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CS Professional · Advanced Direct Tax Laws and Practice · Income Tax Implication on Specified Transactions

A demerged company has accumulated loss of Rs 90 lakh under business income that is not directly relatable to the undertaking transferred to the resulting company. The assets of the undertakings are Rs 6 crore retained by the demerged company and Rs 4 crore transferred to the resulting company. Under section 116(6) of the Income-tax Act, 2025, what portion of the loss can be carried forward in the hands of the resulting company?

The resulting company gets Rs 36 lakh. A loss not directly relatable to the transferred undertaking is apportioned in the ratio of assets retained to assets transferred, which is 6:4, so the resulting company receives four-tenths of Rs 90 lakh, and the demerged company keeps Rs 54 lakh.

  1. ARs 54 lakh
  2. BRs 36 lakhCorrect
  3. CRs 90 lakh
  4. DNil

Explanation

A loss not directly relatable to the transferred undertaking is apportioned in the ratio of assets retained by the demerged company to assets transferred. Ratio is 6:4, so the resulting company gets 4/10 x 90 = Rs 36 lakh and the demerged company keeps Rs 54 lakh. Rs 54 lakh wrongly uses the retained share for the resulting company.

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