Carry forward and set off of accumulated losses in certain exceptional cases like amalgamation and demerger is a vital issue and a major part of the population is unaware of such a fact. The provisions which relate to carry forward and set off in case of amalgamation are as follows:
Where there has been an amalgamation of-
- A company owning an industrial undertaking or a ship or a hotel with another company, or
- A banking company with SBI or any subsidiary of SBI,
- One or more public sector company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business,
then the accumulated loss (other than loss sustained in a speculation business) and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or allowance for depreciation, as the case may be, of the amalgamated company for the previous year in which the amalgamation was effected. The effect of this provision is that the amalgamated company shall enjoy the right to carry forward the accumulated loss and unabsorbed depreciation of the amalgamating company for set off according to the provisions of the Act relating to set off and carry forward of loss and unabsorbed depreciation. The maximum period of 8 years for which the loss can be carried forward shall be counted from the previous year succeeding the previous year in which the amalgamation was effected.
Specified conditions- The above provisions shall be applicable if the following conditions are fulfilled:
| Conditions | |
| Condition 1 | The amalgamating company has been engaged in the business, in which the accumulated loss occurred or depreciation remains unabsorbed, for three or more years. |
| Condition 2 | The amalgamating company has held continuously as on the date of the amalgamation at least three-fourths of the book value of fixed assets held by it two years prior to the date of amalgamation. |
| Condition 3 | The amalgamated company holds continuously for a minimum period of 5 years from the date of amalgamation at least three-fourths of the book value of fixed assets of the amalgamating company acquired in a scheme of amalgamation. |
| Condition 4 | The amalgamated company continues the business of the amalgamating company for a minimum period of 5 years from the date of amalgamation. |
| Condition 5 | The amalgamated company, owning an industrial undertaking of the amalgamating company by way of amalgamation, shall achieve the level of production of atleast 50% of the installed capacity of the said undertaking before the end of four years from the date of amalgamation and continue to maintain the said minimum level of production till the end of five years from the date of amalgamation. However, the Central Government, on an application made by the amalgamated company, may relax the condition of achieving the level of production or he period during which the same is to be achieved or both. |
| Condition 6 | The amalgamated company shall furnish to the Assessing Officer a certificate in Form no. 62 duly verified by a Chartered Accountant showing particulars of production, along with the return of income for the assessment year relevant to the previous year during which the prescribed level of production is achieved and for subsequent assessment years relevant to the previous year falling within five years from the date of amalgamation. |
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- Carried Forward & Set-off of Losses
- Concept of Carry Back of Losses – Expectation Budget 2012-13
- Allowing Losses on Account of Forex Derivatives – Instruction
- MCA’s Guidelines for Deciding Cases for Availability of Names
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