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Amalgamation:-

Two or more Companies Combine to make one company

Demerger

One Company's business is broken into 2 or more companies

Expenses on Amalagamation/Demerger

On Both Amalgamation or demerger,there are lots of expenses to be incurred like legal fees.

Deduction Allowed under this Section regardng such expenses as mentioned below

 

Deduction Under Section 35DD

1.This deduction only available to Indian companies(not to foreign companies)

2.This deduction is available in 5 years equally starting with the year in which Amalgamation / demerger takes place.

(1/5 every year)

3. No deduction available regarding this expenses in any other Section .

4.Deduction available to Company who pays the expense

 Section 35 DD Expenditure on Amalgamation/ Demerger - Deductions

QUESTIONS

Q1

A ltd got merged with B ltd.A ltd ceased to exist and business was run by B ltd in future.

Suppose Amalgamation expenses were Rs 3 lacs which were incurred by A ltd

Calculate Amt of deduction available each year if profit and loss of A ltd was

Proft and Loss of A Ltd 
SALES6000000
Less 
EXPENSES4000000
PROFIT2000000

 

-a-

Computation of PGBP Income 
Profit as per P& L A/c2000000
Add 
Expense Disallowed 
Amalgamtion expenses300000
  
Less 
Expense Allowed 
1/5 of Amalgamation Expenses60000
  
PGBP INCOME2240000

 

Note:-Remaining 4/5 amalgamations would not be available in future year as Company has been wound up( ceased to exist.)

Hence,it is always beneficial that the amalgamated company(B Ltd) incurs the expense as it can claim balance 4/5 during next year.

-ea-

  1. Income Tax
  2. PGBP Income
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com.
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