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Carry Forward and Set-Off of the Accumulated Business Losses and Unabsorbed Depreciation Allowance in Amalgamation or Demerger, etc. (Section 72A)

'Unabsorbed Depreciation and Business Loss' can be carried forward by a person who has incurred such loss or depreciation but certain exceptions are provided in sections 72A and 72AB which provides for carry forward and set off of accumulated business loss and unabsorbed depreciation allowance in the hands of amalgamated company or resulting company/cooperative bank as details below :

1. Carry Forward of Business Loss and Unabsorbed Depreciation as per Section 72A:

Section 72A allows carry forward of business loss and unabsorbed depreciation in case of:

  1. amalgamation of a company [Section 72A(1), (2) and (3)], or

  2. demerger of a company [Section 72A(4) and (5)], or

  3. reorganisation of business [Section 72A(6) & (6A)].

(A). Carry Forward and Set Off of Accumulated Business Loss and Unabsorbed Depreciation in case of 'Amalgamation' [Section 72A(1), (2) and (3)]:

Business loss of an amalgamating company shall be allowed to be carried forward and set off in the hands of the amalgamated company for fresh eight years if certain conditions mentioned in section 72A are satisfied. Similarly, unabsorbed depreciation of a amalgamating company shall be allowed to be carried forward and set off in the hands of the amalgamated company. It can be carried forward indefinitely and set off in the hands of amalgamated company.

(B). Carry Forward of and Set Off of Accumulated Losses and Unabsorbed Depreciation in case of 'Demerger' [Section 72A(4) and (5)]:

In case of a demerger, the accumulated business loss and unabsorbed depreciation of the demerged company shall be allowed to be carried forward and set off in the hands of the resulting company if certain conditions are satisfied.

Accumulated business loss can be carried for unexpired period and the unabsorbed depreciation can be carried forward indefinitely.

(C). Carry Forward and Set Off of Accumulated Losses and Unabsorbed Depreciation in case of 'Reorganisation of Business' [Section 72A(6) & (6A)]:

Where there has been reorganisation of business, whereby,—

  1. a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47, or

  2. a proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, or

  3. a private company or unlisted company is converted into limited liability partnership

then, the accumulated loss and the unabsorbed depreciation of the predecessor firm or the proprietary concern or a company, as the case may be, shall be deemed to be the loss or allowance for depreciation of the successor company or successor LLP for the purpose of previous year in which business reorganisation was effected.

Business loss will be allowed to be carried forward and set off for fresh 8 years and unabsorbed depreciation can be carried forward and set off indefinitely.

2. Provisions relating to Carry Forward and Set Off of Accumulated Losses and Unabsorbed Depreciation Allowance in Business Reorganization of Co-Operative Banks [Section 72AB]

Section 72AB allows carry forward of business loss and unabsorbed depreciation in case of:

  1. Amalgamation of Co-operative Banks;

  2. Demerger of a Co-operative Bank.

Such business loss and unabsorbed depreciation shall be allowed to be set off in the hands of successor co-operative bank if certain conditions are satisfied.

 
CONTENT : Set off or Carry Forward and Set off of Losses [Sections 70 to 80]

Related Topics... 'Set Off or Carry Forward and Set Off of Losses'

1. Set off or Carry Forward and Set off of Losses [Sections 70 to 80]

2. Carry Forward and Set Off of Loss from House Property [Section 71B]

3. Carry Forward and Set off of Business Losses other than Speculation Loss (Section 72)

4. Carry Forward and Set-Off of the Accumulated Business Losses and Unabsorbed Depreciation Allowance in Amalgamation or Demerger, etc. (Section 72A)

5. Carry Forward and Set off of Speculation Loss (Section 73)

6. Carry Forward and Set-Off of Loss from activity of Owning and Maintaining Race Horses (Section 74A)

7. Carry Forward and Set-Off of Capital Loss under the head 'Capital Gains' (Section 74)

8. Carry Forward and Set off of Loss of a 'Specified Business' referree in Section 45AD (Section 73A)

 
 
 
 
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