The Fact News Service
Ludhiana, June 27
MP (Rajya Sabha) from Ludhiana Sanjeev Arora on Wednesday met Union Finance Minister Nirmala Sitharaman in Delhi and congratulated her on second term as FM and urged her to consider some pressing issues pertaining to tax payers and industry in the upcoming budget.
In a statement on Thursday, Arora said he brought to the notice of FM about a matter of significant importance concerning the acquisition of assets under the Insolvency and Bankruptcy Code, 2016 (IBC).
Arora apprised FM that under IBC, pursuant to transparent bidding process, ownership and management of the Corporate Debtor is transferred to the Resolution Applicant. Accordingly, as part of the resolution plan/ liquidation proceed under the IBC, the Corporate Debtor issues fresh shares and/or the existing shares are transferred to the Resolution Applicant, the highest bidder, at the bid amount.
At times, the bid amount may not correspond to and may be lower than the fair market value determined as per the artificial formula given in the IT Rules. Since assets are acquired as part of transparent/open bidding process, it cannot be said that the shares/asset have been acquired at less than its fair market value.
Therefore, Arora recommended FM that appropriate amendment may be made in the IT Act, vis a vis Deemed Income in particular sections 50C, 50CA, 56(2)(x), etc., to clarify that the said provisions shall not apply to assets acquired as part of acquisition under the provisions of the IBC.
Further, Arora brought FM’s attention towards the need for amendments in the Income Tax Act concerning the exemption of compensation under the Right To Fair Compensation And Transparency In Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLAR), and the compensation received through the monetization of Transferable Development Rights (TDR).
Arora apprised FM that Section 96 of the RFCTLAR Act stipulates that no income tax shall be levied on any award granted following the acquisition of land by a company. This provision was further clarified by the Central Board of Direct Taxes (CBDT) in Circular No.36/2016 dated 25th October 2016. However, there has been no corresponding amendment made to the Income Tax Act to reflect this clarification.
He said moreover, certain State governments have introduced TDR certificates as an alternative mode of compensation to expedite the process of compulsory land acquisition. These certificates can be monetized by the landowner, providing them with compensation without direct financial outlay from the government.
Adding, he said given that the monetization of TDR is essentially an alternative form of compensation for land acquisition, it is only just that it receives the same tax treatment as awards under Section 96 of the RFCTLAR. Therefore, he proposed a couple of amendments to the Income Tax Act. He proposed to insert a specific provision in Section 10 to explicitly state that compensation under Section 96 of the RFCTLAR is not taxable and that on parity, aforesaid exemption must also be extended to a landowner selling TDR. Arora hoped that these amendments will provide clarity and fairness in the taxation of compensation received by landowners and align the Income Tax Act with the intentions of the RFCTLAR Act.
Arora also sought an action to address the huge pendency of Appeals before the Commissioners of Income-Tax (Appeals) nationwide. He also took up the issue of rationalization of income tax rates for individuals.
MP Arora also apprised FM that individuals earning over 5 crores are subjected to a maximum marginal tax rate of 42.74%, while the middle-class, with incomes exceeding 10 lacs, face a rate of 31.20%; which is in stark contrast to the corporate tax rate of 25.17% under section 115BAB of the Act. He stressed upon rationalization of these tax rates, aligning the maximum marginal rate for individuals with that of corporates, and advocating for a reduction in the tax burden on middle-class citizens to bolster consumption demand and economic growth.
He thanked FM for taking cognizance of all the suggestions. FM has assured MP Arora that she’ll look into the suggestions for the upcoming Union Budget given by him.
