Editor's Insights (December 2020)

Deloitte India

The real GDP showed contraction of 7.5% in July-September 2020 quarter. In early November, the Government announced stimulus package covering auto, pharma, housing, real estate and overall infrastructure with the aim to stimulate the supply side of the economy and focus on employment generating sectors. There is evident buzz in the system and an anticipation to tide safely over the balance of the pandemic and with vaccines inching closer. This augurs well for an emergent economy like India and in particular M&A space. Recent survey suggests that covid-19 disruption has resulted into companies with strong liquidity and reserves to scout out for acquisition of targets that are weak and who need support to survive in the market.

On a positive note, all the benches of the National Company Law Tribunal (NCLT) have been reconstituted to enable hearings through Video Conference Facility on all working days from 1 December 2020 as they were heard before the lockdown. This is expected to speed up the implementation of M&A activity, which was substantially impacted due to the COVID-19 pandemic restrictions.

International Financial Services Centres Authority (IFSCA) has recently notified Global Inhouse Centres (GIC) Regulations, to enable setting-up and functioning of global in-house centres (GICs) in IFSCs. The move will enable multinational corporations to set up GICs in GIFT City Gujarat. These Regulations, coupled with the various incentives offered by the government, is expected to make India a preferred host for GICs.

With an aim to speed up clearances of FDI proposals, Government has issued revised Standard Operating Procedures (SOP) for processing of FDI proposals that requires government approval. New SOP will bring clarity on the documents required and timelines for processing of application.

This newsletter covers the Karnataka HC judgement which confirmed allowability of ESOP expenses in the hands of the company.

This edition includes the following articles:

• Corporate gifting of shares-Recent jurisprudence and its impact on restructuring - Written by Vishal Hakani (Partner) and Vishal Yeole (Senior Manager), Deloitte India; and

• Deemed gift tax provisions-Impact on real estate transactions under current market conditions - Written by Gautham Lokhande (Partner) and Pooja Vijayawargiya (Director), Deloitte India.