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Unit 4: Set-off and Carry Forward of Losses

Self Assessment Notes

Fill in the blanks:

7. ……………covers the carry forward and set-off of losses arising from a business or
profession.
8. A business loss can be carried forward for a maximum period of …………. assessment
years immediately succeeding the assessment year in which the loss was incurred.
9. As per section 80, the assessee must have filed a return of loss under …………….. in order

to carry forward and set off a loss.
4.4 Section 72A

Section 72A deals with carry forward and set-off of accumulated business losses and unabsorbed
depreciation in certain cases of amalgamation or demerger, etc which are explained as under:

Amalgamation

This section applies where there has been an amalgamation of:
(i) A company owning an industrial undertaking or a ship or a hotel with another company
or an amalgamation of a banking company with a specified bank; or

(ii) Public sector companies engaged in the business of operation of aircrafts.
It provides that the accumulated loss and unabsorbed depreciation of the amalgamating company
shall be deemed to be the loss or depreciation, as the case may be, of the amalgamated company
for the previous year in which the amalgamation took place. Other provisions of the Act relating
to set off and carry forward shall also apply accordingly.

Conditions for Availing Benefit under this Section:

(1) Conditions to be fulfilled by the amalgamating company includes:
(i) The amalgamating company should have been engaged in the business, in which
the accumulated loss occurred or depreciation remains unabsorbed, for 3 or more
years.

(ii) The amalgamating company has held continuously as on the date of amalgamation,
at least 3/4th of the book value of the fixed assets held by it, 2 years prior to the date

of amalgamation.

(2) Conditions to be fulfilled by the amalgamated company:
(i) The amalgamated company should hold at least 3/4th in the book value of fi xed
assets of the amalgamating company acquired as a result of amalgamation for a
minimum period of 5 years from the effective date of amalgamation.
(ii) The amalgamated company continues the business of the amalgamating company
for at least 5 years.

(iii) The amalgamated company must also fulfil such other conditions prescribed under

Rule 9C for the revival of the business of the amalgamating company or to ensure
that the amalgamation is for genuine business purpose :
(a) The amalgamated company shall achieve the level of production of at least
50% of the installed capacity (capacity as on the date of amalgamation) of the
said undertaking before the end of 4 years from the date of amalgamation
and continue to maintain the said minimum level of production till the end

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