A government-appointed committee is planning to recommend amendments to the IBC to exempt buyers of stressed assets from paying MAT and getting the CCI’s approval.
A government-appointed committee is planning to recommend amendments to the IBC to exempt buyers of stressed assets from paying minimum alternate tax(MAT) and getting the Competition Commission of India’s (CCI) approval. This is being done due to the urgency of these transactions, and it would help the ongoing insolvency cases, including the 12 accounts referred by the RBI to banks.
Every merger and acquisition in India requires the CCI’s approval. This is essential to ensure companies do not abuse their dominant position in a sector.
Competition lawyers said exempting buyers of stressed assets from the competition law might lead to one player exploiting its dominant position in the market; at the same time, delay because of the approval process can be avoided.
SEBI has already exempted these companies from open-offer, even if it crosses a threshold. Companies buying these assets need not make an open-offer, which is mandatory for other listed companies above a threshold. Any entity acquiring at least 25 per cent in a company has to make an open offer for another 26 per cent.
Exemption from MAT may be provided by modifying tax liabilities for companies acquiring such assets, somewhat in line with the provisions of the Sick Industrial Companies Act (SICA): SICA exempts sick companies from paying MAT; those taking over insolvent companies may also get an exemption from this tax.
Under SICA, profit of a company, when it is declared sick, is reduced before arriving at the amount on which MAT is to be charged. Also, when a portion of the debt of the insolvent company is written off, the gain for the acquirer is notional. Under SICA, a concession from MAT was provided under this.
Source: Business Standard