Claiming deduction u/s 80IC

[Toshar Ahuja]

A firm availing claiming 100% deduction u/s 80IC is taken over by a Company on 1/4/2011 (fulfilling conditions of Sec 47(xiii) of Income Tax Act, 1961) on which date 5 years of 100% deduction also expire.  Will it get 25% deduction or 30% deduction for next five years? and if the assessee starts Unit II before 01/04/2012, then will it get 100% deduction for first five years and then 30% deduction for next five years?

[Surender Gupta]

Such type of deduction is allowed in case of amalgamation or demerger only. There is no similar provision in case of firm. Moreover in case of amalgamation or demerger there is a sunset clause of 1.4.2007

AI Summary

Tax deduction continuity after a firm takeover is unavailable; entitlement exists only for amalgamation or demerger with sunset provision. Continuation of preferential start up deductions after a firm is taken over by a company is permitted only in the circumstances of an amalgamation or demerger; a plain firm takeover does not invoke those provisions. Where amalgamation or demerger relief applies, availability of the deduction is subject to a statutory sunset that limits transitional entitlement.