Firms buying stressed assets...
Similarly, sales of assets including land would attract the stamp duty, which varies from state to state in the range three to 10 per cent, but in most states it is around five per cent.
The stamp duty is a state subject and as such is required to be amended by states. Even though there is a central law — the Indian Stamp Act, 1989 — the rates are decided by states, which have the Constitutional right to make any changes to the Act and have their own sets of rules in this regard.
Even in a particular state, these might vary from one locality to another. For example, Maharashtra has the Bombay Stamp Act, 1958. Other states such as Gujarat, Karnataka, Kerala, Rajasthan, and Tamil Nadu also have their laws on this.
There is also an issue of transferring losses or tax holidays of the company acquired to the one that has purchased it. According to current laws, the tax holiday enjoyed by the insolvent company cannot be carried forward.
“To make the IBC process more robust, the carried forward losses of the company under the IBC should be shifted to the acquiring company pursuant to the acquisition of business,” Shah said.
Also, there are conditions on transferring losses and unabsorbed depreciations in the case of merger or demerger. For instance, the transferee company should continue to hold 75 per cent of the book value of the fixed assets for at least five years and the amalgamated company has to achieve at least 50 per cent of the installed capacity of the amalgamating company before the end of four years and maintain it till the fifth year in order to receive such transfers.
These conditions are likely to be relaxed for merger under the IBC.
Neeru Ahuja of Deloitte said: “Tax issues faced by companies under the IBC could lead to a large number of taxation disputes. It is important for the government to resolve the matter.”
A recently constituted committee set up by the government under the chairmanship of the secretary in the Ministry of Corporate Affairs is looking at these changes.