Skip to content

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

Under section 116(5) of the Income-tax Act, 2025, what is the consequence if the amalgamated company fails to comply with any of the conditions in section 116(4) after it has already set off the amalgamating company's loss?

The loss or depreciation already set off in any tax year is deemed to be income of the amalgamated company and is taxed in the year in which the non-compliance occurs. The scheme itself is not voided and the loss is not returned to the amalgamating company.

  1. AThe set off is deemed to be income of the amalgamated company chargeable to tax for the year in which non-compliance occursCorrect
  2. BThe amalgamation is treated as void from the beginning and the scheme is reopened
  3. CThe loss is transferred back to the amalgamating company
  4. DOnly a penalty is levied and the set off remains valid

Explanation

Section 116(5) provides that the set off of loss or allowance of depreciation made in any tax year is deemed to be income of the amalgamated company chargeable to tax for the year of non-compliance. It does not void the scheme or return the loss to the amalgamating company.

Did you get it right without looking?

One question tells you little. A timed set on Income Tax Implication on Specified Transactions shows your real accuracy, how long you take and where you lose marks.

Practise Income Tax Implication on Specified TransactionsFree diagnostic mock

More Income Tax Implication on Specified Transactions questions