Presentation on:

Tax Implications & Carry Forward or Set Off of Accumulated Loss and Unabsorbed Depreciation in case of Merger, Amalgamation & Demerger.

Plan of discussion

Concept of Merger & its Tax Implications & Carry Forward and Set Off. Concept of Amalgamation & its Tax Implications & Carry Forward and Set Off. Concept of Demerger & its Tax Implications & Carry Forward and Set Off. Conclusion.

Concept of Merger ,its Tax Implications & Carry Forward AND Set Off.

Concept of Merger.

Its Tax Implications.

Carry Forward and Set Off.

Concept of Merger:
Merger is defined as a combination where two or more than two companies combine into one company.

Tax Implications in case of MERGER Transfer on capital assets: Depreciation: Cost of acquisition of asset: Expenditure on merger:

Determining holding period:

Carry Forward and Set Off:

The accumulated loss and the unabsorbed depreciation of the predecessor firm or the proprietary concern, shall be deemed to be the loss or allowance for depreciation of the successor company for the purpose of previous year in which business reorganization was effected and other provisions of this Act to set off and carry forward of loss and allowance for depreciation shall apply accordingly.

Concept of Amalgamation, its tax implications & carry forward AND set off.

Concept of Amalgamation. Its Tax Implications. Carry Forward and Set Off.

Concept of Amalgamation:
Amalgamation is a blending of two or more existing undertakings into one undertaking.

Tax Implications in case of Amalgamation

Assessee must be the owner of the assets. Assets must be used for business/profession. 50% Depreciation only. No depreciation on land. No deduction is allowable if: a) the assessee is not the owner. b) the assessee is not the user. c) the assest is sold during the year. d) the asset is used for scientific research. e) the asset is used for exploitation of mineral oil.

Carry Forward and Set Off:

The accumulated loss and the unabsorbed depreciation of the amalgamating company, shall be deemed to be the loss or allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected and other provisions of this Act to set off and carry forward of loss and allowance for depreciation shall apply accordingly if the following conditions are satisfied:In Case of Amalgamating co. has been in that business for at least 3 years, has held at least 3/4th of book value of fixed assets for 2 years.
In Case of Amalgamated co. to continue the business (all businesses) of amalgamating co. for at least 5 years, to hold least 3/4th of book value of fixed assets of amalgamating co. for 5 years,

Concept of Demerger & its tax implications & carry forward and set off.

o Concept of Demerger. o Its Tax Implications. o Carry Forward and Set Off.

Concept of Demerger:
Demerger is often used to describe division or separation of different undertakings of a business, functioning thereto under a common corporate umbrella.

Tax Implications in case of Demerger

Transfer of capital assets: Issuance of shares:

Deemed dividend implications

Resulting company chargeable to tax: Depreciation:

Carry Forward and Set Off:

In case of demerger, the accumulated loss and the allowance for unabsorbed depreciation of the demerged company shall :a. where such accumulated loss or unabsorbed depreciation is directly relatable: b. where such accumulated loss or unabsorbed depreciation is not directly relatable: The carry forward and set off of loss and unabsorbed depreciation as per the provisions shall be allowable only when demerger is as per the provisions of Section 2(19AA) of the Income Tax Act 1961.

Conclusion

Thank You!