Carry forward of losses

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Generally, the person incurring the loss is only entitled to carry forward the loss to be adjusted in subsequent year(s). However, in certain cases of reconstitution of the business like amalgamation, demerger, conversion of proprietary firm into company or conversion of partnership firm into company, etc., the reconstituted entity is entitled to carry forward the unadjusted loss of  predecessor entity (provided that conditions specified in this regard are satisfied).​

The following conditions must be satisfied:

• All the assets and liabilities of the firm immediately before its succession should become the assets and liabilities of the company.
• All the partners of the firm immediately before its succession becomes the shareholders of the company in the same proportion as their capital accounts stood before its succession.
• The partners of the firm do not receive any consideration or benefits (whether direct or indirect) other than the shares allotted to them by the company.
• The partner’s aggregate shareholding in the company is not less than 50 % of the total voting powers in the company and their shareholding should continue to remain so for a period of 5 years from the date of succession.

Where any condition s mentioned above are not complied within any subsequent years, the set- off of loss or allowance for depreciation made in any previous year in the hands of the successor company shall be deemed to be the income of the company chargeable to tax in the year in which such conditions are not complied with.