With M&A (mergers and acquisitions) on the increase, across sectors, what can one look forward in the forthcoming Budget?

"The benefit under Section 72A of the Income Tax Act for losses of amalgamating company is available only to certain industries. In order to provide level playing field to all industries, there are proposals to extend such benefit across all the sectors," says Mr Ashesh Safi, Director, Deloitte Haskins & Sells, Mumbai.

M&A transactions often result in the acquisition of goodwill. Amount paid for goodwill is not tax deductible under present law, points out Mr Safi.

"In many countries, goodwill is allowed to be amortised for tax purpose over a period. Like other intangible assets, the Government should consider allowing amortisation of goodwill for tax purposes," he reasons.

What do Indian companies that make acquisitions outside India in a big way expect from the Budget?

"In order to provide boost to such acquisition activities outside India, the Government should consider providing tax incentive to Indian companies," Mr Safi insists.

One such incentive can be `weighted deduction for interest paid on borrowing utilised for acquisition outside India,' and another, `deduction for losses of foreign subsidiary'.

As an incentive for the taxman to think of incentives, Mr Safi suggests that the tax benefit obtained by holding company in India may be recovered subsequently, if the foreign subsidiary is hived off, or against foreign taxable profits.

D. Murali