This may require amendment in tax laws as there is no provision for setting off of carried forward losses against profits when the entities involved in the merger are private parties.
IDBI corner 95% owned Life Insurance Corporation of India ,LIC) and the government, but the Reserve Bank of India (reserve Bank of India) classified it as a private lender.
A senior official said that the government is ready to amend the Income Tax Act to facilitate privatization of the bank. The government had provided similar relaxations for public sector bank consolidation in April 2020, to set off accumulated losses and unabsorbed losses. depreciation The number of state-owned lenders was reduced from 21 to 12 after the merger.
“The government is willing to provide requisite relaxations to facilitate stake sale,” the official said. “The contours of any relaxation will be decided after consultation with all stakeholders.”
IDBI Bank is also seeking approval to set off accumulated losses of ₹45,586 crore against the balance in the Securities Premium Account.
accounting Adjustment
scheme, which is pending before National Company Law Tribunal ,NCLT), is an accounting adjustment that will allow the bank to pay dividends and will have no effect on privatization.
“The loss will remain in the books and can potentially be carried forward in the event of a merger, provided relevant amendments are made to the Income Tax Act,” said Girish Vanwari, founder, Transaction Square, a national merger advisory firm.
Another official pointed out that to facilitate strategic disinvestment, the Finance Act, 2021 had amended section 72A of the Income Tax Act to allow tax benefit for accumulated losses in case of amalgamation of a public sector company. One after the stake sale. The accumulated losses and unabsorbed depreciation of PSUs for the previous year will flow to the amalgamated company. “Similar relaxation can be given in the case of IDBI Bank as well,” the official said.
In October, the government had invited Expression of Interest (EoI) for majority stake IDBI Bank With the transfer of management control.
The government, along with LIC, will sell 60.72% stake in the lender. The last date for submission of EOI has been extended till 7th January.
IDBI Bank closed 3.8% down on the BSE on Wednesday, a sharp decline compared to the Sensex’s 1% decline. At this rate the bank is valued at Rs 57,848 crore.