8th National Direct Tax Summit and Awards 2025

The presentation began by identifying the key drivers in M&A transactions, categorizing them into internal factors such as consolidation, focus on core business, tax optimization, streamlining, repatriation of capital, succession planning, and the pursuit of tangible results. It also considered external factors like growth through acquisition, divestments, leverage and debt management, managing distress or insolvency, capital or fund raising, and adapting to business and industry requirements.

The discussion then extended into various restructuring options that were available, including mergers and amalgamations, demergers, slump sales, itemized sales of assets, share transfers, buybacks or capital reduction of shares, gifts, and other arrangements under the Companies Law/LLP Act. Each option presented distinct characteristics, such as the tribunal process, cash or non-cash considerations, tax implications, and the possibility of utilizing losses.

The presentation also addressed key tax issues in M&A, such as tax on deferred consideration, deductibility of non-compete payments, treatment of investments, carryforward of losses, goodwill allocation, slump sale successions, GAAR, treaty access, company conversions to LLPs, foreign company mergers, valuation aspects, and indirect transfers.

Moreover, the webinar highlighted other tax developments that affected M&A transactions, including slump sale exchanges, reconstitution of partnerships, amendments to the LLP Act, changes in goodwill eligibility for depreciation, revenue rights to review NCLT orders, modified return filings, shareholding change applicability under IBC, new OI regulations, and changes in buyback rules following the Finance Act 2024—particularly concerning their treatment at par with dividends.

Additionally, the presentation covered key rulings in M&A transactions, providing insights into cases such as Ajanta Pharma Limited, Panasonic India Pvt. Ltd., and Cummins Auto Services Ltd., which offered guidance on commercial rationale, GAAR implications, and the treatment of losses in M&A scenarios.

The webinar further advised on tax due diligence best practices, emphasizing the importance of indemnity and warranty clauses, understanding the target entity's business and industry, reviewing tax filings and compliance, verifying income and deductions, examining litigation and dispute history, and addressing key issues specific to the target. It also discussed General Anti-Avoidance Rules (GAAR), highlighting their applicability, basic provisions, and implications for tax benefits.

Lastly, the presentation provided an overview of the provisions on indirect transfers, with a focus on the taxation of gains from the transfer of shares or interests in overseas entities deriving value from assets in India, along with the related compliance requirements.