CS Professional · Advanced Direct Tax Laws and Practice · Income Tax Implication on Specified Transactions
Under the Income-tax Act, 2025 (applicable from the June 2027 session), the accumulated loss and unabsorbed depreciation of an amalgamating company can pass to the amalgamated company only in specified cases. Which of the following amalgamations falls within those cases?
The carry-forward of losses and unabsorbed depreciation applies where a company owning an industrial undertaking, a ship or a hotel amalgamates with another company. Pure trading, investment or retail companies are not covered, because section 116(1) lists only specified categories of amalgamating entities.
- AA company owning an industrial undertaking amalgamating with another companyCorrect
- BA trading company amalgamating with another trading company
- CA private investment company amalgamating with its holding company
- DA company running a retail chain amalgamating with a company owning a hotel chain
Explanation
Section 116(1) allows the carry-over where a company owning an industrial undertaking, a ship or a hotel amalgamates with another company. The amalgamating company is the one that must own the industrial undertaking, ship or hotel. A trading company or investment company does not qualify. In the last option the amalgamating retail company does not own a ship, hotel or industrial undertaking, so it is not covered.
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