Carry forward and set-off of accumulated loss and unabsorbed depreciation in certain cases of amalgamation [Section 72A]:

Sub-section (1) of section 72A provides that where there is an amalgamation of a company, owning an industrial undertaking or a ship or a hotel with another company or the amalgamation of a banking company with a specified bank, then the accumulated loss and unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected and other provisions of the Act shall apply accordingly.

The “specified bank” means the State Bank of India constituted under the State Bank of India Act, 1955 or a subsidiary bank as defined in the State Bank of India (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.

Conditions: However, sub-section (2) lays down the following conditions for admissibility of set-off and carry forward in hands of the amalgamated company:

Conditions to be fulfilled by the amalgamating company

(i) The amalgamating company should have been engaged in the business, in which the accumulated loss occurred or depreciation remains unabsorbed, for three or more years.

(ii) The amalgamating company has held continuously as on the date of amalgamation at least three-fourths of the book value of the fixed assets held by it, two years prior to the date of amalgamation.

Conditions to be fulfilled by the amalgamated company

(i) the amalgamated company holds continuously for a minimum period of 5 years from the date of amalgamation at least 75% in the book value of fixed assets of the amalgamating company acquired in a scheme of amalgamation;

(ii) the amalgamated company continues the business of the amalgamating company for a minimum period of 5 years from the date of amalgamation;

(iii) the amalgamated company fulfills such other conditions as may be prescribed to ensure the revival of the business of the amalgamated company or to ensure that the amalgamation is for genuine business interest.

•  Withdrawal of deduction or allowance: Sub-section (3) provides that where any of the conditions laid down in sub-section (2) are not complied with, the

set off or allowance for depreciation made in any previous year in the hands of the amalgamated company shall be deemed to be the income of the amalgamating company chargeable to tax for the year in which such conditions are not complied with.

•  Meaning of “Industrial undertaking”: “Industrial undertaking” means any undertaking which is engaged in:

(i) the manufacture or processing of goods; or

(ii) the manufacture a computer software; or

(iii) the business of generation or distribution of electricity or any other form of power; or

(iv) the business of providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services; or

(v) mining; or

(vi) the construction of ships, aircrafts or rail systems.