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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 during the tax year, Rs 30 lakh of unabsorbed depreciation is not directly relatable to the undertaking transferred. Assets of the undertaking are distributed Rs 6 crore to the demerged bank and Rs 4 crore to the resulting bank. What share of the unabsorbed depreciation goes to the resulting bank under section 118 of the Income-tax Act, 2025?

The resulting bank gets Rs 12 lakh. Unabsorbed depreciation not directly relatable is apportioned in the ratio in which assets are distributed, 6:4, so the resulting bank's share is 4/10 of Rs 30 lakh.

  1. ARs 18 lakh
  2. BRs 12 lakhCorrect
  3. CRs 15 lakh
  4. DRs 30 lakh

Explanation

Under section 118(2)(b), amounts not directly relatable are apportioned in the proportion in which assets of the undertaking are distributed between the two banks. The ratio is 6:4, so the resulting bank receives 4/10 x 30 = Rs 12 lakh. Rs 18 lakh is the demerged bank's share, a result of reversing the ratio.

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