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

Sahyadri Co-operative Bank (predecessor) amalgamates with Konkan Co-operative Bank (successor) during the tax year. Sahyadri has accumulated loss and unabsorbed depreciation. Under section 118 of the Income-tax Act, 2025, how is the successor treated in respect of these items, assuming all conditions are met?

The successor co-operative bank may set off the predecessor's accumulated loss and unabsorbed depreciation as if the amalgamation had not occurred, with the other set off and carry forward provisions applying, provided the section's conditions are satisfied.

  1. AThe successor may set them off as if the amalgamation had not taken place, with the other carry forward and set off provisions applyingCorrect
  2. BThe successor loses the right to claim them entirely because of the amalgamation
  3. COnly the unabsorbed depreciation can be set off; the accumulated loss lapses
  4. DOnly half of the accumulated loss and unabsorbed depreciation may be set off

Explanation

Section 118(1) allows a successor co-operative bank, where amalgamation takes place during the tax year, to set off the predecessor's accumulated loss and unabsorbed depreciation as if the amalgamation had not taken place. Other provisions on set off and carry forward apply accordingly. Nothing in the sub-section limits it to depreciation or to half the amount.

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