INTERNATIONAL JOURNAL OF MARKETING,

Online Available at indianresearchjournals.com

FINANCIAL SERVICES & MANAGEMENT RESEARCH
Vol.1 No. 5, May, ISSN 2277 3622

CORPORATE RESTRUCTURING AND TAX NEUTRALITY

DR. CHITTA RANJAN SARKAR
Associate Professor, Burdwan University, Burdwan, W.B. and Fellow Member of ICAI, New Delhi.

Abstract
Corporate restructuring is the process of rearrangement of business activities and has become the buzzword to cope
with the fierce competitive environment prevailing all throughout the globe in the era of globalization and
liberalization. To face the growing challenges, the corporate entities are under sheer pressure to go for redefining
their strategies on a continuous move based on their core competencies and market excellences to enter into new
venture resulting corporate restructuring. The Income tax laws have been eager to cater different tax exemptions to
give fillips to such reorganizations for the noble mission to protect corporate entities from the fierce competitions as
well as to help them survive and grow for the greater interests of the society at large.

Keywords: Restructuring, Tax Exemptions, Corporate Entities.

represents various forms of

CORPORATE RESTRUCTURING:
AND MEANING

CONCEPT

for the greater interests of

business alliance like merger,

human kind. To tackle the

amalgamation,

situation, there are various

acquisition,

Corporate restructuring is the deliberate corporate re-demerger etc. to avoid the

organization process as well as the re-arrangement of the unwanted corporate failures
affairs of corporate enterprises undertaken with the primeand
corporate
financial
objective to reduce or avert the business risks involved in the bankruptcy. It is a matter of
process of carrying business activities under fiercegreat
concern
to
pay
competitive environments. Mergers, Acquisitions andadequate heed to these
Business Alliances (MAA), are the common strategies tocorporate collapses since the
usher corporate business restructuring with much fervour andcorporate entities very often
zeal to ward off cut throat competitions and have become the had to face the misery of
prime corporate endeavour as a matter of robust corporatecorporate destitution caused
practice and ideology especially in the era of globalization by abject competitions or
and liberalization to sustain business growth and prosperity. sheer inability to keep pace

provisions

Amid all adversities of wild competitions, the corporate with the global scenario and
entities with their unflinching passion for further advancement, also to take drastic measure

result of which the corporate

strive for accumulating power and flavour of growth through the so as to foil or frustrate the
deliberate process of corporate restructuring. The process of financial
stringency
and
corporate restructuring is a dynamic process to help corporate corporate
debacle.
The

corporate buoyancy as far as

under

the

Companies Act and also in

the

Income

Tax

Act

to

instigate the corporate bodies

to

go

for

restructuring

corporate

through

the

accredited process of merger,

acquisition etc. such that the
cruel claws of competitions
cannot prey the progress of
human

development

advancements

and

and
as

bodies enjoy the strategic

practicable. Tax Exemption
and

entities strategically come together under one corporate umbrella corporate failures have the
to protect and safeguard themselves from the gruelling impact of terrific impact on the society

TAX NEUTRALITY

market cruelties and market shocks caused by hectic market since the society experiences

The Indian Income Tax Act,

competitions as well as to safeguard the corporate assets and the

like

1961 has propounded a lot of

opportunities from their injudicious and colossal devastation bymoratorium in employment

enactments to offer specific

means of market competitions and thus to boost up the adoption opportunities, lack of effective

tax concessions/exemptions

of best possible venture by dint of appropriate alternative use use of available resources,

on

and exploration of available resources to the ultimate satisfaction inadequacy

forward

adversities

set

carry

in

revenue
business

unabsorbed depreciation and

operations in the forms of

loss etc. in case of merger

both direct and indirect taxes

and acquisition of companies

that are highly necessary for

to boost up industrial and

meeting the social overheads

business

57

and

gains;

from

of the corporate entities and the society as a whole. Corporate generation

restructuring

capital

off

of

DR. CHITTA RANJAN SARKAR

devel
opm
ents.
The
basic
inten
sion
of
the
tax
legisl
ation
rests
on
the
prem
ises
in
titillat
ing
and
motiv
ating
the
busin
ess
hous

various

ve

tax

competiti

exemptio

ons

ns

vogue

and

in

advantag

amongst

es under

business

the

entities

Income

operatin

Tax Act,

1961

the same

making

lines

the

business

venture

in

of

domestic

merger/a

as

malgama

as

tion and

internatio

demerge

nal

boundari

under
of

well

proposal

es

also that

tax

and

neutral,

there are

less

no

hazardo

dearth of

us

business

and

wealth

opportun

prolific.

ities, lack

The chief

of

purpose

employm

of
tax
es to
enactme
go
nts
in
more
persuadi
and
ng
more
corporat
for
e
merg
mergers
ers
and
and
amalgam
amal
ations is
gam
to
ation
formulat
s by
e
a
givin
balanced
g
approac
them
h in the
the
economy
fillips
such that
in
there are
the
less
of
form
aggressi
of

ent
opportun
ities and
entrepre
neurship
to

best

satisfy
the
common
people.
Tax
neutrality
is

the

specific
advantag
e offered
under
the
Income
Tax

Act

on

the

lines that

even te

in

if thechange

allowing

businin

depreciat

the

ess ownershi

ion

entiti p

assets

es

of

compani

on

almost in

prefe es since

the same

footing

under

merg the

as

er ornormal

allowabl

is

restr provision

e in the

uctur of

hands of

ing, corporat

the

they e

compani

tax

will

laws

es

not

carry

before

be

forward

deba of

merger

past

or

rred losses

amalgam

from and

ation.

the

This way

unabsor

entitl bed

tax

eme depreciat

neutrality

nt ofion is not

is highly

tax

geared

allowabl

bene e
fits

if

change

up

to

convince

like in

the

carry ownershi

corporat

forw p

of

ard business

enterpris

and takes

es in the

set

realm of

place.

off ofOver and

corporat

past above

losse this,

restructu

exemptio

and ns

ring.

are

unab provided

eciati arising

MERGE
R OR
AMALG
AMATI
ON

on ofon

A merger

the

occurs

sorb from
ed

capital

depr gains

transfer

non- of assets

when

exist in

two

ent

the

process

or

more

com of

compani

pani reorgani

es unite

es

together

zation

despiand also

to form a

singl to
e

acquisiti

com on

or

pany.takeover
A

process,

merg except
er inthat

in

India the case

is

of

know merger
n asexisting
amal stockhol
gam ders

of

ation both
and compani
the

es

two involved
term retain
s

shared

merg interest
er

in

the

and new
amal corporati
gam on.

By

ation contrast,
are in

an

used acquisiti
inter on
chan process
geab one
ly tocompany
conn purchase
ote

the

bulk

the
of

sam another
e

company

thing 's stock,

.

creating

How an
ever, uneven
the

balance

term of
merg ownershi
er isp in the
very acquirer
simil company
ar
and
is
almo
st
akin

Am
alga
mati
on
is
the

blen
ding
of
two
or
mor
e
exis
ting

am
atio
n
sho
uld
bec
om
e
the
pro
per
ty
of
the
am
alg
am
ate
d
co
mp
any
by
virt
ue
of
the
am
alg
am
atio
n.

pany or
unde
rtaki
ngs
into
one
unde
rtaki
ng.
Ama
lgam
ation
of
com
pani
es
mea
ns
eithe
r
mer
ger
of
one
or
mor
e
com
pani
es
with
anot
her
com
pany
or
the
mer
ger
of
two
or
mor
e
com
pani
es
into
one
com

merger
of two or
more
compani
es into a
single
entity.
Howeve
r,
section
2(1B) of
the

Act

prescrib
es

the

following
conditio
ns to be
fulfilled
for

merger
to

be

qualified
as

an

amalga
mation:

1.

All
the
pro
per
ties
of
the
am
alg
am
atin
g
co
mp
any
im
me
diat
ely
bef
ore
the
am
alg

2.

All
liab
iliti
es
of
the
am
alg
am
atin
g
co
mp
any
im
me
diat
ely
bef
ore

t
h
e
a
m
a
l
g
a
m
a
t
i
o
n

e
am
alg
am
ate
d
co
mp
any
by
virt
ue
of
the
am
alg
am
atio
n.

s
h
o3. Sh
u
are
l
hol
d
der
s
b
hol
e
din
c
g
o
not
m
les
e
s
tha
t
n
h
thr
e
eefou
l
rths
i
(in
a
val
b
ue)
i
of
l
the
i
sha
t
res
i
in
e
the
s
am
alg
o
am
f
atin
g
t
co
h

mp
any
(ot
her
tha
n
sha
res
alre
ady
hel
d
by
the
am
alg
am
ate
d
co
mp
any
or
by
its
no
min
ee)
sho
uld
bec
om
e
sha
reh
old
ers
of
the
am
alg
am
ate
d
co
mp
any
by
virt
ue
of

tA
hdemerg
eer is a
form of
acorporat
e
m
arestructu
in
lre
gwhich
athe
undertak
m
aing of a
tcompan
is
iy
transferr
o
to
ned
.another
compan
y under
DE a
ME scheme
RG of
ER demerg
The
er
term
whereby
'dem
the
erge
transfer
r' is
or
som
compan
etim
y
is
es
called
used
'demerg
to
ed'
indic
compan
ate
y
and
the
the
effec
transfer
tive
ee
oppo
compan
site
y
is
of a
called
mer
as
ger,
'resultin
wher
g'
e
compan
one
y. The
com
basic
pany
concept
split
of
s
demerg
into
er
two.
requires

transfer
of
an
undertak
ing from
an
existing
compan
y
(Transfe
ror
Compan
y)
to
another
existing
compan
y
(Transfe
ree
Compan
y)
in
terms of
the
provisio
n
of
section
2(19AA)
of
the
Act.
Sections
391-394
of
the
Compan
ies Act
1956
govern
demerg
er.
There
are
some
conditio
ns to be
satisfied
to treat
transfer
of
undertak
ing
as
demerg
er.
The
stipulati

ons economi

demandi

favo es

ng

of

way

uring scale,

of

mer growth,

taming

ger diversific

and

of

tackling

ation,

corp tax

undue

orat shields

and

unhealth

etc.

entiti which
es

pose

y
a

competit

hing large

ions and

e oneffect on

rivalry

som compani

with the

basic

es those

plau undertak

objectiv

sible e

e to add

reas merger

sharehol

ons process

ders'

like as

value.

58

the

CORPORATE RESTRUCTURING AND TAX NEUTRALITY

of the Act, the

tax
concession
TA X I M P
L I C AT I O available
N S O F C under various
O R P O RAT provisions of
E
the
Income
RESTRUCT Tax Act may
URING
be
grouped
In
the
under
three
process
of
categories:
corporate
1. Tax
restructuring,
concession
corporate tax
availableto
the
legislation
amalgamat
plays
a
ing
company
significant
role model to2. Tax
inspire
and
concessio
accelerate
n
the process
available
of
to
the
amalgamatio
sharehold
n
and
ers of the
amalgam
demerger of
ating
companies
company
for
the
greater
3. Tax
concession
interests
of
available to
the
the
companies
amalgamat
ed
reconstructed
company
and
the
I.
Tax
society
in
Concession
general. The
available to
Various Tax
the
Exemptions
amalgamatin
g company:
TA X
C
1) Exe
O N C E S
S I O N S mption from
O N
capital gains
AMALGAMA on transfer
TION/DEME
of
capital
RGER OF
asset
to
COMPANIES
If
anamalgamated
amalgamatio Indian
n takes place company:
within
the According to
meaning of section 47(vi)
section 2(1B) of the Act if
capital gains

arise
on
transfer of any
capital asset
in the scheme
of
amalgamation
,
by
an
amalgamating
company
to
the
amalgamated
company,
such capital
gain shall be
exempt from
tax provided
the
amalgamated
company
is
an
Indian
company.

amalgam
ation
satisfies
all
the
three
condition
s
laid
down in
section
2(1B) and

later on sold or
transferred, the

such capital cost of shares

gains shall be of
the
exempt from amalgamating
tax, if the
company shall
following
be the cost of
conditions
shares of the
are satisfied:

9)

amalgamated

The
company.
transfer Further,
for
of
determining
shares iswhether
the
made inshares in the
consider amalgamated
ation of
are long-term
the
capital assets
allotmen
or not, the
t to the
period
of
sharehol
holding
shall
ders of
be computed
any
from the date
share or
of acquisition
shares
of shares in
in
the
the
amalga
amalgamating
mated
company.
compan
y; and

III. Tax
35) The
concessions
amalgam available to
the
ated
company amalgamated

is
ancompany:
Indian
The
company
amalgamated
2) Under company shall
section 49(2)be eligible for
of the Acttax
when
theconcessions
shares
soonly if the
received fromfollowing two
the
conditions are
amalgamated satisfied
company are

2)

Ex
em
pti
on

capit Indi
an
al
asset com
in an pan

fro
m
ca
pit
al

The
amalgam
ated
company
is
an
Indian
company

a)
Carry
forward and
set off of
accumulated
business

losses and
unabsorbed
depreciation
of the
amalgamatin
g company
The Income Tax
Act,

1961

prescribes that
unabsorbed
depreciation of
assets

and

accumulated
business

loss

can be carried
forward only by
the

same

assessee under
whose

hands

the

loss

incurred

or

depreciation
remains
unabsorbed

The
ga
in
s
on
tra

nsfer
of
except in case
of succession
of business by
inheritance.

y
ign
fore
held company to ign
by a
com
fore another

pan
y:
Acc

ordin
g to
sectio
n
47(vi
a) of
the
Act if
capita
l
gains
arise
on
transf
er of
share
s held
in
India
n
comp
any
by
amal
gama
ting
foreig
n
comp
any
to
amal
gama
ted
foreig
n
comp
any,
such
capita
l gain
shall
be
exem
pt
from
tax
provi
ded:

9)

a
t

l
e
a
s
t
2
5
%
o
f
t
h
e
s
h
a
r
e
h
o
l
d
e
r
s
o
f

o
r
e
i
g
n

How
e
amalgam ever,
unde
ated
foreign r the
company;provi
and
sion

35) such

c
o
m
p
a
n
y

a
m
a
l
g
a
m
a
t
i
n
g
f

a
speci
fied
bank
, the

s of

amal

transfer Secti
does noton

gam

72A

ated

attract
of
tax
liability the
Act,
on
capital in
gains inthe
c
case
the
o
country of
n
in whichamal
t
gam
the
i
amalga ation
n
mating of a
u
company com
e
is
pany
incorpor ,
t
ated.
owni
oII.
Taxng
concession an
rs availableindu
eto
thestrial
m
shareholder unde
as
of
anrtaki
iamalgamati ng or
nng company a

com

1) Under
s
section 47(vii)or a
h
hotel
of the Act,
a
with
rcapital gainsanot
earising from

gam

hthe transfer ofcom

oshares in apany
lscheme
ofor
d
amalgamation the
e
amal
,
r
gam
s
ation

certa

of a

Acco

bank

rding

ing

ly,

com

the

pany

accu

ship

t
h
e

with

her

o
f
t
h

pany
is
entitl
ed to
carry
forw
ard
the
unab
sorb
ed
depr
eciati
on
and
brou
ght
forw
ard
loss
of
the
amal
ating
com
pany
provi
ded
in
cond
itions
are
fulfill
ed.

mulat amat

eciat year in whichfresh

ed

ed

ion amalgamation perio

busi

busin com

of

ness

ess

pany

the the

loss

shall

amal amalgamated year

for

and

be

gam company shalls

furth

unabs dee

ated be entitled tothere

er

orbed med

com carry

indef

depre to be

pany unabsorbed

ciatio the

for

the the

the

ing

ofloss
and

amalg depr
59

is effected andd of
8

forwardfrom
and

depreciation ofset
off

loss

inite
perio
d by

previ amalgamating unab

virtu

ous company for asorb

e of

DR. CHITTA RANJAN SARKAR

secti
on
72A
of
the
Inco
me
Tax
Act.
To
attai
n
this
tax
neut 2
rality
, the
amal
gam
ating
as
well
as
the
amal
gam
ated
com
pani
es
are
requi
red
to
satis
fy
the
follo
wing
cond
ition
s:

9)

C
o
n
d
i
t
i

ons
to
be
fulf
ille
d
by
the
am
alg
am
atin
g
co
mp
any
The
am
alg
am
atin
g
co
mp
any
sho
uld
hav
e
bee
n
eng
age
d in
the
bus
ine
ss,
in
whi
ch
the
acc
um
ulat
ed
loss
occ
urre
d or
dep

reci
atio
n
rem
ain
s
una
bso
rbe
d,
for
thre
e or
mor
e
yea
rs;

The
am
alg
am
atin
g
co
mp
any
has
hel
d
con
tinu
ous
ly
as
on
the
dat
e of
am
alg
am
atio
n at
lea
st
thre
efour
ths
of
the

b
o
o
k

dat
e of
am
alg
am
atio
n.

v
a
l 35) Co
u
ndi
e
tio
a
s
s
e
t
s
h
e
l
d
b
y

ns
to
be
fulf
ille
d
by
the
am
alg
am
ate
d
co
mp
any

i
2 The
t
am
,
alg
am
t
ate
w
d
o
co
mp
y
any
e
hol
a
ds
r
con
s
tinu
ous
p
ly
r
for
i
a
o
min
r
imu
m
t
peri
o
od
of
t
five
h
yea
e

rs
fro
m
the
dat
e of
am
alg
am
atio
n at
lea
st
sev
ent
y
five
per
cen
t in
the
boo
k
val
ue
of
fixe
d
ass
ets
of
the
am
alg
am
atin
g
co
mp
any
acq
uire
d in
a
sch
em
e of
am
alg
am
atio
n;

T
h
e
a
m
a
l
g
a
m
a
t
e
d
c
o
m
p
a
n
y

e
am
alg
am
atin
g
co
mp
any
for
a
min
imu
m
peri
od
of
five
yea
rs
fro
m
the
dat
e of
am
alg
am
atio
n;

ed
to
ens
ure
the
revi
val
of
the
busi
nes
s of
the
ama
lga
mati
ng
com
pan
y or
to
ens
ure
that
the

c
o
n
t
i
n
u4 The
e
ama
s
lga

ama
lga
mati
on
is
for
gen
uine
busi

mat

t
h
e

nes

ed

com

purp

pan

ose.

b
u
s
i
n
e
s
s

fulfill
s
suc
h
othe
r
con
ditio
ns

o
f

as
may
be

t
h

pres
crib

2)

Tax
Tre
atm
ent
on
De
pre
ciat
ion
on
As
set
s
tra

non 32 of
sthe
fIncome
eTax Act
rregardin
rg
edeprecia
dtion

rge
abl
e in
the
yea
r of
am
alg
am
atio
n
or
de
me
rge
r to
be
co
mp
ute
d
as
foll
ow
s:

charge

ion
nassets
are

awaived
and are

snot
cstrictly
hobserve
in
ed
case
of
m
eamalga
mation
oor
fdemerg
er
of
acompani
es
m
awhere
lan asset
gis
atransferr
ed to an
m
aIndian
tamalga
imated
oor
nresulting
compan
oy under
ra
scheme
dof
eamalga
m
mation
e
ror
gdemerg
eer.

r
The
provi
sion
s of
secti

1)

De
pre
ciat
ion
cha

The
am
oun
t of
dep
reci
atio
n of
the
pre
vio
us
yea
r in
whi
ch
the
ow
ner
shi
p of
ass
ets
cha
nge
s
bec

a
u3
s
e
o
f
b
u
s
i
n
e
s
s

ual;

erge

The

r) in

amo

the

unt

ratio

of

of

depr
ecia
tion
so
arriv
ed
at
shal
l be
app
ortio

r
e
s
t
r
u
c
t
u
r
i
n
g

ned
bet
wee
n
the
ama
lga
mati
ng
and
the
ama
lga

h
a
s

mat
ed
com
pani

t
o

es
(the
dem

c
o
m
p
u
t
e
d

erge

a
s

es

d
and
the
resu
lting
com
pani
in
cas

u
s

e of
dem

n
u
m
b
e
r
o
f
d
a
y
s
f
o
r
w
h
i
c
h
t
h
e
a
s
s
e
t
s
a
r
e
u
s
e
d
b
y
t
h
e

or

duri

de

ng

mer

the

ger

pre

to

viou

be

com

yea

put

r in

ed

whi

as

ch

follo

own

ws:

ers
hip
of
ass
ets
cha
nge
s
bec
aus
e of
am
alga
mati
on
and
de
mer
ger.
ii)
Dep
reci
atio
n
cha
rge
able
in
the
sub
seq
uen
t
yea
rs
of
am
alga
mati
on

Wh
ere
an
ass
et
is
tran
sfer
red
in a
sch
em
e of
am
alg
am
atio
n/d
em
erg
er,
to
an
Indi
an
co
mp
any,
the
act
ual
cos
t of
a
cap
ital
ass
et
tran
sfer

r
e
d
b
y
v
i
r
t
u
e
o
f
s
e
c
t
i
o
n
4
3
(
1
)
t
h
e
A
c
t
s
h
a
l
l
b
e
t
a
k
e

n to
be
the
sa
me
as
it w
o u
l d
h a
v e
b e
e n
i f t
h e
a m
a l
g a
m a
tin
g
co
mp
any
/de
mer
ged
co
mp
any
had
con
tinu
ed
to
hol
d
the
cap
ital
ass
et
for
the
pur
pos
e of
its
ow
n
bus
ine

ss.

Wh
ere
in
any
pre
vio
us
yea
r,
any
blo
ck
of
ass
et
is
tran
sfer
red
in a
sch
em
e of
am
alg
am
atio
n/d
em
erg
er
(by
the
am
alg
am
atin
g
co
mp
any
to
the
Indi
an
am
alg
am
ate
d

c
o
m
p
a
n
y
o
r
b
y
d
e
m
e
r
g
e
d
c
o
m
p
a
n
y
t
o
r
e
s
u
l
t
i
n
g
I
n
d
i
a
n
c

om
pan
y),
the
n
act
ual
cos
t of
the
blo
ck
of
ass
et
in
the
cas
e of
am
alg
am
ate
d
/res
ulti
ng
co
mp
any
,
sha
ll
be
the
writ
ten
do
wn
val
ue
of
blo
ck
of
ass
ets
as
in
the
cas
e of

am
alg
am
atin
g/d
em
erg
ed
co
mp
any
for
the
im
me
diat
ely
pre
ced
ing
pre
vio
us
yea
r as
red
uce
d
by
the
am
oun
t of
dep
reci
atio
n
act
uall
y
allo
we
d in
rela
tion
to
the
sai
d
pre
vio
us

3)

yct capital
egains tax
aliability
ron
.transfer

under

of capital

cost

Tassets is

acquisiti

anot to be
xapplied

on

in

asset to

T
rscheme
eof
aamalgam
tation or
m
edemerge
of
nr
tcompani
es on the

o
presupp
n

scheme
of
amalgam
ation, the
of
of

such
the
amalgam
ated
company
shall be
cost

of

acquisiti
on

of

such

osition

asset to

Tthat
rtransfer
a
of asset
n
sis not to
fbe
econstrue
r

the

otransfer.

due

fIn terms

any

of

improve

as

Asection
s
s43C of
ethe Act,
twhile
scomputin
The
char
geab
ility
of
secti
on
45(1)
unde

the

amalgam
ating
company
plus

an

increase
in

cost
to

ment
made
thereto
and
expendit
ure

profit

or

incurred

loss

on

wholly

sale

of

and

assets

exclusive

as stock

ly

in

connecti

trade

which

on

has

such

become
r the
the
Inco
property
me
of
the
Tax
amalgam
Act
ated
to
company
attra

in
with

transfer.

d)
Tax
Treatm
ent of
Expend
iture on

Am amalgam
alga ation or
mati
demerge
on
r,
an
and
De assesse
mer e being
ger an Indian

exclusive

Secti company

previous

on

years

is

ly for the
purpose
during
five
successi
ve

35D allowed
D ofa

commen

the

deductio
Act n equal
pres to one-

the

cribe fifth

which

of

cing with
previous
year

in

expendit
that ure
in aincurred

the

sche wholly

demerge

me and
of

r takes

60

amalgam
ation

or

CORPORATE RESTRUCTURING AND TAX NEUTRALITY

directly
relatable
to
the
undertaki
ng
transferre
d by the
demerge
d
company
to
the
resulting
company,
such loss
or
unabsorb
ed
depreciati
on shall
be
entitled to
be wholly
set-off or
carried
forward
by
the
resulting
company.

the case of
amalgamated
place. A tax company
which can very
planning
measure maywell get the
be undertaken advantage of
the
on the l i n e s claiming
deduction
in
thattheaf
o r e s a i d e the year of
x p e n d i t u r amalgamation
e
o
n as also in the
amalgamation four
immediately
/demerger
should
be subsequent
incurred
or years.
paid as far as e)
Carry
forward and
practicable
and possible Set-off of

Losses and

by
the
Unabsorbed
amalgamated

Depreciation

company
on Demerger
instead of byIn terms of
the
section 72A,
amalgamating the
company. This accumulated
will ensure the business loss
availability of and
deduction of unabsorbed
one-fifth
of depreciation
such
of
the
expenditure in undertaking
the
four transferred by
immediately
subsequent

the demerged
company
in
years which the process of
otherwise will demerger are
not
be allowed to be
and
available
in set-off
carry
forward
the hands of
the
amalgamating by
resulting
company
because
of company as
ceasing
its follows:
by1 Where
the process of
the loss
amalgamation
or
existence

/demerger
and any such
hardship will
not arise in

unabsorb
ed
depreciati
on
is

But where
nexus
between
the loss or
unabsorbe
d
depreciati
on and the
undertakin
g
transferre
d by the
demerged
company
to
the
resulting
company
is
not
prominent
or
indirectly
relatable,
then the

amount

CONCLUSIO

of loss or N
unabsorb The

business

demerger etc. It

enterprises all
ed
depreciati over the globe

has become a

on
be

shall have

to

undergo

apportion various
changes in their
ed
between corporate lives
on a continuous
the
demerge basis to keep
d and the pace with the
resulting devastating
company impact

of

in
the business rivalry,
same
market ups and
proportio down and the
n
in ongoing
which the corporate
assets of restructuring
the
process
undertaki through merger,
ng have acquisition,
been
retained
by
the
demerge
d
company
and those
transferre
d to the
resulting
company
and
be

will

allowed
to be setoff
and
carried

common
feature for the
business
organizations to
go for corporate
restructuring
with

the

objective

to

grow

and

prosper amid all

hazards
embedded
therein.

It

is

also

observed

that

many

enterprises
consider

it

advantageous
to merge with
the

superior

counterparts for
the

sake

of

betterment
through
extended
market
in

facility

home

and

foreign
markets,

wide

customer chain,
sophisticated
and

improved

technology

of

production,
good

research

and
development
facility and so

forward
according

on. There are

ly in the
respectiv

advantages

e hands
of

restructuring to

demerge
d and the

shields and tax

resulting
company.

provided under

other
of

corporate
achieve

tax

exemptions as
the Income Tax

Act, 1961 that

inspire

many

corporate
bodies

to

amalgamate or
merge

with

other corporate
bodies in a tax
neutral
situation.

In

essence,

it
be3.

may

highlighted that
corporate
enterprises
should go for
business
reorganization
s through the
conduit

of

amalgamation,
merger,
demerger etc.
if it is really
conducive
their

for

overall

growth

and4.

prosperity and
also

for

the

greater interest
of

their

diversified
stakeholders
and the society
as a whole.

REFERENC
ES:

1.

2.

T.K., Role
of
Tax
Incentive
s in New
Projects,
FICCI
Working
Paper,
1996,
New
Delhi

7.

Singhania
, V.K. &
Singhania
,
K.,
Direct
Taxes
Law and
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Taxmann'
s
Publicatio
ns
(P)
Ltd., 47th
Edn.,
New
Delhi,
Decembe
r 2011

8.

Singhania
, V.K. &
Singhania
,
M.,
Corporate
Tax
Planning
and
Business
Tax
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es
with
Case
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Taxmann'
s
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ns
(P)
Ltd., 15th
Edn.,
New
Delhi,
August
2011

Chitale,
M. P., Tax
Incentive
s
for
Savings
and
Investme
nt,
Economic
and
Political
Weekly,
Vol.
VII
No.11,
1973
Goel, D.
C.,
Incentive
s
to
Manufact
uring
Taxation,
Taxation,
Vol. 23,
No.
3,
1967

5. Kulkarni,
Agarwal,
M.
K.,
R.K.
&
Incidence
Agarwal,
of
J.D., Tax
Taxation
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in India,
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Indian
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Economic
Hind Law
s, XXXIII,
Publisher
1952-53
s, New
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Delhi,
n,
C.,
1985
Alva,

Growth:
Another
Look,
Economic
and
Political
Weekly,
Annual
Number,
1982

Industrial

9.

Sarkar,
C.
R.,
Tax
Incentive
s
and
Economi
c
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An
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nal
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on, New
Century
Publicatio

ns,
Daryagan
j,
New
Delhi,
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10. www.inco
metaxindi
a.gov.in