The National Company Law Appellate Tribunal (NCLAT) has dismissed petitions filed by the Income Tax Department raising objection over Reliance Jio’s scheme to hive off its fibre and tower business into two separate units.
Earlier, the Ahmedabad-bench of National Company Law Tribunal (NCLT) had granted permission to the composite scheme of arrangement, through which two companies – Jio Digital Fibre Private Limited and Reliance Jio Infratel Private Limited were proposed to be demerged.
The move was opposed by the Income Tax Department by challenging it before the NCLAT. The department had contended that by scheme of the arrangement, Jio has sought to convert the redeemable preference shares into loans. This conversion of equity into debt is not only contrary to the well settled principles of the company law but also would reduce the profitability or the net total income of the transferor company, causing a huge loss of revenue to the department.