Definition and Recognition of Amalgamation

• Amalgamation refers to the merger of one or more companies into another company.
  
• It must meet the definition under section 2(1B) of the Income-tax Act, 1961.
  
• All assets and liabilities of the amalgamating company must be transferred to the amalgamated company.
  
• Shareholders of the amalgamating company must receive shares in the amalgamated company.
  
• The transaction should be a genuine merger for tax recognition.
  

Tax Neutrality Under Section 47

• Transfer of capital assets in a scheme of amalgamation is not regarded as a taxable transfer.
  
• Section 47(vi) exempts capital gains in the hands of the amalgamating company.
  
• Section 47(vii) provides exemption for shareholders if they receive shares in exchange.
  
• Conditions must be fulfilled to qualify for this exemption.
  
• Tax neutrality is granted only for mergers between Indian companies.
  

Carry Forward of Losses and Depreciation

• Under section 72A, accumulated business losses and unabsorbed depreciation of the amalgamating company can be carried forward.
  
• The amalgamated company must continue the business of the amalgamating company for at least five years.
  
• Assets must be retained for a minimum of five years from the date of amalgamation.
  
• The scheme must be approved by a competent authority like a tribunal or board.
  
• The benefit is not available in case of shell companies or abusive transactions.
  

Depreciation and Asset Treatment

• Assets transferred are eligible for depreciation in the hands of the amalgamated company.
  
• Depreciation is calculated based on the written down value of the assets.
  
• Block of asset concept continues after amalgamation.
  
• The year of transfer allows partial depreciation based on usage.
  
• Cost of acquisition for the amalgamated company is the original cost to the amalgamating company.
  

Filing and Compliance Requirements

• Amalgamation details must be disclosed in the return of income.
  
• Approval order from the relevant authority must be preserved and submitted when required.
  
• Updated books and tax records of both companies must be maintained.
  
• PAN, TDS, and other statutory registrations may require migration or update.
  

Assessment or pending proceedings continue against the amalgamated entity.