Income Tax Act

Official PDF pages 176–180

SOURCE PDF PAGE 176
the amalgamated company shall be deemed to be the income of the amalgamated
company chargeable to tax for the year in which the non-compliance occurs.
(6) Irrespective of anything contained in any other provisions of this Act, in the case
of a demerger, the accumulated loss and the allowance for unabsorbed depreciation
of the demerged company shall,—
( a )   if directly relatable to the undertakings transferred to the resulting com -
pany, be allowed to be carried forward and set off in the hands of the
resulting company;
( b )   if not directly relatable to the undertakings transferred to the resulting
company, be apportioned between the demerged company and the
resulting company in the same proportion in which the assets of the
undertakings have been retained by the demerged company and trans -
ferred to the resulting company, and shall be allowed to be carried for -
ward and set off in the hands of the demerged company or the resulting
company, as applicable.
(7) The Central Government may, by notification, specify such conditions to ensure
that the demerger is for genuine business purposes.
(8) If there has been reorganisation of business where, a firm is succeeded by a
company fulfilling the conditions laid down in section 70(1)( zd ) or a proprietary
concern is succeeded by a company fulfilling the conditions laid down in section
70(1)( zf ), then, irrespective of anything contained in any other provision of this Act,
the accumulated loss and the unabsorbed depreciation of the predecessor firm or
the proprietary concern, shall be deemed to be the loss or allowance for depreci -
ation of the successor company for the tax year in which business reorganisation
was effected and other provisions of this Act relating to set off and carry forward
of loss and allowance for depreciation shall apply accordingly, subject to provisions
of sub-section (9).
(9) If any of the conditions laid down in section 70(1)( zd ) or ( zf ), as the case may be,
are not complied with, the set off of loss or allowance of depreciation made in any
tax year in the hands of the successor company, shall be deemed to be the income
of the company chargeable to tax in the year in which the non-compliance occurs.
(10) If there has been reorganisation of business whereby a private company or
unlisted public company is succeeded by a limited liability partnership fulfilling the
conditions laid down in section 70(1)( ze ), then, irrespective of anything contained
in any other provision of this Act, the accumulated loss and the unabsorbed depre -
ciation of the predecessor company, shall be deemed to be the loss or allowance for
depreciation of the successor limited liability partnership for the tax year in which
business reorganisation was effected and other provisions of this Act relating to set
off and carry forward of loss and allowance for depreciation shall apply accordingly,
subject to provisions of sub-section (11).
(11) If any of the conditions laid down in section 70(1)( ze )are not complied with,
the set off of loss or allowance of depreciation made in any tax year in the hands of
the successor limited liability partnership, shall be deemed to be the income of the

──────────

SOURCE PDF PAGE 177
limited liability partnership chargeable to tax in the year in which the non-com -
pliance occurs.
(12) For any amalgamation referred to in sub-section (1) or reorganisation of business
referred to in sub-section (8) or (10) effected on or after the 1st April, 2025, any loss
forming part of the accumulated loss of the predecessor entity, being—
( i )   the amalgamating company; or
( ii )   the firm or proprietary concern; or
( iii )   the private company or unlisted public company,
as the case may be, which is deemed to be the loss of the successor entity, being—
( a )   the amalgamated company; or
( b )   the successor company; or
( c )   the successor limited liability partnership,
as the case may be, shall be carried forward for not more than eight tax years
immediately succeeding the tax year for which such loss was first computed for the
original predecessor entity.
(13) For the purposes of this section,—
( a )   “accumulated loss” means so much of the loss of the predecessor firm
or the proprietary concern or the private company or unlisted public
company before conversion into limited liability partnership or the amal -
gamating company or the demerged company, under the head “Profits
and gains of business or profession” (excluding loss in a speculation
business) which would have been eligible for carry forward and set off
to such predecessor entity under section 112, had the reorganisation of
business or conversion or amalgamation or demerger not occurred;
( b )   “industrial undertaking” means any undertaking which is engaged in—
( i )   the manufacture or processing of goods; or
( ii )   the manufacture of computer software; or
( iii )   the business of generation or distribution of electricity or any other
form of power; or
( iv )   the business of providing telecommunication services, whether
basic or cellular, including radio paging, domestic satellite service,
network of trunking, broadband network and internet services; or
( v )   mining; or
( vi )   the construction of ships, aircrafts or rail systems;
( c )   “original predecessor entity” means predecessor entity in respect of the
first amalgamation for sub-section (1) or first reorganisation of business
for sub-sections (8) and (10), as the case may be;
( d )   “specified bank” means the State Bank of India constituted under the
State Bank of India Act, 1955 (23 of 1955) or a corresponding new bank
constituted under section 3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of the

──────────

SOURCE PDF PAGE 178
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
(40 of 1980);
( e )   “unabsorbed depreciation” means so much of the allowance for depre -
ciation of the predecessor firm or the proprietary concern or the private
company or unlisted public company before conversion into limited
liability partnership or the amalgamating company or the demerged
company, which remains to be allowed and which would have been
allowed to such predecessor entity under this Act, had the reorganisation
of business or conversion or amalgamation or demerger not occurred.
Treatment of accumulated losses and unabsorbed depreciation in scheme of
amalgamation in certain cases.
117.   (1) Irrespective of anything contained in section 2( 6 )( a ) to ( c ) or section 116,
where there has been an amalgamation of,—
( a )   one or more banking company with—
( i )   any other banking institution under a scheme sanctioned and
brought into force by the Central Government under section 45(7)
of the Banking Regulation Act, 1949 (10 of 1949); or
( ii )   any other banking institution or a company following a strategic
disinvestment, wherein the amalgamation occurs within five years
from the end of the tax year during which such disinvestment is
carried out; or
( b )   one or more corresponding new bank or banks with any other corre -
sponding new bank under a scheme brought into force by the Central
Government under section 9 of the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 9
of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1980 (40 of 1980), or both; or
( c )   one or more Government company or companies with any other Gov -
ernment company under a scheme sanctioned and brought into force
by the Central Government under section 16 of the General Insurance
Business (Nationalisation) Act, 1972 (57 of 1972),
the accumulated loss and unabsorbed depreciation of such banking company or
companies or amalgamating corresponding new bank or banks or amalgamating
Government company or companies, shall be deemed to be the loss or, allowance
for depreciation of the banking institution or company or amalgamated corres-
ponding new bank or amalgamated Government company for the tax year in which
the scheme of amalgamation was brought into force and other provisions of this
Act relating to set off and carry forward of loss and allowance for depreciation shall
apply accordingly.
(2) Where any scheme of amalgamation as referred to in sub-section (1) is brought
into force on or after the 1st April, 2025, any loss forming part of the accumulated
loss of the predecessor entity, being—
( i )   the banking company or companies;
( ii )   the amalgamating corresponding new bank or banks; or

──────────

SOURCE PDF PAGE 179
( iii )   the amalgamating Government company or companies,
as the case may be, which is deemed to be the loss of the successor entity, being—
( a )   the banking institution or company; or
( b )   the amalgamated corresponding new bank or banks; or
( c )   the amalgamated Government company or companies,
as the case may be, shall be carried forward in the hands of the successor entity for
not more than eight tax years immediately succeeding the tax year for which such
loss was first computed for original predecessor entity.
(3) For the purposes of this section,—
( a )   “accumulated loss” means so much of the loss of the amalgamating
banking company or companies or amalgamating corresponding new
bank or banks or amalgamating Government company or companies
under the head “Profits and gains of business or profession” (excluding
losses of a speculation business) which such predecessor entity would
have been entitled to carry forward and set off under section 112 had
the amalgamation not occurred;
( b )   “banking company” shall have the same meaning as assigned to it in
section 5( c ) of the Banking Regulation Act, 1949 (10 of 1949);
( c )   “banking institution” shall have the same meaning as assigned to it in
section 45(15) of the Banking Regulation Act, 1949 (10 of 1949);
( d )   “corresponding new bank” shall have the same meaning as assigned to
it in section 2( d ) of the Banking Companies (Acquisition and Transfer
of Undertakings) Act, 1970 (5 of 1970), or section 2( b ) of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of
1980);
( e )   “general insurance business” shall have the same meaning as assigned
to it in section 3( g ) of the General Insurance Business (Nationalisation)
Act, 1972 (57 of 1972);
( f )   “Government company” means a Government company as defined in
section 2( 45 ) of the Companies Act, 2013 (18 of 2013), engaged in the
general insurance business and established under section 4 or 5 or 16 of
the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972);
( g )   “original predecessor entity” means predecessor entity in respect of the
first amalgamation;
( h )   “strategic disinvestment” shall have the meaning assigned to it in section
116(3)( c )( i );
( i )   “unabsorbed depreciation” means the allowance for depreciation of the
amalgamating banking company or companies or amalgamating corre -
sponding new bank or banks or amalgamating Government company
or companies which remains to be allowed and which would have been
allowed to such predecessor entity, had the amalgamation not occurred.

──────────

SOURCE PDF PAGE 180
Carry forward and set off of losses and unabsorbed depreciation in business
reorganization of co-operative banks.
118.   (1) The assessee, being a successor co-operative bank, shall, in a case where the
amalgamation has taken place during the tax year, be allowed to set off the
accumulated loss and the unabsorbed depreciation, if any, of the predecessor
co-operative bank as if the amalgamation had not taken place, and all the other
provisions of this Act relating to set off and carry forward of loss and allowance for
depreciation shall apply accordingly.
(2) In case of a co-operative bank where demerger takes place during the tax year,
and where the accumulated loss or unabsorbed depreciation of the demerged
co-operative bank—
( a )   is directly relatable to the undertaking transferred, the whole of such
accumulated loss or unabsorbed depreciation shall be allowed to be car -
ried forward and set off against the income of the resulting co-operative
bank; and
( b )   is not directly relatable to the undertaking transferred, then such accumu -
lated loss or unabsorbed depreciation shall first be apportioned between
the demerged co-operative bank and the resulting co-operative bank in
the same proportion in which assets of the undertaking are distributed
between the demerged co-operative bank and the resulting co-operative
bank, and be allowed to be carried forward and set off against their
respective incomes.
(3) The provisions of this section shall apply, if—
( a )   the predecessor co-operative bank—
( i )   has been engaged in the business of banking for three or more
years; and
( ii )   has held at least three-fourths of the book value of fixed assets as
on the date of the business reorganisation, continuously for two
years before the date of business reorganisation;
( b )   the successor co-operative bank,—
( i )   holds at least three-fourths of the book value of fixed assets of the
predecessor co-operative bank acquired through business reor -
ganisation, continuously for a minimum five years immediately
succeeding the date of business reorganisation;
( ii )   continues the business of the predecessor co-operative bank for a
minimum five years from the date of business reorganisation; and
( iii )   fulfils such other conditions, as may be prescribed, to ensure the
revival of the business of the predecessor co-operative bank or to
ensure that the business reorganisation is for genuine business
purpose.
(4) The Central Government may, by notification, specify such other conditions as
it may consider necessary, other than the condition referred to in sub-section (3)
( b )( iii ), for the purposes of ensuring that the business reorganisation is for genuine
business purposes.