Thought Leadership

Arising from the need to social distance to mitigate the spread of COVID-19, the question that arises in the minds of many will be the state of the co-working industry in a possible new epoch. 

One of the greatest uncertainties we face today surrounds the trade-off between minimizing the human cost from the coronavirus and restarting the economy.  Much of the world economy remains shut down, and consequently, economic distress arising from the coronavirus crisis has been pervasive.  And rightfully, governments around the world have announced an unprecedented program of stimulus, support, rescue and regulatory relief in response to the economic impact of the effort to combat the pandemic.
 

Business Trusts may invest in a number of Holding companies/ SPVs and it is likely that there may be surplus funds available in one Holding company/ SPV which can be productively lent to another Holding company/ SPV.  Considering provisions of Section 2(22)(e), such loans may have adverse tax implications.  Provisions of Section 2(22)(e) do not apply to a listed company or its subsidiary.  Since units of a Business Trust shall be listed and the Holding company/ SPV is its subsidiary, exemption from Section 2(22)(e) should be available to such Holding companies/ SPVs as they are available to a listed company or its subsidiary. 

The Finance Bill 2020 proposes to levy tax on the dividend paid by InvITs/ REITs to the unitholders in the hands of the unitholders, which was until this proposed amendment exempt from tax. An efficient tax structure provided under the Income Tax Act 1961 enabled the successful listing of two InvITs in 2017, two privately placed but listed InvITs and India’s first REIT in April 2019 which attracted investment from large long-term foreign investors and also domestic institutional investors.