I-T dept targets cos trying to cut tax bills through recast HEMA RAMAKRISHNAN TIMES NEWS NETWORK[ WEDNESDAY, DECEMBER 24, 2003 12:52:12 AM ] NEW DELHI: Companies facing, or likely to face, heavy income tax demands may have to think twice before embarking on any major restructuring exercise entailing sale or transfer of assets to subsidiaries. The income-tax department is keeping a close tab on such companies and would clamp down on any parent company hiving off assets for meagre considerations to its subsidiaries which, in turn, jeopardises collection of pending income tax demands. “We will take stringent action if it is established that any parent company, against whom tax demands are either pending or are likely to be raised, undertakes a questionable restructuring exercise,” said a top Central Board of Direct Taxes (CBDT) official. The remarks are to be viewed in the light of a recent investigation launched on a liquor company with a substantial amount of disputed tax demands. The department concluded that the assessee company’s activities were reduced to a bare minimum with no significant assets to be disposed off. The assessee company had virtually become a shell company under the garb of a holding company. The CBDT official, however, made it clear that the tax department had no problems if financially sound parent companies undertake demergers to further consolidate their businesses. Demergers were recognised as a relatively new phenomenon when the government brought in a number of amendments in the income tax legislation in the Finance Act 1999. The objective was to ensure that business reorganisation enables industry to become globally competitive. The amendments were based on broad principles. One, demergers should be tax neutral and should not attract additional liability to tax. Two, in demergers, the tax benefits and concessions available to any undertaking should be available to the said undertaking on its transfer to the resulting company. Three, tax benefits to such business reorganisation should be limited to transfer of specific assets which would amount to sale of assets and not business reorganisation. Four, the accumulated losses in unabsorbed depreciation in a demerger should be allowed to be carried forward to the resulting company if these can be directly related to the undertaking proposed to be transferred. Where it is not possible to relate these to the undertaking, the said losses and depreciation should be apportioned between the demerged company and the resulting company in proportion of these assets coming to the share of each as a result of demerger. *************************************************************************** Mailing list (sbinews@xxxxxxxxxxxxx) related information: News/articles about SBI and Banking related matters published in the print media, Internet etc will be circulated through this Mailing List. The messages in this list will help in improving awareness of SBI and its activities vis-a-vis the happenings in the Banking industry. This should be of help to all staff members of SBI, particularly those who are preparing for promotional written tests/interviews/group discussions. Subscription to this Mailing List is simple and FREE. Please check the procedure below. Please share this information with other colleagues/branches that could be interested in subscribing to this Mailing List. The messages circulated here should not be deemed to have the official endorsement of the SBI or any of its employees. The correct factual position may be ascertained from official sources. To join this mailing list, just send an email to sbinews-request@xxxxxxxxxxxxx with the word 'subscribe' without the quotes in the subject of the email message. To leave this mailing list, just send an email to sbinews-request@xxxxxxxxxxxxx with the word 'unsubscribe' without the quotes in the subject of the email message. Archives (old messages) are available for viewing at: //www.freelists.org/archives/sbinews Click on the month-year at the lower left corner to view messages posted during that month. This is an announcements/newsletter type mailing list i.e. only the Moderator/s can post messages to the list. This mailing list is maintained and moderated by Sri. R.S.Pai, currently working as Chief Manager(IT-Internet Banking), SBI, Corporate Centre, Mumbai. Moderator: Smt. S. Vijaya, CM (Training), SBI, STC, Bangalore. Visit http://rspai.tripod.com for some useful Banking, Reference and Utilities Links