Infrastructure Finance that is seeking a tax exemption since 2015 is set for a dispute with the income tax (I-T) department, which has notified it as a fund only since April 1 this year. The firm, however, was registered as an infrastructure debt fund with the Reserve Bank of India
The Section 10(47) of the Act grants tax exemption to the notified infrastructure debt fund when the fund is set up as per the guidelines and the notifications issued by the government and the RBI.
According to a source close to the development, the company had filed an application with the CBDT
for notification as an infrastructure debt fund since fiscal 2014-15, when it received the NBFC licence from the RBI to operate as an NBFC.
An email sent to the company did not elicit any response. The tax exemption is significant as the company had reported a net profit of Rs 103 crore in fiscal 2019, as against Rs 83 crore in fiscal 2018 without making any provisions for tax.
What’s the dispute
NIIF Infra Finance is registered as an Infra Fund with RBI since 2015
CBDT notifies NBFC as infra fund from April 1, 2019
Opens NIIF Infra Finance to tax dispute for preceding years
NIIF Infra asks CBDT to notify it as a debt fund since 2015
Company’s profits may get impacted if CBDT refuses
The CBDT, however, notified the company as an infrastructure debt fund only from April 1 this year, which means the tax exemption will not be available for the preceding years between fiscal 2015 and fiscal 2019. The NBFC has asked the CBDT to notify it as an infrastructure debt fund since its inception so that it can receive the tax benefits for the previous years.
The National Investment and Infrastructure Fund (NIIF) holds majority 60 per cent stake in NIIF IFL. While IDFC
Financial Holding Company holds around 30 per cent in the NBFC, HDFC holds the rest 11.11 per cent in the fund. The NIIF is in talks to acquire the balance 30 per cent equity from IDFC.
The company’s loan book grew to Rs 4,669 crore as of March 31 this year, as against Rs 4,220 crore as of March 31, 2018.
The portfolio is diversified across renewable energy of almost 38 per cent, roads (17 per cent), hospitals (14 per cent), power transmission (12 per cent), IT/SEZs (6 per cent) and others (13 per cent). Any tax dispute can upset the calculation of the company, especially the asset liability maturity (ALM) profile, said the source.
NIIF IFL’s ALM profile, as of March 31 this year, reflected positive cumulative mismatches across buckets up to 1 year. The company expects inflows of Rs 352 crore against total outflows of Rs 160 crore till March 31, 2020. Its liquidity is also supported by cash and liquid investments of Rs 95 crore as of March 31, 2019.