Amalgamation loss carry-forward depends on meeting shareholder conditions on the appointed date under tax law.

For amalgamation-based tax relief under sections 2(1B) and 72A of the Income-tax Act, 1961, the statutory conditions must be tested on the appointed date fixed by the sanctioned scheme. Where the shareholders of the transferor company holding not less than three-fourths in value do not become shareholders of the amalgamated company on that date, the amalgamation does not satisfy the statutory definition for loss carry forward purposes. In that event, the transferee company cannot carry forward or set off the accumulated losses of the amalgamating company, and the loss claim fails for non-compliance with the prescribed prerequisites.

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Issues: Whether the assessee was entitled to carry forward and set off the accumulated losses of the amalgamating company under section 2(1B) read with section 72A of the Income-tax Act, 1961, having regard to the appointed date of amalgamation and the requirement that shareholders holding not less than three-fourths in value become shareholders of the amalgamated company.

Analysis: The scheme of amalgamation was sanctioned with effect from the appointed date, 01.04.2013, and that date governed the tax consequence. On that date, the assessee held only 26% of the equity shares in the transferor company. The statutory condition in section 2(1B) was therefore not satisfied, and the reliance placed on the cited precedent did not assist the assessee on its facts. Once the amalgamation took effect, the transferor company ceased to exist, and the claim to carry forward and set off losses failed for want of compliance with the statutory prerequisites.

Conclusion: The claim for carry forward and set off of losses was rightly denied, and the issue was decided against the assessee.

Final Conclusion: The statutory conditions for amalgamation-based tax relief were not met on the relevant appointed date, so the disallowance of loss carry forward and set-off was sustained.

Ratio Decidendi: For purposes of sections 2(1B) and 72A of the Income-tax Act, 1961, compliance must be tested on the appointed date fixed by the sanctioned amalgamation scheme, and failure to satisfy the shareholder condition on that date disentitles the assessee to carry forward and set off the transferor's losses.

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