Govt. notifies numerous tax concessions to ease ‘Air India’ divestment

• Notification No. 104 /2021
• Notification No. 105 /2021
• Notification No. 106 /2021
• Notification No. 107 /2021
• Notification No. 108 /2021

The Central Government has notified several tax concessions to ease the privatization of ‘Air India’. The Govt. has issued 5 notifications, giving relief to various tax implications that could arise on the proposed divestment plan to be executed for Air India. The following relaxations have been notified by the Govt:

1) No capital gains on transfer capital assets

Section 47(viiaf) was inserted by the Finance Act, 2021 to provide that any transfer of a capital asset by a public sector company to another public sector company notified by the Central Government or State Government, shall not be regarded as transfer. Such transfer must be under a plan approved by the Central Government.

Vide Notification no. 104/2021, it has been notified that the transfer of capital asset under a plan approved by Central Government from Air India Limited (transferor public sector company) to Air India Assets Holding Limited (transferee public sector company) shall not be regarded as transfer.

2) No deeming fiction under section 56(2)(x) on receiving equity shares

Rule 11UAC of the Income-tax Rules, 1962 prescribes class of persons to whom provisions of section 56(2)(x) shall not apply. Said rule has been amended vide Notification no. 105/2021.

A new clause (4) has been added to Rule 11UAC 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 out within the ambit of section 56(2)(x).

3) No TDS under section 194-IA

Section 194-IA provides that any person buying an immovable property shall deduct tax at the rate of 1% from the sales consideration paid or payable to the resident seller. The tax shall be deducted if the amount of sales consideration is Rs. 50 lakhs or more.
Vide Notification no. 106/2021, it has been notified that no deduction shall be made under section 194-IA on any payment made to Air India Limited from the transfer of immovable property to Air India Holding Limited under a plan approved by the Central Government.

4) No TDS under section 194Q

Section 194Q provides that every buyer who is responsible for payment to a resident seller is required to deduct tax at source at the rate of 0.1% subject to fulfillment of prescribed conditions. The tax shall be deducted at the time of credit or payment, whichever is earlier.
Vide Notification no. 107/2021, it has been 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.

5) No TCS under section 206C(1H)

Section 206C(1H) provides for the collection of tax by a seller from the amount received as consideration for the sale of goods if it exceeds Rs. 50 lakhs in any previous year.
Vide Notification no. 108/2021, it has been notified that Air India Limited shall not be considered as ‘Seller’ for the purpose of section 206C(1H) in relation to transfer of goods by it to Air India Assets Holding Limited under a plan approved by the Central Government.

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