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

In a demerger of a co-operative bank, an unabsorbed depreciation of ₹90 lakh is not directly relatable to the transferred undertaking. Assets of ₹600 crore are retained by the demerged bank and ₹300 crore go to the resulting bank. How much unabsorbed depreciation is allowed to the resulting bank?

The resulting bank gets ₹30 lakh. A non-relatable unabsorbed depreciation is apportioned in the ratio of assets distributed, here 600:300, so the resulting bank takes one-third of ₹90 lakh. The demerged bank keeps the remaining ₹60 lakh.

  1. A₹90 lakh
  2. B₹45 lakh
  3. C₹60 lakh
  4. D₹30 lakhCorrect

Explanation

Section 118(2)(b) apportions in the ratio of assets distributed between the banks. Ratio is 600:300 = 2:1, so the resulting bank gets 300/900 × 90 = ₹30 lakh. ₹60 lakh is the demerged bank's share, a wrong-base mistake.

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