The Construction Federation of India (CFI) has asked the government to exempt Special Purpose Vehicle (SPV) companies from capital gains tax in the 2011-12 Budget.
"CFI has advocated capital gains tax exemption for 'Special Purpose Vehicle' (SPV) companies on the lines of exemptions provided to listed companies," it said in a pre-Budget wish-list for the Finance Ministry.
If any capital asset is sold or transferred, the profits arising out of such sales are taxable as capital gains in the year in which the transfer takes place.
The SPV is usually a subsidiary company with an asset or liability structure and legal status, which makes its obligations secure even if the parent company goes bankrupt.
The CFI noted that it is mandatory for infrastructure projects to be executed through SPV companies under licence and concession agreements with the government. SPV companies fall in the category of unlisted companies.