Page 307 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes Transfer of Capital Asset by a Banking Company to a Banking Institution in a Scheme
of Amalgamation Sanctioned by the Central Government [Sec. 47 (viaa)]

Where a capital asset is transferred by a Banking Institution in a scheme of amalgamation
sanctioned and brought into force by the Central Government under section 45(7) of the Banking
Regulation Act 1949, it is not treated as transfer. Banking company and Banking Institution have
got the same meaning as assign to them under section 5(c) and section 45(15) respectively of
the Banking Regulation Act 1949. This provision is operative from assessment year 2005-06 and
onwards.

Carry Forward and Set-off of Accumulated Loss and Unabsorbed Depreciation in
Certain Cases of Amalgamation (Section 72A)

Sub-section (1) of section 72A provides that where there is an amalgamation of a company, owning
an industrial undertaking or a ship or a hotel with another company or the amalgamation of a
banking company with a specified bank, then the accumulated loss and unabsorbed depreciation

of the amalgamating company shall be deemed to be the loss or allowance for depreciation of the
amalgamated company for the previous year in which the amalgamation was effected and other
provisions of the Act shall apply accordingly.

!
Caution The “specifi ed bank” means the State Bank of India constituted under the State
Bank of India Act, 1955 or a subsidiary bank as defined in the State Bank of India (Subsidiary

Banks) Act, 1959 or a corresponding new bank constituted under section 3 of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under section 3 of the
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.

Conditions

However, sub-section (2) lays down the following conditions for admissibility of set-off and carry
forward in hands of the amalgamated company:

Conditions to be Fulfilled by the Amalgamating Company

1. The amalgamating company should have been engaged in the business, in which the
accumulated loss occurred or depreciation remains unabsorbed, for three or more years.
2. The amalgamating company has held continuously as on the date of amalgamation at least

three-fourths of the book value of the fixed assets held by it, two years prior to the date of
amalgamation.

Conditions to be Fulfilled by the Amalgamated Company
1. The amalgamated company holds continuously for a minimum period of 5 years from the

date of amalgamation at least 75% in the book value of fixed assets of the amalgamating
company acquired in a scheme of amalgamation;
2. The amalgamated company continues the business of the amalgamating company for a
minimum period of 5 years from the date of amalgamation;

3. The amalgamated company fulfils such other conditions as may be prescribed to ensure the
revival of the business of the amalgamated company or to ensure that the amalgamation is
for genuine business interest.

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