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Unit 4: Set-off and Carry Forward of Losses

same proportion in which the value of the assets have been transferred. The Central Government Notes
is empowered to notify such conditions as it considers necessary to ensure that the demerger or
amalgamation is for genuine business purpose.

Re-organisation of Business [Section 72A(6)]

In case of re-organisation of business, whereby a firm is succeeded by a company as per the
provisions of section 47(xiii), or a sole proprietary concern is succeeded by a company as per
the provisions of section 47(xiv), then the accumulated business loss and the unabsorbed

depreciation of the firm/proprietary concern, as the case may be, shall be deemed to be the loss
or depreciation allowance of the successor company for the previous year in which the business
re-organisation took place. Other provisions of the Act relating to set-off and carry forward will
apply accordingly.

Notes Meanings of Certain Terms
“Accumulated loss” means so much of the loss of the predecessor firm or the proprietary

concern or the amalgamating company or the demerged company, as the case may be,

under the head “Profit and gains of business or profession” (not being a loss sustained
in a speculation business) which such predecessor firm or the proprietary concern or

amalgamating company or demerged company, would have been entitled to carry
forward and set off under the provisions of section 72 if the re-organisation of business or
amalgamation or demerger had not taken place.
“Unabsorbed depreciation” means so much of the allowance for depreciation of the
predecessor firm or the proprietary concern or the amalgamating company or the

demerged company, as the case may be, which remains to be allowed and which would

have been allowed to the predecessor firm or the proprietary concern or amalgamating
company or demerged company, as the case may be, under the provisions of this Act, if the
re-organisation of business or amalgamation or demerger had not taken place.
“Industrial undertaking” means any undertaking which is engaged in -
(i) the manufacture or processing of goods;
(ii) the manufacture of computer software;
(iii) the business of generation or distribution of electricity or any other form of power;
(iv) providing telecommunication services, whether basic or cellular, including radio
paging, domestic satellite service, network of trunking, broad band network and
internet services;
(v) mining;
(vi) the construction of ships, aircraft or rail systems.
“Specifi ed bank” means the State Bank of India (SBI) constituted under the SBI Act, 1955
or a subsidiary bank as defined in the SBI (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.

However, this facility will not be available if it is found that any of the conditions laid down in
the corresponding sub-sections (xiii) and (xiv) of section 47 have not been complied with. In such
case, the set-off of loss or allowance of depreciation made in any previous year in the hands of

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