Amendment of section 72A.
22. In section 72A of the Income-tax Act, in sub-section (1),––
(i) for clause (c), the following clauses shall be substituted, namely:––
“(c) one or more public sector company or companies with one or more public sector company or companies; or
(d) an erstwhile public sector company with one or more company or companies, if the share purchase agreement entered into under strategic disinvestment restricted immediate amalgamation of the said public sector company and the amalgamation is carried out within five year from the end of the previous year in which the restriction on amalgamation in the share purchase agreement ends,”;
(ii) after the long line, the following shall be inserted, namely:––
‘Provided that the accumulated loss and the unabsorbed depreciation of the amalgamating company, in case of an amalgamation referred to in clause (d), which is deemed to be the loss or, as the case may be, the allowance for unabsorbed depreciation of the amalgamated company, shall not be more than the accumulated loss and unabsorbed depreciation of the public sector company as on the date on which the public sector company ceases to be a public sector company as a result of strategic disinvestment.
Explanation. –– For the purposes of clause (d),––
(i) “control” shall have the same meaning as assigned to in clause (27) of section 2 of the Companies Act, 2013 (18 of 2013);.
(ii) “erstwhile public sector company” means a company which was a public sector company in earlier previous years and ceases to be a public sector company by way of strategic disinvestment by the Government;
(iii) “strategic disinvestment” means sale of shareholding by the Central Government or any State Government in a public sector company which results in reduction of its shareholding to below fifty-one per cent. along with transfer of control to the buyer.’.
Notes on Clauses:
Clause 22 of the Bill seeks to amend section 72A of the Income-tax Act relating to provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.
Sub-section (1) of the said section provides that the accumulated loss and unabsorbed depreciation of the amalgamating company or companies shall be deemed to be the accumulated losses and unabsorbed depreciation of the amalgamated company or companies in specified cases and subject to the conditions specified in the said section.
Clause (c) of the said sub-section, inter alia, provides that where there has been amalgamation of one or more public sector company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business then notwithstanding anything contained in any other provisions of the said Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, the allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected.
It is proposed to substitute the said clause so as to provide that in case of amalgamation of one or more public sector company or companies with one or more public sector company or companies, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss, or as the case may be, the allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected.
It is further proposed to insert a new clause (d) to the said sub-section so as to provide that in case of amalgamation of an erstwhile public sector company with one or more company or companies, if the share purchase agreement entered into under strategic disinvestment restricted immediate amalgamation of the said public sector company and the amalgamation is carried out within five years from the end of the previous year in which the restriction on amalgamation in the share purchase agreement ends, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of the said Act relating to set off and carry forward of loss, and the allowance for depreciation shall apply accordingly.
It is also proposed to insert a proviso to the said sub-section so as to provide that the accumulated loss and the unabsorbed depreciation of the amalgamating company, in case of an amalgamation referred to in clause (d), which is deemed to be loss or, as the case may be, allowance for unabsorbed depreciation of the amalgamated company, shall not be more than the accumulated loss and unabsorbed depreciation of the public sector company as on the date on which the public sector company ceases to be a public sector company as a result of strategic disinvestment.
It is also proposed to insert an Explanation to define the expressions “control”, “erstwhile public sector company” and “strategic disinvestment” for the purposes of clause (d) of the said sub-section.
These amendments will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
