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CS Professional · Corporate Restructuring, Valuation and Insolvency · Taxation and Stamp Duty Aspects of Corporate Restructuring

A co-operative bank amalgamation takes place on 1 October during a tax year. For set off and carry forward of loss and allowance for depreciation under section 118 of the Income-tax Act, 2025, how is the year treated?

The period from the start of the tax year to the day before the reorganisation and the period from the reorganisation date to year end are deemed two different tax years for set off and carry forward of loss and depreciation. The split is automatic.

  1. AThe whole year is one tax year
  2. BThe period from 1 April to 30 September and the period from 1 October to year end are two different tax yearsCorrect
  3. COnly the post-amalgamation period counts as a tax year
  4. DThe year is split into two only if the bank requests it

Explanation

Section 118(6) deems the period from the start of the tax year to the day before reorganisation, and the period from the reorganisation date to the end, to be two different tax years. It is automatic, not optional.

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