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
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 | |
| SALES | 6000000 |
| Less | |
| EXPENSES | 4000000 |
| PROFIT | 2000000 |
View answer
| Computation of PGBP Income | |
| Profit as per P& L A/c | 2000000 |
| Add | |
| Expense Disallowed | |
| Amalgamtion expenses | 300000 |
| Less | |
| Expense Allowed | |
| 1/5 of Amalgamation Expenses | 60000 |
| PGBP INCOME | 2240000 |
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.
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