Industry body Assocham today sought from the government slew of tax relief for companies against whom insolvency proceedings have been initiated. "Where any outstanding liability, inclusive of any accrued interest is waived in accordance with the approved Resolution Plan, such waiver/write-back should not be subject to tax under both normal and Minimum Alternate Tax (MAT) provisions of the Income-tax Act, 1961," Assocham said in a letter to Central Board of Direct Taxes (CBDT).
The chamber has also sought exemption from Section 50CA of the I-T Act for the companies which are being revived under the Insolvency and Bankruptcy Code (IBC). This section provides that the computation of capital gains would be done on the basis of fair value of the shares of the company even if these are transferred under the IBC package below the fair value. Since MAT was not payable by a sick company on its book profits from the year in which it became sick, it is recommended that similar reliefs should be extended to the corporate debtor after the approved Resolution Plan is effected. In the letter marked to the Financial Services Department as well as MCA, Assocham also sought that companies against whom insolvency proceedings have been approved by the NCLT, they should be exempt from the General Anti Avoidance Rules (GAAR) provisions.
The resolution plans approved after factoring in these reliefs/concessions will result in quick revival of assets, freeing up liquidity for banks for further lending, increased economic activity, job creation, increased contribution to the exchequer and will have multiplier effect on the associated economy, Assocham said. "A quick and timely resolution to the stressed assets with positive outcome implemented in a transparent manner will improve India's 'Doing Business' ranking thereby ensuring participation from global players and resultant capital inflows," Assocham Secretary General D S Rawat said. Currently, non-performing loan resolution process is going on for 12 companies and this represent 25 per cent of total bad loans in the system NPLs.