As already discussed , 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.
A. 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:
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Amalgamation of a Company [Section 72A(1), (2) and (3)], or
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Demerger of a Company [Section 72A(4) and (5)], or
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Reorganisation of Business [Section 72A(6) & (6A)].
1. 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.
2. Carry Forward and Set Off of Accumulated Business Loss 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.
3. Carry Forward and Set Off of Accumulated Business Loss and Unabsorbed Depreciation in case of Reorganisation of Business [Section 72A(6) & (6A)]:
Where there has been reorganisation of business, whereby,—
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firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47, or
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proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, or
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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.
B. Amalgamation of Banking Company with Banking Institution [Section 72AA] –
Section 72AA was inserted with effect from the assessment year 2005-06 with a view to providing carry forward and setoff 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.
C. 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:
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Amalgamation of Co-operative Banks;
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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. |
