CBDT- Issues final notification u/s. 115JG relating conversion of foreign banks’ Indian branch into subsidiary

CBDT issues final notification u/s. 115JG(1) specifying the conditions to be fulfilled upon conversion of Indian Branch of foreign bank into Indian subsidiary company and also specifying modifications, exceptions, in applicability of certain provisions of the Act to such conversion; Apart from the conditions specified in draft notification for availing capital gains exemption that all assets / liabilities of Indian Branch are taken over by subsidiary, foreign co. receives consideration only by way of share allotment, foreign co./ its nominees hold whole of the share capital of the subsidiary, conversion is in accordance with RBI guidelines, the final notification additionally stipulates that all assets and liabilities of Indian branch are transferred at book values and any change in value of assets consequent to their revaluation shall be ignored; Likewise, the final notification specifies two additional ‘exceptions, modifications and adaptations’, viz. 1) Sec. 56(2)(x) shall not apply to the transaction of receipt of shares in the Indian subsidiary company by the foreign company in consequence of the conversion and 2) the provisions of 35DDA [relating amortisation of expenditure incurred under VRS] shall be, as far as may be, apply to the Indian subsidiary company, as they would have applied to the Indian branch, if the conversion had not taken place; The conditions relating to unabsorbed depreciation, losses set-off / carry forward, tax credit are largely similar to those proposed under draft notification; CBDT also amends Rule 8AA to provide for determination of the holding period for the capital asset which became the property of the Indian subsidiary co. in consequence to conversion u/s. 115JG(1), states that the period for which the asset was held by the Indian branch and by the previous owner [who acquired the capital asset by a mode referred to in Sec. 49(1) / Sec. 115JG(1)] shall be included