Rule 60 of the Draft Income-tax Rules, 2026 prescribes conditions for carrying forward or setting off accumulated loss and unabsorbed depreciation in cases of amalgamation, as referred to in section 116(4)(b)(iii) of the Act. It mandates that where an amalgamated company acquires an industrial undertaking through amalgamation, it must achieve at least 50% of the installed production capacity of such undertaking within four years from the date of amalgamation and continue to maintain this minimum production level until the end of five years from the amalgamation date. The amalgamated company is also required to furnish a certificate in Form No. 29, duly verified by an accountant as defined under section 515(3)(b), along with its return of income for the tax year in which the prescribed production level is achieved and for subsequent relevant years within the five-year period. Sub-rule (2) empowers the Central Government to relax the production threshold or timeline, or both, in deserving cases where genuine efforts were made but circumstances prevented compliance. “Installed capacity” is defined as the production capacity existing on the date of amalgamation.
Extract of Rule No. 60 of Draft Income-tax Rules, 2026
Rule 60
Conditions for carrying forward or set-off of accumulated loss and unabsorbed depreciation allowance in case of amalgamation.
(1) The conditions referred to in section 116(4)(b)(iii) of the Act shall be the following, namely :—
(a) the amalgamated company, owning an industrial undertaking of the amalgamating company by way of amalgamation, shall-
(i) achieve the level of production of at least fifty per cent of the installed capacity of the said undertaking before the end of four years from the date of amalgamation; and
(ii) continue to maintain the said minimum level of production till the end of five years from the date of amalgamation.
(b) the amalgamated company shall furnish to the Assessing Officer a certificate in Form No. 29, duly verified by an accountant as defined in section 515(3)(b) of the Act, with reference to the books of account and other documents showing particulars of production, along with the return of income for the relevant tax year during which the prescribed level of production is achieved and for subsequent relevant tax years falling within five years from the date of amalgamation.
(2) For the purposes of sub-rule (1)(a), the Central Government, on an application made by the amalgamated company, may relax the condition of achieving the level of production or the period during which the same is to be achieved or both in suitable cases having regard to the genuine efforts made by the amalgamated company to attain the prescribed level of production and the circumstances preventing such efforts from achieving the same.
(3) For the purposes of this rule, “installed capacity” means the capacity of production existing on the date of amalgamation;
