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Corporate Tax Planning

Notes of 5 years from the date of amalgamation. Central Government has the power
to modify this requirement on an application made by the amalgamated
company.

(b) The amalgamated company shall furnish to the Assessing Officer a certifi cate

in Form No.62 verified by a Chartered Accountant in this regard.

In case the above specified conditions are not fulfilled, that part of carry forward of loss and
unabsorbed depreciation remaining to be utilised by the amalgamated company shall lapse and
such loss or depreciation as has been set-off shall be treated as the income in the year in which
there is a failure to fulfil the conditions.

Demerger

Demerger is a form of corporate restructuring. One of the prime reasons why large corporate
houses go in for demerger is to increase the role of specialisation in the particular segment. In
case of large conglomerates, demerging entities often are the departments which are growing at
an impressive rate and have substantial potential.
According to the Sub-section 19AA of Section 2 of Income Tax Act, 1961 (19AA) “demerger”, in
relation to companies, means the transfer, pursuant to a scheme of arrangement under sections
391 to 394 of the Companies Act, 1956 (1 of 1956), by a demerged company of its one or more
undertakings to any resulting company in such a manner that:
(i) all the property of the undertaking, being transferred by the demerged company,
immediately before the demerger, becomes the property of the resulting company by
virtue of the demerger;
(ii) all the liabilities relatable to the undertaking, being transferred by the demerged company,
immediately before the demerger, become the liabilities of the resulting company by virtue
of the demerger;
(iii) the property and the liabilities of the undertaking or undertakings being transferred by the
demerged company are transferred at values appearing in its books of account immediately
before the demerger;
(iv) the resulting company issues, in consideration of the demerger, its shares to the shareholders
of the demerged company on a proportionate basis;
(v) the shareholders holding not less than three-fourths in value of the shares in the demerged
company (other than shares already held therein immediately before the demerger, or
by a nominee for, the resulting company or, its subsidiary) become share-holders of the
resulting company or companies by virtue of the demerger, otherwise than as a result of
the acquisition of the property or assets of the demerged company or any undertaking
thereof by the resulting company;
(vi) the transfer of the undertaking is on a going concern basis;
(vii) the demerger is in accordance with the conditions, if any, notified under sub-section (5) of

section 72A by the Central Government in this behalf.

Treatment of Set-off and Carry Forward of Losses

Where there has been a demerger of an undertaking, the accumulated loss and the unabsorbed
depreciation directly relatable to the undertaking transferred by the demerged company to the
resulting company shall be allowed to be carried forward and set off in the hands of the resulting
company.

If the accumulated loss or unabsorbed depreciation is not directly relatable to the undertaking,
the same will be apportioned between the demerged company and the resulting company in the

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