DIPP clarifies on Facility Sharing Agreements between Group Companies

The Department of Industrial Policy & Promotion, has clarified vide its circular dated 15th September 2015, that “facility sharing arrangements” between Group Companies either by way of leasing/sub-leasing within Group Companies for the larger purpose of business activities would not be construed to be covered within the meaning of the term “real estate business” within the provision of the consolidated FDI Policy circular of 2015 which is effective from 12th May 2015 provided such arrangements are at arms’ length basis in accordance with the relevant provisions of the Income Tax Act, 1961 & the annual lease rent earned by the Lessor company does not exceed 5% of its total revenue.

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