TaxTMI 
TaxTMI 
Strategic Disinvestment and Tax Benefits in Clause 117 of the Income Tax Bill, 2025 VS. Section 72AA of the Income Tax Act, 1961
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....inancial losses and depreciation allowances can be transferred and utilized post-amalgamation. Understanding these provisions is essential for companies undergoing mergers and acquisitions, particularly in the banking and government sectors. The legislative intent behind both Clause 117 and Section 72AA is to facilitate corporate restructuring by allowing the successor entity to benefit from the financial losses and depreciation of the predecessor entities. This commentary will provide a detailed analysis of Clause 117, followed by a comparative analysis with Section 72AA, highlighting similarities, differences, and implications for stakeholders. Objective and Purpose The primary objective of Clause 117 is to streamline the process of ama....
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....eciation of the amalgamating entities to be the loss and depreciation of the amalgamated entity. This treatment allows the successor entity to utilize these tax attributes in the tax year in which the amalgamation is effected. 3. Carry Forward Limitation:- Clause 117 specifies that any loss forming part of the accumulated loss of the predecessor entity can be carried forward by the successor entity for up to eight tax years following the tax year in which the loss was first computed for the original predecessor entity. Definitions and Interpretations Clause 117 provides specific definitions for terms such as "accumulated loss," "banking company," "banking institution," "corresponding new bank," "general insurance business," "government....
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....sorbed depreciation in amalgamation scenarios. - The provisions apply to similar entities, including banking companies, corresponding new banks, and government companies, under schemes sanctioned by the Central Government. - Both provisions allow the successor entity to utilize the tax attributes of the predecessor entities in the year of amalgamation. Differences 1. Terminology and Definitions: While the core definitions are aligned, Clause 117 introduces the concept of "strategic disinvestment," which is not explicitly addressed in Section 72AA. This addition reflects the evolving regulatory landscape and the need to accommodate strategic policy decisions. 2. Carry Forward Period: Clause 117 specifies an eight-year limitation on ....