Facility sharing no longer treated as real estate business

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On 15 September, the Department of Industrial Policy and Promotion (DIPP) clarified that facility sharing arrangements between group companies through leasing/sub-leasing arrangements for the larger interest of business would not be treated as “real estate business” within the provisions of the consolidated foreign direct investment (FDI) policy circular of 2015, provided that such arrangements are at an arm’s length price in accordance with the provisions of the Income Tax Act, 1961, and annual lease rent earned by the lessor company does not exceed 5% of its total revenue.

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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bangalore, Singapore, Silicon Valley and Munich. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.