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Setting off of unabsorbed losses and unabsorbed depreciation during Amalgamation


Setting off of unabsorbed losses and unabsorbed depreciation during Amalgamation

The setting off of unabsorbed losses and unabsorbed depreciation of the amalgamating company by the amalgamated company is allowed only in limited cases as envisaged in Sec 72(A) of Income Tax Act in order to encourage revival of sick units. The setting off, however, is allowed only if the following conditions are fulfilled:

a) the amalgamated company was not a financially viable company immediately before amalgamation
b) the amalgamation was in the public interest
c) such other conditions as the central government may specify by notification in the official gazette to ensure that benefits under this section is available only to facilitate rehabilitation or revival of the business of the amalgamating company

Carry forward of unabsorbed depreciation is allowed only if:
a) during the previous year relevant to the assessment year, the business of the amalgamating company was carried out by the amalgamated company without any modification or reorganisation as was permitted by central government; and
b) the amalgamated company furnishes along with the return on income tax a certificate from the specified authority to the effect that adequate steps have been taken into account for the rehabilitation of sick unit.
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