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

A co-operative bank business reorganisation takes place on 1 October within 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 that year treated?

The year is split into two deemed tax years: from the beginning of the tax year to the day before the reorganisation, and from the reorganisation date to the end of the tax year, for set off and carry forward of loss and depreciation.

  1. AAs a single tax year for the successor
  2. BAs two different tax years: up to the day before 1 October, and from 1 October to the end of the tax yearCorrect
  3. CAs two different tax years: April to September and October to March, regardless of the date
  4. DAs a tax year to be ignored for carry forward purposes

Explanation

Section 118(6) deems the period from the start of the tax year to the date immediately preceding the reorganisation, and the period from the date of reorganisation to the end of the tax year, as two different tax years. So the split falls at 30 September/1 October based on the actual date of reorganisation.

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