Page 97 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes the successor company shall be deemed to be the income of the company chargeable to tax in the
year in which the conditions have been violated.

Conversion of a Company into LLP [Section 72A (6A)]

The successor LLP would be allowed to carry forward and set-off the business loss and unabsorbed
depreciation of the predecessor company. However, if the entity fails to fulfil the conditions

specified in section 47(xiiib), the benefit of set-off of business loss/unabsorbed depreciation

availed by the LLP would be deemed to be the profits and gains of the LLP chargeable to tax in

the previous year in which the LLP fails to fulfil any of the conditions.
Self Assessment
Fill in the blanks:
10. ……………….. deals with carry forward and set-off of accumulated business losses and
unabsorbed depreciation in certain cases of amalgamation or demerger.
11. The amalgamating company should have been engaged in the business, in which the
accumulated loss occurred or depreciation remains unabsorbed, for …………..... years.
12. ……………............ is a form of corporate restructuring.

4.5 Section 72AA

This section provides for carry forward and set off of accumulated loss and unabsorbed

depreciation allowance of a banking company against the profits of a banking institution under
a scheme of amalgamation sanctioned by the Central Government.

Did u know? Reserve Bank of India had constituted, on the recommendations of the Joint
Parliamentary Committee (2002), a Working Group to evolve guidelines for voluntary
mergers involving banking companies. Based on the recommendations of the Group, the
guidelines laying down the process of merger proposal, determination of swap ratios,
disclosures, the stages at which Boards will get involved in the merger process and norms
of buying or selling of shares by the promoters before and during the process of merger
have since been fi nalised.
Where a banking company has been amalgamated with a banking institution under a scheme
sanctioned and brought into force by the Central Government under section 45(7) of the Banking
Regulation Act, 1949, the accumulated loss and unabsorbed depreciation of the amalgamating
banking company shall be deemed to be the loss or the allowance for depreciation of the banking
institution for the previous year in which the scheme of amalgamation is brought into force, and
all the provisions contained in the Income-tax Act, 1961, relating to set off and carry forward of
loss and unabsorbed depreciation shall apply accordingly.

The Explanation to this section defi nes the expressions “accumulated loss”, “banking company,
“banking institution” and “unabsorbed depreciation” as follows –
(i) “accumulated loss” means so much of the loss of the amalgamating banking company

under the head “Profits and gains of business or profession” (not being a loss sustained
in a speculation business) which such amalgamating banking company, would have been
entitled to carry forward and set-off under the provisions of section 72 if the amalgamation
had not taken place;
(ii) “banking company” shall have the same meaning assigned to it in clause (c) of section 5 of
the Banking Regulation Act, 1949;

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