10aa exemption and adjustment of carried for unabsorbed dep

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CACS Gaurav Choudhary (Querist)

23 November 2013 The assessee holds a manufacturing unit within Falta SEZ since 2006 and has been incurring losses since beginning and finally the unit was closed down in the year 2011.

Although the unit was within the FSEZ and eligible for 10AA exemption the same was not availed and unit has been allowed to carry forward the lossess including depreciation allowance to the tune of 600 lacs.

The unit has since being acquired by the another company which is also engaged in export business. The acquirer plans to sell out the existing plant & machinery relating to particular product manufactured earlier and instead is in the process of setting up the new plan at the same factory premises.

The acquirer would like to merge the acquired company with itself.

The query relates to the following:-

1. Whether the carry forward loss consisting mainly of unabsorbed depreciation allowance will be allowed to be adjusted with the income of acquirer.

2. The merged entity was although eligible for exemption u/s 10AA, opted to not to avail the same and therefore business loss allowed to be carried forward and assessed as such can be adjusted with profit of acquirer having taxable business income from various other units.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

23 November 2013 When the option has not been exercised by the loss making company A and as a result was being allowed to c/fd the losses, obviously the acquirer would company will be eligible to c/fd and set off the said losses against taxable business income.
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