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

Sahyadri Co-operative Bank (predecessor) merges into 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 bank allowed to treat these items for the year of amalgamation?

The successor co-operative bank may set off the predecessor's accumulated loss and unabsorbed depreciation as if the amalgamation had not taken place, and the other provisions on set off and carry forward apply accordingly. Neither item is forfeited nor deferred.

  1. ASet them off as if the amalgamation had not taken place, with the other provisions on set off and carry forward applyingCorrect
  2. BForfeit them entirely because the predecessor ceases to exist
  3. CCarry them forward only after a three-year waiting period
  4. DSet off only the unabsorbed depreciation and not the accumulated loss

Explanation

Section 118(1) allows the successor co-operative bank to set off the predecessor's accumulated loss and unabsorbed depreciation as if the amalgamation had not taken place. Both items are covered, so forfeiture, a waiting period or depreciation-only relief is wrong.

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