CA Final · Direct Tax Laws & International Taxation · Aggregation of Income, Set Off or Carry Forward of Losses
Vindhya Cooperative Bank amalgamated into Sahyadri Cooperative Bank during the tax year, on 1 October. Vindhya had an accumulated loss of Rs 40,00,000 and had been in banking for six years. It held its fixed assets continuously for two years before the amalgamation. Sahyadri earned Rs 30,00,000 of income in the period before 1 October and Rs 50,00,000 from 1 October to year end, before the set off of any loss. After the amalgamation, Sahyadri sold some of the acquired fixed assets so that it will hold less than three-fourths of their book value. Which statement is correct under the Income-tax Act, 2025?
The loss can be set off against Sahyadri's post-amalgamation income, since the pre- and post-reorganisation periods are separate tax years. However, because Sahyadri fails to hold three-fourths of the acquired fixed assets' book value for five years, the loss set off is deemed its income in the year of breach.
- AThe accumulated loss is set off against the Rs 30,00,000 income earned before 1 October
- BThe accumulated loss is set off against the post-amalgamation income, but the set off made will be deemed income of Sahyadri for the year in which the three-fourths condition is breachedCorrect
- CThe accumulated loss can never be set off because Sahyadri is the successor
- DThe set off is permanently protected once allowed, even if conditions are breached
Explanation
The period before the date of reorganisation and the period from that date are treated as two different tax years. The accumulated loss is therefore set off against post-amalgamation income, not the earlier Rs 30,00,000. If the successor fails to hold at least three-fourths of book value of the fixed assets for five years, the loss set off earlier is deemed its income in the year of breach.
Did you get it right without looking?
One question tells you little. A timed set on Aggregation of Income, Set Off or Carry Forward of Losses shows your real accuracy, how long you take and where you lose marks.
More Aggregation of Income, Set Off or Carry Forward of Losses questions
- Surya Finvest Ltd is a company whose principal business is trading in shares. In the tax year it incurred a loss of Rs 4,00,000 on purchase …
- Raj Stables, a firm, owns and maintains race horses. In the tax year it received stake money of Rs 2,00,000 and incurred revenue expenditure…
- Nagar Co-operative Bank, a co-operative bank, demerges an undertaking into Vikas Co-operative Bank (resulting bank) during the tax year. Nag…
- Kavita Traders, an individual, has a speculation business loss of Rs 2,00,000 first computed in the tax year 1. Which statement is correct u…
- Mehta Traders Ltd, a trading company, has two speculation businesses. For the current tax year, speculation business A shows a loss of Rs 3,…
- Meenakshi Textiles Pvt Ltd, a company, has a speculation business that incurred a loss of Rs 6,00,000 in the tax year, which was the first y…