Amendment to the definition of Demerger – Section 2(19AA)
Currently, clause (iii) of section 2(19AA) provides that all the property and liabilities of an undertaking(s) transferred by a demerged company shall be recorded at book value. It is proposed that the requirement of recording property and the liabilities at book value shall not apply where the property and the liabilities of the undertakings received by a resulting company are recorded at a value different from the book value (as recorded in the books of demerged company) immediately before the demerger on account of compliance with Indian Accounting Standards.
This amendment will take effect from 1st April, 2020 and will apply from assessment year 2020-2021 and onwards.
Section 43B – Deductions only available on actual payments & Section 43D Special provision in case of income of certain financial institutions
Under section 43B it is proposed that interest paid on borrowings from deposit-taking NBFCs or systemically important non-deposit taking NBFCs shall be allowable as a deduction only if actually paid during the previous year. An explanation has also been included to clarify that if such interest was already allowed in a previous year prior to FY 2019-20 when the liability arose, the same shall not be allowed as a deduction again if paid in subsequent year. A further explanation is also included to clarify that unpaid interest converted into loan shall not be deemed to have been paid. Further, relevant definitions have also been included in the proposed amendment.
It has been further provided that the definition of ‘Deposit-taking NBFCs’ and ‘Systemically Important Non Deposittaking NBFCs’ shall have the meaning assigned to it in under The RBI Act, 1934 or other regulatory guidelines.
Section 43D has also been proposed to be amended so as to include deposit-taking NBFCs and systemically important non deposit-taking NBFCs within the scope of this section.
The amendments will take effect from 1st April, 2020 and will apply from assessment year 2020-2021 and onwards.
Amendment in section 79 – carry forward of losses in case of substantial change in ownership
It is proposed vide Finance Bill 2019 to realign section 79 and substitute it with the proposed realigned section.
In order to facilitate ease of doing business for start-ups, it has been proposed to amend section 79 to provide that the closely held eligible start-ups shall be allowed to carry forward and set off against the income of the year on satisfaction of either of the condition:
(a) the shareholders carrying not less than 51 % of the voting power on the last day of the previous year or years in which the loss was incurred continue to be the shareholders of the company; or
(b) all the original shareholders of the Company at the end of the year in which the loss was incurred continue to be shareholders of such shares in the year in which the loss is to be set off
For other closely held companies, loss incurred in a year shall be allowed to carry forward and set-off against the income of the year only if condition (a) above is satisfied.
It is further proposed to relax the applicability in case of company and its subsidiary and the subsidiary of such subsidiary, whose resolution plan has been approved by the NCLT under section 242 of the Companies Act, 2013, where.
a) the NCLT has suspended the existing Board of Director and has appointed new directors; and
b) a change in shareholding of such company, its subsidiary company or subsidiary of such subsidiary company pursuant to such resolution after giving a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner
This amendment will take effect from 1st April 2020 i.e. from assessment year 2020-21.
Amendment to MAT provisions
Section 115JB deals with Minimum Alternate Tax (MAT), a special provision for payment of tax by certain companies based on its book profit which is determined after making certain adjustments to the net profit disclosed in the profit and loss account prepared in accordance with the provisions of the Companies Act, 2013.
It is proposed to realign clause (iih) of Explanation 1 to subsection (2) to include reduction from the book profits, the aggregate amount of unabsorbed depreciation and brought forward loss in case of a company, and its subsidiary and the subsidiary of such subsidiary, where, the NCLT, on an application moved by the Central Government under section 241 of the Companies Act, 2013 has suspended the Board of Directors of such company and has appointed new directors who are nominated by the Central Government, under section 242 of the said Act
The proposed amendment also provides that a company shall be a subsidiary of another company, if such other company holds more than half in nominal value of the equity share capital of the company.
This amendment will take effect from 1st April, 2020 and will apply from assessment year 2020-2021 and onwards.
Section 10(34A) & 115QA – Extending the applicability of the provisions of these sections to listed companies
It is proposed to extend the applicability of section 115QA with respect to any buy back of shares to all companies including companies listed on recognised stock exchange on or after 5th July 2019.
Pursuant to the aforesaid amendment in section 115QA, it is also proposed to extend exemption under clause (34A) of section 10 of the Act to shareholders of the listed company on account of buy-back of shares on which additional income -tax has been paid by the company.
These amendments will take effect from 5th July, 2019
