Taxmen on alert over M&A effect

New Delhi, April 13: Worried over corporates defrauding revenue by mergers and acquisitions, the finance ministry has asked its officials to ensure that such deals do not result in loss to the exchequer.

The revenue officials, CBDT said in a communication to chief commissioners, should raise concerns on tax issues while submitting their comments on mergers and acquisition deals to the ministry of corporate affairs ( MCA) so that they could be incorporated in reports to the high court.

The communication issued by the Central Board of Direct Taxes (CBDT) said officials should “object to the scheme of amalgamation if the same is found prejudicial to interest of revenue”.

As per the procedure, M&As are required to be vetted by the high court concerned.

Commenting on the CBDT communication, Amit Maheshwari, partner, Ashok Maheshwary & Associates, said: “This is a very welcome step as both the ministries would now work together to ensure that there is no leakage of revenue.”

Going forward, a close coordination between government departments would be required to monitor increasingly complex arrangements, he added.

The MCA is required to incorporate “comments and inputs from the income tax department... so as to ensure that the proposed scheme of reconstruction or amalgamation has not been designed in such a way to defraud the revenue and consequently... prejudicial to public interest”.

Under the current rules, regional directors of the corporate affairs ministry are required to obtain specific comments from the I-T department within 15 days of the receipt of notice before filing response to the court on mergers and acquisitions. — PTI