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Govt clarifies on facility sharing deals for group cos
Sep '15
The Department of Industrial Policy and Promotion (DIPP) has clarified that the facility sharing agreements within two group companies will not be treated as real estate business provided the arrangements are at arm's length price.

“Facility sharing agreements between group companies through leasing/sub-leasing arrangements for the larger interest of business will not be treated as 'real estate business' within the provisions of the Consolidated FDI policy circular of 2015,” it said in a statement.

These would be subject to the condition that “such arrangements are at arm's length price in accordance with relevant provisions of Income Tax Act 1961 and annual lease rent earned by the lessor company does not exceed 5 per cent of its total revenue,” it added.

In another notification, the Government has permitted foreign investments through partly paid shares and warrants in a move to facilitate FDI in India.

“The government has reviewed the provisions of the extant FDI policy…and it has been decided to allow partly paid shares and warrants as eligible capital instruments for the purposes of FDI policy,” the DIPP said in the notification. (SH)

Fibre2Fashion News Desk – India

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