To make stressed firms more attractive for bidders, the Finance Bill has allowed companies to carry forward losses even after a change in majority shareholding.
The Bill also seeks to amend the provision pertaining to minimum alternate tax (MAT), allowing companies to adjust depreciation and loss against profits after the resolution process. These two amendments were long-pending demands of industry and insolvency professionals.
“Hopefully, these changes will help create higher demands for companies facing insolvency, and improve resolution of such firms rather than letting them go into liquidation,” said Manoj Kumar, Partner at Corporate Professionals.
Section 79 of the Income-Tax Act, 1961, states that losses cannot be carried forward if the ownership by way of majority shareholding in a company changes hands. “Withdrawal of the advantage of carry-forward of losses, when a resolution applicant acquires a company during the insolvency process, is a big let-down for the acquirer,” Kumar added.