New Delhi, Dec 7 (UNI) The National Company Law Tribunals (NCLTs) should be empowered by law to grant relief on any tax that may be imposed on any waiver of accrued interest with regard to stressed assets referred for resolution under the Insolvency and Bankruptcy Code, the ASSOCHAM has said in its communication to the Finance Minister Arun Jaitley.
Assocham said, “Where any outstanding liability, inclusive of any accrued interest, in respect of the entity for which the Resolution Plan is approved (i.e. Corporate Debtor), is waived in accordance with the approved Resolution Plan, such waiver/write-back may attract tax under both normal and Minimum Alternate Tax (MAT) provisions.”
“This will burden the stressed enterprise with huge transactional tax liability and make the resolution process unviable, as the new resolution applicant and the stressed business have to shell out this additional sum which in some case may reach up to 35 per cent of the waived liability,” the Chamber Secretary General DS Rawat said in his letter to the Finance Minister.
The chamber said the NCLT should be authorised to grant relief on such waiver/write-back of outstanding liabilities under normal as well as under MAT. It said there are certain provisions of the Income Tax Act which cast huge tax liabilities in the process of resolution, which if required to be discharged in absence of statutory protection would defeat the entire purpose of resolution as there will hardly any money left for revival of the asset.
The chamber said, “Besides, the resolution plan would involve transfer, assignment, issue of shares and securities for infusion of capital and transfer of ownership of stressed business and other immovable assets which may not be at the book value or fair market value as defined in law. It may thus result into huge transactional tax liability in hands of stressed business or the new resolution applicant on a notional income, seriously jeopardising the viability of plan.”