Section 72A of the Act relates to provisions on carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger. Sub-section (1) of section 72A provides that in specified cases, accumulated loss and unabsorbed depreciation of the amalgamating company shall be deemed to be the accumulated loss and unabsorbed depreciation of amalgamated company for the previous year in which the amalgamation was affected. Conditions have also been laid down in the said section to facilitate carry forward and set off of loss and unabsorbed depreciation in the case of strategic disinvestment. Strategic disinvestment has been defined as sale of shareholding by the Central Government or any State Government in a public sector company which results in reduction of its shareholding below fifty-one per cent along with transfer of control to the buyer.
2. Section 72AA of the Act relates to carry forward of accumulated losses and unabsorbed depreciation allowance in a scheme of amalgamation in certain cases, which, inter-alia, includes amalgamation of one or more banking company with any other banking institution.
3. To facilitate further strategic disinvestment, it is proposed to amend the definition of ‘strategic disinvestment’ in section 72A of the Act so as to provide that strategic disinvestment shall mean sale of shareholding by the Central Government, the State Government or Public Sector Company in a public sector company or a company which results in
(i) reduction of its shareholding below fifty-one per cent, and
(ii) transfer of control to the buyer.
4. The first condition shall apply in case the shareholding was above fifty one percent before such sale of shareholding. The requirement of transfer of control may be carried out by either the Central Government or State Government or Public Sector Company (or any two of them or all of them).
5. It is also proposed to amend section 72AA of the Act to allow carry forward of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation of one or more banking company with any other banking institution or a company subsequent to a strategic disinvestment, if such amalgamation takes place within 5 years of strategic disinvestment.
6. This amendment will take effect from 1st April, 2023 and will accordingly apply to the assessment year 2023-24 and subsequent assessment years.
[clauses 33 & 34]
Extract of relevant clause of Finance Bill 2023
Clause 33 of the Bill seeks to amend section 72A relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.
It is proposed to substitute clause (iii) of the Explanation to clause (d) of sub-section (1) of the said section to provide that strategic disinvestment shall mean sale of shareholding by the Central Government or any State Government or a public sector company in a public sector company or in a company, which results in––
(a) reduction of its shareholding to below fifty-one per cent.; and
(b) transfer of control to the buyer.
It is further proposed to provide that the condition of reduction of its shareholding to below fifty-one per cent. shall apply only in a case where shareholding of the Central Government or the State Government or the public sector company was above fifty-one per cent. before such sale of shareholding.
It is also proposed to provide that the requirement of transfer of control in relation to such strategic disinvestment may be carried out by either the Central Government, or the State Government or the public sector company or any two of them or all of them.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Clause 34 of the Bill seeks to amend section 72AA of the Income-tax Act relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in scheme of amalgamation in certain cases.
It is proposed to amend clause (i) of the said section to also allow carry forward of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation of one or more banking company with any other banking institution or a company subsequent to a strategic disinvestment, if such amalgamation takes place within five years of strategic disinvestment.
It is further proposed to insert a new clause (via) in the Explanation to the said section to define “strategic disinvestment” by giving reference to the meaning assigned to it in clause (iii) of the Explanation to clause (d) of sub-section (1) of section 72A.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
33. Amendment of section 72A.
In section 72A of the Income-tax Act, in sub-section (1), in clause (d), in the Explanation, for clause (iii), the following clause shall be substituted, namely:–
‘(iii) “strategic disinvestment” means sale of shareholding by the Central Government or any State Government or a public sector company, in a public sector company or in a company, which results in–
(a) reduction of its shareholding to below fifty-one per cent.; and
(b) transfer of control to the buyer:
Provided that the condition laid down in sub-clause (a) shall apply only in a case where shareholding of the Central Government or the State Government or the public sector company was above fifty-one per cent. before such sale of shareholding:
Provided further that requirement of transfer of control referred to in sub-clause (b) may be carried out by the Central Government or the State Government or the public sector company or any two of them or all of them.’.
34. Amendment of section 72AA.
In section 72AA of the Income-tax Act,–
(a) for clause (i), the following clause shall be substituted, namely:–
“(i) one or more banking company with–
(a) any other banking institution under a scheme sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of the Banking Regulation Act, 1949; or
(b) any other banking institution or a company subsequent to a strategic disinvestment, wherein the amalgamation is carried out within a period of five years from the end of the previous year during which such strategic disinvestment is carried out; or”;
(b) in the long line, after the words “such banking institution or”, the words “company or” shall be inserted;
(c) in the Explanation, after clause (vi), the following clause shall be inserted, namely:–
‘(via) “strategic disinvestment” shall have the meaning assigned to it in clause (iii) of the Explanation to clause (d) of sub-section (1) of section 72A;’.
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