Notification under clause (viiaf) of section 47 of the Income tax Act, 1961

## Report on Notification Regarding Income Tax Act, 1961: Transfer of Capital Assets - Air India **1. Executive Summary:** This report analyzes a notification (S.O. 3678(E)) issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes on September 10, 2021. The notification pertains to Section 47 of the Income-tax Act, 1961, specifically clause (viiaf), and addresses the transfer of capital assets from Air India Limited (AIL) to Air India Assets Holding Limited (AIAHL). The notification provides that this transfer, under a plan approved by the Central Government, is permissible under the Act. The changes take effect from April 1, 2022, and apply to the assessment year 2022-2023 and subsequent years. This report aims to provide clarity on the notification's implications for affected parties. **2. Introduction:** The purpose of this report is to provide an informative overview of Notification No. 104/2021 (S.O. 3678(E)), focusing on its key provisions, implications, and expected outcomes. The analysis is based solely on the information contained within the provided policy text. **3. Policy Overview:** This is a *new* policy notification related to the Income-tax Act, 1961. * **Core Objective(s):** As inferred from the provided text, the core objective is to facilitate the transfer of capital assets from Air India Limited to Air India Assets Holding Limited without triggering certain tax implications under the Income-tax Act, 1961, specifically as it relates to Section 47 clause (viiaf). This facilitation is conditional on the transfer being part of a plan approved by the Central Government. **4. Background and Rationale:** * **Likely Problem/Issue Addressed:** The policy likely addresses a potential tax burden that could arise from the transfer of capital assets between two public sector companies during the Air India divestment process or restructuring. Without this notification, the transfer might be considered a taxable event under the Income-tax Act, potentially hindering the transfer process or creating financial burdens for AIL and AIAHL. **5. Key Provisions / Changes:** As a new policy notification, the main components are: * **Tax Exemption for Capital Asset Transfer:** The notification provides that the transfer of capital assets from Air India Limited (PAN: AACCN6194P) to Air India Assets Holding Limited (PAN: AAQCA4703M), under a plan approved by the Central Government, is covered under clause (viiaf) of Section 47 of the Income-tax Act, 1961. This suggests the transfer will not be subject to capital gains tax. * **Effective Date:** The notification comes into force on April 1, 2022, and applies to the assessment year 2022-2023 and subsequent assessment years. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders are: * **Air India Limited (AIL):** As the transferor public sector company. * **Air India Assets Holding Limited (AIAHL):** As the transferee public sector company. * **Central Government:** Responsible for approving the transfer plan. * **Ministry of Finance, Department of Revenue, Central Board of Direct Taxes:** Responsible for issuing the notification. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** Central Board of Direct Taxes (CBDT) is the issuing authority. The Central Government is responsible for approving the transfer plan. * **Timelines:** The notification is effective from April 1, 2022, and applies to the assessment year 2022-2023 onwards. * **Procedures:** While the notification doesn't detail specific procedures, it implies that a "plan approved by the Central Government" is a prerequisite for the tax exemption to apply. AIL and AIAHL would likely need to adhere to the approved plan in executing the asset transfer. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes are: * **Facilitation of Asset Transfer:** To streamline the transfer of assets from AIL to AIAHL without the impediment of capital gains tax. * **Smooth Restructuring/Divestment:** To support the smooth restructuring or divestment of Air India. * **Financial Viability:** Prevent potential tax liabilities from negatively impacting the financial viability of AIL and AIAHL during the transfer process. **9. Conclusion:** Notification No. 104/2021 (S.O. 3678(E)) provides a specific tax exemption for the transfer of capital assets between Air India Limited and Air India Assets Holding Limited, conditional on Central Government approval of the transfer plan. This measure likely aims to facilitate the restructuring or divestment of Air India by removing potential tax hurdles and ensuring a smoother transition of assets. The notification is significant for AIL, AIAHL, and other stakeholders involved in the Air India restructuring process.

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