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CA Final · Direct Tax Laws & International Taxation · Aggregation of Income, Set Off or Carry Forward of Losses

A co-operative bank amalgamates with another co-operative bank during the tax year, and the successor bank wishes to use the predecessor's accumulated loss and unabsorbed depreciation under section 118 of the Income-tax Act, 2025. Which of the following is a condition for this benefit?

The successor co-operative bank must hold at least three-fourths of the book value of the fixed assets acquired from the predecessor continuously for a minimum of five years after the reorganisation, and also continue the business for five years. This is a stated condition of section 118.

  1. AThe successor bank must hold at least three-fourths of the book value of fixed assets acquired from the predecessor continuously for five years after the reorganisationCorrect
  2. BThe successor bank must hold all the fixed assets acquired for ten years
  3. CThe predecessor must have carried on banking for at least one year
  4. DThe successor bank must continue the business for only two years

Explanation

Section 118(3)(b) requires the successor to hold at least three-fourths of the book value of fixed assets acquired, continuously for a minimum of five years, and to continue the business for five years. The predecessor must have been in banking for three or more years. Failure leads to the set-off being deemed income of the successor in the year of default.

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