New Delhi: The government should liberalise the regulations related to mergers and acquisitions to encourage companies re-organise and restructure their business operations, the Confederation of Indian Industry (CII) has said.
Currently, tax benefits related to mergers and amalgamations are given to industrial undertakings, and to select services such as shipping, hotels, aircraft and banking.
The CII said the tax benefits available to some sectors under Section 72A of the Income Tax Act should be extended to all businesses including telecom, financial services, entertainment, sports, information technology (IT) and IT-enabled services.
Section 72A of the Income Tax Act encourages amalgamation and restructuring of a company or firms by allowing to set-off, or carry forward, unabsorbed depreciation and accumulated business losses when amalgamated with other company.
Under the current law, in the case of mergers which have tax benefits, the accumulated past losses of the amalgamating company can be set-off against the current profits of the amalgamated company.
This benefit of carrying forward losses in an amalgamation is currently available only to an industrial undertaking subject to meeting specified conditions.
The CII is of the view that the government should modify the underlying law to broad-base the said provisions as this would allow similar benefits to be claimed by taxpayers in other industries like information technology, financial services and entertainment.
"The objective is to make business operations tax-neutral, and thereby, encourage companies in re-organising and restructuring their business operations," the CII said.