Section 72A of Income Tax Act, 1961
Vaswani Nishtha
December 15, 2023 at 12:18 PM
Provisions relating to carry forward and set-off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.
Carry Forward of Business Loss and Unabsorbed Depreciation as per Section 72A:
Section 72A allows carry forward of business loss and unabsorbed depreciation in case of:
- amalgamation of a company [Section 72A(1), (2) and (3)], or
If certain requirements listed in section 72A are met, business loss of a merging company may be carried forward and offset in the hands of the merged company for a new eight-year period. Similar to this, unabsorbed depreciation of a merging firm may be carried over and deducted in the books of the combined company. It may be continued indefinitely and may be started by the merged company.
- demerger of a company [Section 72A(4) and (5)], or
If certain requirements are met, the cumulative business loss and unabsorbed depreciation of the demerged company may be carried forward and offset in the hands of the new company.
Both accumulated business losses and unabsorbed depreciation may be carried forward forever for any remaining time.
- reorganization of business [Section 72A(6) & (6A)].
Where there has been reorganization of business, whereby,—
- A company succeeds to a firm if it satisfies the requirements in clause (xiii) of section 47, or
- A business succeeds a proprietary concern if it meets the requirements in clause (xiv) of section 47, or
- The transformation of a private firm or unlisted company into a limited liability partnership
then, for the purposes of the prior year in which business reorganisation was accomplished, the accumulated loss and the unabsorbed depreciation of the predecessor firm, proprietary concern, or company, as the case may be, shall be deemed to be the loss or allowance for depreciation of the successor company or successor LLP.
Unabsorbed depreciation may be carried forward and set off indefinitely, and business losses may be carried forward and set off for an additional 8 years.
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