Celebrate Freedom with 20% OFF on CAclubindia Pro Subscription. Use Code: FREEDOM20

Query in acquisition of a company.

Tax planning 542 views 1 replies

Sumeet

CA Final

110 Points Joined March 2012

A Pvt. Ltd. and B Pvt. Ltd. are two different cos. Both are in different type of industry.

A Pvt. Ltd. is going on very well in its business and its last year profit is around 10 million rupees whereas B Pvt. Ltd. does not do anything however few years ago, B Pvt. Ltd. was operative and was incurring losses every year. In last 5 years, B Pvt. Ltd. has a brought forward loss of 15 million.

Now A Pvt. Ltd. wants to acquire B Pvt. Ltd. so that the former can take the benefit of brought forward losses of the latter while paying the tax.

Is it valid as per Income Tax?

And can A Pvt. Ltd. can adjust the b/f loss of B Pvt. Ltd. in its Gross Total Income?

Replies (1)

CA SACHIN VIJ

Chartered Accountant

112 Points Joined February 2012

Yes you can adjust the b/f loss of B Pvt. Ltd. in Gross Total Income of A Pvt Ltd.

Plus bonus is that A Pvt Ltd will get the fresh period of eight years for carry forward and set off the same in future years if the same could not be claimed in full at first year.

In Income Tax Act, 1961 losses can be brought forward for a period of maximum of 8 years. if the amalgamation / merger takes place in 8th year even then the amalgamated (A Pvt Ltd) will get fresh period of 8 years to carry forward and set off the same.

Refer this article also:

sec 72a merger acquisition amalgamation

/articles/taxation-aspect-of-mergers-and-amalgamation-9630.asp#.T2DdgsMfdgs.email