Notification under Explanation to subsection (1H) of section 206C of the Income tax Act, 1961

## Policy Analysis Report: Income Tax Notification No. 108/2021 **1. Executive Summary:** This report analyzes Income Tax Notification No. 108/2021, issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (CBDT). This notification provides an exemption under Section 206C(1H) of the Income-tax Act, 1961, specifically stating that Air India Limited shall not be considered a 'seller' for the purposes of Tax Collected at Source (TCS) in relation to the transfer of goods to Air India Assets Holding Limited, under a plan approved by the Central Government. The notification aims to facilitate the transfer of assets related to Air India. It is effective retrospectively from April 1, 2021. **2. Introduction:** The purpose of this report is to provide an overview and analysis of Income Tax Notification No. 108/2021 based solely on the provided text. This report aims to inform stakeholders about the scope, implications, and likely rationale behind this notification. **3. Policy Overview:** This is a specific exemption notification related to Section 206C(1H) of the Income-tax Act, 1961. The core objective, as inferred from the provided text, is to provide relief from TCS obligations for Air India Limited in the specific instance of transferring goods to Air India Assets Holding Limited, as part of a government-approved plan. **4. Background and Rationale:** As an amendment to the existing Income Tax Act, this notification specifically addresses an issue arising from the transfer of assets from Air India Limited to Air India Assets Holding Limited. The rationale, inferred from the context, is to streamline this transfer by exempting Air India Limited from the obligation to collect tax at source (TCS) under Section 206C(1H) on goods transferred to Air India Assets Holding Limited. This likely aims to reduce the administrative burden and potential tax implications that could arise from such a transaction, potentially facilitating a smoother transfer process. **5. Key Provisions / Changes:** This notification introduces a specific exemption. * **What specific part of the original policy is being changed:** The notification creates an exception to the general rule of Section 206C(1H) of the Income-tax Act, 1961, which mandates Tax Collection at Source (TCS) by a seller from a buyer under certain circumstances. * **What the *new* rule/provision *is*, based *only* on the amendment text:** The *new* rule specifies that Air India Limited (PAN: AACCN6194P) shall *not* be considered a 'seller' for the purposes of subsection (1H) of section 206C of the Act, when it transfers goods to Air India Assets Holding Limited (PAN: AAQCA4703M) under a plan approved by the Central Government. * **Explain the *difference* or the *effect* of this specific change:** Without this notification, Air India Limited *would* have been obligated to collect TCS from Air India Assets Holding Limited on the transfer of goods if the conditions of Section 206C(1H) were met. The notification removes this obligation, thus simplifying the asset transfer process and potentially avoiding any associated tax complications for both entities within the approved plan. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders are: * Air India Limited. * Air India Assets Holding Limited. * The Ministry of Finance, Department of Revenue, and the Central Board of Direct Taxes (CBDT). * Potentially other entities involved in the Air India disinvestment plan approved by the Central Government. **7. Implementation Aspects (Inferred):** * **Responsible agency/bodies mentioned:** Central Board of Direct Taxes (CBDT), Ministry of Finance, Department of Revenue. * **Any timelines or procedures specified *in the text*?:** The notification is deemed to have come into effect from April 1, 2021. This implies that any transactions falling within the scope of the exemption from that date onwards are covered. The approval by the Central Government for the transfer plan is a prerequisite for the exemption to apply. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of this notification is to facilitate the transfer of assets from Air India Limited to Air India Assets Holding Limited under a government-approved plan, without the complexities and potential financial implications of TCS under Section 206C(1H). This streamlining likely contributes to the broader Air India disinvestment strategy. The impact of the amendment specifically is a reduction in administrative burden and potential tax-related complications for both Air India Limited and Air India Assets Holding Limited. **9. Conclusion:** Income Tax Notification No. 108/2021 provides a targeted exemption from TCS under Section 206C(1H) of the Income-tax Act, 1961 for Air India Limited's transfer of goods to Air India Assets Holding Limited. This is a significant step to facilitate the asset transfer process. The notification streamlines the asset transfer by removing the TCS compliance burden for Air India Limited in this specific scenario.

Key Entities Referenced