Second amalgamation and 72a

ABC Co. Ltd having accumulated loss 10 Cr. amalgamated with PQR Co.Ltd. having accumulated loss 5 Cr. w.e.f 01/04/2005. The brought forward loss of ABC Co. Ltd. remained unabsorbed till AY2008-09. The PQR Co.Ltd. undergone for a second amalgamation with XYZ Co. Ltd. w.e.f. 01/04/2008 (ie. before completion of minimum 5 year prescribed in 72A). The XYZ Co.Ltd. has a profit of 9Cr. during FY2008-09. Whether accumulated loss of ABC Co.Ltd. can be set off or carry forward by XYZ Co.Ltd.?

Replies (1)

as nobody replied let me express my view:

         As per clause (b) to sub section (2) of section 72A, notwithstanding anything contained in sub-section (1), the accumulated loss (of amalgamating Co.) shall not be set off or carried forward and the unabsorbed depreciation (of amalgamating Co.) shall not be allowed in the assessment of the amalgamated Co. unless the amalgamated Co. (here, PQR Co. Ltd.)

        (i) holds continuously for a minimum period of 5 years from the date of amalgamation at least 3/4th of the book value of fixed assets of the amalgamating Co. acquired in a scheme of amalgamation;

        (ii) continues the business of the amalgamating Co. for a minimum period of 5 years from the date of amalgamation;

        The PQR Co. amalgamated with XYZ Co. w.e.f. 01/04/2008 ie., before completion of 5 years after amalgamation with ABC Co. This means all the property, assets & liabilities of PQR (which includes assets of ABC Co.) stands transferred to XYZ Co. w.e.f. 01/04/2008 and PQR Co. stands dissolved without winding up. Thus, the PQR Co. failed to fulfill the conditions prescribed in clause(b) of section 72A. Hence the accumulated loss/depreciation of ABC Co. shall not be allowed in the assessment of PQR Co. during AY2008-09. Consequently, the same would not be available to brought forward during AY2009-10 for set off with the income of XYZ Co. for AY2009-10.

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