TaxTMI 
TaxTMI 
Comparison of Section 118 "Carry forward and set off of losses and unabsorbed depreciation in business reorganisation of co-operative banks." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....depreciation on amalgamation and demerger of co-operative banks. It affects successor, amalgamating, demerged and resulting co-operative banks, and sets eligibility conditions relating to prior banking activity, fixed asset holding thresholds and continuity of business. Effective date or decision date: Not stated in the document. Background & Scope Statutory hook: Clause 118 (Bill) sits within the set-off and carry-forward framework of the Income Tax Bill, 2025 and cross-refers to section 112 for the concept of losses and to section 65 for defined words concerning amalgamation/demerger/business reorganisation. The clause covers two principal events: amalgamation (where a successor bank may set-off predecessor losses) and demerger (where l....
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.... Eligibility conditions (sub-s. (4)): Conditions on predecessor and successor banks: predecessor engaged in banking for >=3 years and holding >=3/4 of book value of fixed assets continuously for two years prior to reorganisation; successor to hold >=3/4 of book value of predecessor's fixed assets for five years immediately succeeding reorganisation, continue the predecessor's business for minimum five years, and "fulfil such other conditions, as prescribed". * Executive power (sub-s. (5)): Central Government may, by notification, specify other conditions (excluding those in sub-s. (4)(b)(iii)) to ensure genuineness of the reorganisation. * Consequence of non-compliance (sub-s. (6)): If prescribed/notified conditions are not comp....
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.... Illustration 1: A predecessor co-operative bank computes a loss in Year 1 and is amalgamated with a successor bank in Year 3. Under sub-s. (1), the successor may set off that accumulated business loss against its income for the amalgamation year as if amalgamation had not occurred, subject to the other provisions of the Act and eligibility conditions. (No numerical computation provided in the text.) * Illustration 2: A demerger occurs where some losses are directly attributable to a transferred undertaking; per sub-s. (2)(a) the entire directly relatable loss goes to the resulting co-operative bank to carry forward and set off. (No allocation mechanics beyond asset-proportional apportionment for non-directly relatable losses are specifie....
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....rying forward accumulated loss (sub-section (3)). The enacted Section 118 (Document 1) omits this eight-year limitation entirely. * Practical impact: Removing the explicit eight-year cap in the enacted text potentially allows carry forward beyond eight years, subject to other provisions of the Act; this is a materially favourable change for successor banks compared with the Bill (old) if no other limiting provision applies. * Placement and numbering of defined terms: Clause 118 (Old Version) places definitions in sub-section (8) with the label "In this section,--" and defines "accumulated business loss"; the enacted Section 118 uses sub-section (7) labelled "For the purposes of this section, --" and defines "accumulated loss", "unabsorb....
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....ook value for five years and continuing the business for five years. The enacted version frames some of these as sub-section (3) and the Bill (old) frames them as sub-section (4). * Practical impact: Primarily numbering and drafting shifts; substantive conditions appear consistent between drafts except for the eight-year carry-forward clause omitted in the enacted text. * Terminology around loss description: The Old Version (Document 2) consistently uses "accumulated business loss"; the enacted Section (Document 1) uses "accumulated loss". * Practical impact: Potential alignment issue with other sections that reference "accumulated business loss"; readers should confirm internal cross-references to avoid ambiguity. Practical Implicat....