Union Budget 2023-24 + FINANCE Bill, 2023

Facilitating certain strategic disinvestment

Section 72A of the Act relates to provisions on carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger. Sub-section (1) of section 72A provides that in specified cases, accumulated loss and unabsorbed depreciation of the amalgamating company shall be deemed to be the accumulated loss and unabsorbed depreciation of amalgamated company for the previous year in which the amalgamation was affected. Conditions have also been laid down in the said section to facilitate carry forward and set off of loss and unabsorbed depreciation in the case of strategic disinvestment. Strategic disinvestment has been defined as sale of shareholding by the Central Government or any State Government in a public sector company which results in reduction of its shareholding below fifty-one per cent along with transfer of control to the buyer.

2. Section 72AA of the Act relates to carry forward of accumulated losses and unabsorbed depreciation allowance in a scheme of amalgamation in certain cases, which, inter-alia, includes amalgamation of one or more banking company with any other banking institution.

3. To facilitate further strategic disinvestment, it is proposed to amend the definition of ‘strategic disinvestment’ in section 72A of the Act so as to provide that strategic disinvestment shall mean sale of shareholding by the Central Government, the State Government or Public Sector Company in a public sector company or a company which results in

(i) reduction of its shareholding below fifty-one per cent, and

(ii) transfer of control to the buyer.

4. The first condition shall apply in case the shareholding was above fifty one percent before such sale of shareholding. The requirement of transfer of control may be carried out by either the Central Government or State Government or Public Sector Company (or any two of them or all of them).

5. It is also proposed to amend section 72AA of the Act to allow carry forward of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation of one or more banking company with any other banking institution or a company subsequent to a strategic disinvestment, if such amalgamation takes place within 5 years of strategic disinvestment.

6. This amendment will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years.

[clauses 33 & 34]

 

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Full Text:

Union Budget 2023-24 + FINANCE Bill, 2023

Strategic disinvestment: redefined to cover government or public sector share sales reducing majority shareholding and enabling loss carryforward on amalgamation. Section 72A is amended to expand strategic disinvestment to include sale of shareholding by the Central Government, State Government or a Public Sector Company that reduces their shareholding below fifty-one per cent and transfers control to the buyer; transfer of control may be effected by any one or more of those entities. Section 72AA is amended to allow carry forward and set off of accumulated losses and unabsorbed depreciation where banking companies amalgamate with another banking institution or company within five years of such strategic disinvestment. The amendments take effect from 1 April 2023.