-tax (28th Amendment) Rules, 2021 notified through Notification No. 105/2021 dated 10.09.2021 to insert a new clause (4) to provide that any movable property, being equity shares of the public sector company, received by a person from the Central Government or any State Government under strategic disinvestment shall be outside the purview of section 56(2)(x).
For the purpose of this clause, “strategic disinvestment” shall have the same meaning as assigned to it in clause (iii) of Explanation to clause (d) of sub-section (1) of section 72A.
Read the full text of Notification No. 105/2021 dated 10.09.2021 on Exemption from Section 56(2)(x)
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 10th September, 2021
INCOME-TAX
G.S.R. 623(E).—In exercise of the powers conferred by clause (XI) of the proviso to clause (x) of sub-section (2) of section 56 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely: ‒
1. Short title and commencement:-(1) These rules may be called the Income-tax (28th Amendment) Rules, 2021.
(2) They shall come into force from the 1st day of April, 2022 and shall be applicable for the assessment year 2022-23 and subsequent assessment years.
2. In the Income-tax Rules, 1962, in rule 11UAC, after clause (3), the following clause shall be inserted, namely: —
“(4) any movable property, being equity shares, of the public sector company, received by a person from the Central Government or any State Government under strategic disinvestment.
Explanation–For the purpose of this clause, “strategic disinvestment” shall have the same meaning as assigned to it in clause (iii) of Explanation to clause (d) of sub-section (1) of section 72A.”.
[Notification No. 105/2021/F. No. 370149/158/2021-TPL]
ANKIT JAIN, Under Secy. (Tax Policy and Legislation)
Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969(E), dated the 26th March, 1962 and last amended by the Income-tax (27th Amendment) Rules, 2021, vide notification number G.S.R. 616(E) dated 6th September, 2021.
Download CBDT Notification No. 105/2021 dated 10.09.2021 on Exemption from Section 56(2)(x) in pdf format
3. Notification No. 106/2021 dated 10.09.2021: No TDS u/s 194-IA
Section 194-IA provides that any person being the buyer of immovable property from a resident seller, shall deduct tax at the rate of 1% from the sales consideration paid or payable if the same is Rs. 50 Lakh or more.
The Government has vide Notification No. 106/2021 dated 10.09.2021 notified that no deduction of tax shall be made under section 194-IA on any payment made to Air India Limited for transfer of immovable property to Air India Assets Holding Limited under a plan approved by the Central Government.
Thus, any transfer of immovable property by Air India Limited to Air India Assets Holding Limited under an approved plan shall not be liable to TDS under section 19-IA even if the consideration exceeds Rs. 50 Lakh.
This exemption is made applicable from 1st April 2021.
Read the full text of Notification No. 106/2021 dated 10.09.2021 on No TDS u/s 194-IA
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 10th September, 2021
INCOME-TAX
S.O. 3679(E).—In exercise of the powers conferred by sub-section (1F) of section 197A of the Income-tax Act, 1961 (43 of 1961) , the Central Government hereby specifies that no deduction of tax shall be made under section 194-IA of the said Act on any payment made to the Air India Limited (PAN: AACCN6194P) for transfer of immovable property to Air India Assets Holding Limited (PAN: AAQCA4703M) under a plan approved by the Central Government.
2. The notification shall be deemed to have come into force with effect from the 1st day of April, 2021.
[Notification No. 106 /2021/F. No. 370149/158/2021-TPL]
ANKIT JAIN, Under Secy. (Tax Policy and Legislation)
Explanatory Memorandum : It is certified that no person is being adversely affected by giving retrospective effect to this notification.
Download CBDT Notification No. 106/2021 dated 10.09.2021 on No TDS u/s 194-IA in pdf format
4. Notification No. 107/2021 dated 10.09.2021: No TDS u/s 194Q
Section 194Q provides that any person, being a buyer who is responsible for paying any sum to any resident seller for the purchase of any goods for more than Rs. 50 Lakh in any previous year, shall deduct an amount equal to 0.1 per cent of such sum exceeding Rs. 50 Lakh as income tax.
The term "buyer" means a person whose total sales, gross receipts or turnover from the business carried on by him exceeds Rs. 10 crore during the preceding financial year.
However, the Central Government is empowered to exclude any person from the definition of ‘buyer’ for the purpose of TDS u/s 194Q. When a person is notified as not a buyer under section 194Q then such a person is not required to deduct any tax or TDS under section 194Q even if the transaction with the seller exceeds Rs. 50 Lakh in a previous year.
CBDT vide Notification No. 107/2021 dated 10.09.2021 notified that Air India Assets Holding Limited shall not be considered as ‘buyer’ for the purpose of Section 194Q in case of transfer of goods by Air India Limited under a plan approved by the Central Government.
This exemption is made applicable from 1st July 2021.
Read the full text of Notification No. 107/2021 dated 10.09.2021 on No TDS u/s 194Q
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 10th September, 2021
INCOME-TAX
S.O. 3680(E).—In exercise of the powers conferred by Explanation to sub-section (1) of section 194Q of the Income-tax Act, 1961 (43 of 1961) , the Central Government hereby specifies that Air India Assets Holding Limited (PAN: AAQCA4703M) shall not be considered as ‘buyer’ for the purpose of sub-section (1) of section 194Q of the said Act in case of transfer of goods by Air India Limited (PAN: AACCN6194P) to it under a plan approved by the Central Government.
2. The notification shall be deemed to have come into force with effect from the 1st day of July, 2021.
[Notification No. 107 /2021/F. No. 370149/158/2021-TPL]
ANKIT JAIN, Under Secy. (Tax Policy and Legislation)
Explanatory Memorandum : It is certified that no person is being adversely affected by giving retrospective effect to this notification.
Download CBDT Notification No. 107/2021 dated 10.09.2021 on No TDS u/s 194Q in pdf format
5. Notification No. 108/2021 dated 10.09.2021: No TCS u/s 206C(1H)
Section 206C(1H) provides that a seller, who receives any amount as consideration for the sale of any goods for more than Rs. 50 Lakh in any previous year shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration on the amount exceeding Rs. 50 Lakh as income tax.
The term "seller" is defined to mean a person whose total sales, gross receipts or turnover from the business carried on by him exceeds Rs. 10 crore during the preceding financial year.
However, the Central Government is empowered to exclude any person from the definition of ‘seller’ for the purpose of TCS u/s 206C(1H). When a person is notified as not a seller under section 206C(1H) then such a person is not required to collect any tax or TCS under section 206C(1H) even if the transaction with the buyer exceeds Rs. 50 Lakh in a previous year.
CBDT vide Notification No. 108/2021 dated 10.09.2021 notified that Air India Limited shall not be considered as ‘Seller’ for the purpose of Section 206C(1H) in case of transfer of goods to Air India Assets Holding Limited under a plan approved by the Central Government.
This exemption is made applicable from 1st April 2021.
Read the full text of Notification No. 108/2021 dated 10.09.2021 on No TCS u/s 206C(1H)
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 10th September, 2021
INCOME-TAX
S.O. 3681(E). —In exercise of the powers conferred by clause (b) of Explanation to sub-section (1H) of section 206C of the Income-tax Act, 1961 (43 of 1961) , the Central Government hereby specifies that, Air India Limited (PAN: AACCN6194P) shall not be considered as ‘seller’ for the purposes of sub-section (1H) of section 206C of the said Act in relation to transfer of goods by it to Air India Assets Holding Limited (PAN: AAQCA4703M) under a plan approved by the Central Government.
2. The notification shall be deemed to have come into force with effect from the 1st day of April, 2021.
[Notification No. 108 /2021/F. No. 370149/158/2021-TPL]
ANKIT JAIN, Under Secy. (Tax Policy and Legislation)
Explanatory Memorandum : It is certified that no person is being adversely affected by giving retrospective effect to this notification.
Download CBDT Notification No. 108/2021 dated 10.09.2021 on No TCS u/s 206C(1H) in pdf format
6. CBDT Press Release on carry forward of losses in case of change in shareholding due to strategic disinvestment
Finance Act, 2021 has amended section 72A of the Income-tax Act, 1961 (the Act) to inter alia provide that in case of an 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, then, subject to the conditions laid therein, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss, or as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected. In order to facilitate the strategic disinvestment, it has been decided that Section 79 of the Income-tax Act, 1961, 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 above relaxation shall 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, directly or through its subsidiary or subsidiaries, fifty-one per cent of the voting power of the erstwhile public sector company. The term “erstwhile public sector company” and “strategic disinvestment” shall have the meaning in Explanation to clause (d) of sub-section (1) of Section 72A of the Income-tax Act, 1961. Necessary legislative amendments for the above decision shall be proposed in due course of time.
Download CBDT Press Release dated 10.09.2021 on carry forward of losses in case of change in shareholding due to strategic disinvestment in pdf format
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