Beruflich Dokumente
Kultur Dokumente
Presented By: 1. Srishti Jha 2. Poonam Binayak 3. Gaurav Thareja 4. Kamal Munjal 5. Puneet Singh 6. Ashima Kapoor
AMALGAMATION
Definition of Amalgamation
Amalgamation is a blending of two or more existing undertakings, the shareholder of each blending company becoming substantially shareholders in the company which is to carry on the blended undertakings. The Income Tax Act,1961 defines Amalgamation in section 2 (IB) as a merger of one or more companies with another company, or the merger of two or more companies to form one company, provided
75% in value of the shareholders of amalgamating company must become shareholders of the amalgamated company.
Amalgamation :
Shareholder X Shareholder Y Shareholder X & Y
Company X Ltd.
Company Y Ltd.
Company XY Ltd.
I.
The permission of High Court of the State concerned is must. As such amalgamation is said to have taken place on the date on which it is approved by the High court. Once it is approved, it should be treated as relating back to the appointed date with reference to which the accounts of both the amalgamating and amalgamated companies were made up.
amalgamating company
II.
No Capital gain on transfer of shares held in Indian Company by the amalgamating Foreign Company.
This happens if the following conditions are fulfilled:
a) b) At least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated company, Such transfer does not attract tax on capital gains in the country, in which it was in incorporated.
III.
Apportionment of depreciation between amalgamating company and amalgamated company [Section 32].
The aggregate deduction, in respect of depreciation allowable to the amalgamating company and the amalgamated company in the case of amalgamation shall not exceed in any previous year.
II.
III.
IV.
Expenditure on know-how- provisions of Section 35AB(3): The expenditure on Know-How is Capital Expenditure and is eligible for depreciation @ 25% on WDV basis.
The above provision can be simply stated in a following manner:
a) The transfer of asset from amalgamating company to amalgamated company shall not be treated or transfer; The unamortized capital expenditure on know how shall be written off by the amalgamated company in same manner as in the case of amalgamating company for remaining number of years; In case know how is transferred in some later year, the gain or loss be treated in the hands of amalgamated company.
b)
c)
Where the undertaking of an Indian company which is entitled to claim which is entitled to claim this deduction is transferred before the expiry of 10/5 years as specified u/s 35D(1), to another Indian company under a scheme of amalgamation:
a) b) No deduction shall be admissible under sub-section (1) in the case of the amalgamating company for the previous year in which the amalgamation takes place; The provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the amalgamation had not taken place.
VII. Amortization
of
Where an assessee, being an Indian company, incurs any expenditure, on or after the 1st day of April 1999, wholly and exclusively for the purposes of amalgamation of an undertaking the assessee shall continue to be available to the amalgamated company for remaining number of years.
VIII. Amortization
entitled to the deduction under sub- section (1) is transferred, before the expiry of the period of ten years specified in sub- section (1), to another Indian company in a scheme of amalgamation.
a) No deduction shall be admissible under this section in the case of the amalgamating company for the previous year in which the amalgamation takes place, and b) The provisions of the section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the amalgamation had not taken place.
capital expenditure on promotion of family planning in India in five equal installments i.e. 1/5th every year. Where an undertaking which is entitled to deduction u/s 36(1)(ix) is transferred in a scheme of amalgamation by the amalgamating company to the amalgamated company , the deductions shall continue to be available to the amalgamated company for the remaining no. of years.
XI. Actual Cost of the block of assets transferred under amalgamation-provisions of Section 43(6).
When due to amalgamation a block of assets is
transferred from the amalgamating company to the amalgamated company , it is not regarded as transfer. The W.D.V (Written down value)as shown in the books of amalgamating company on the first day of the previous year in which amalgamation takes place shall become the actual cost for charging depreciation by the amalgamated company.
XII. Exemption from capital gains in the hands of the amalgamating companies- provisions of Section 47(vi).
Capital gain arising from the transfer of assets by
the amalgamation companies to the Indian amalgamated company is exempt from tax because such transfer of assets is not regarded as transfer.
B.
The transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company. The amalgamated company is an Indian Company.
The cost of shares received under transfer as mentioned above u/s 47(vii).
a. The cost of shares allotted in amalgamated company shall remain same as was for the shares held in amalgamating company.
Example :
Mr. Mahendra is shareholder D Ltd..He acquired 300 shares of the company of the face value Rs.
100 per share in 1972.The fair market value of the shares as on 1-4-81 was Rs. 200 per share. He made a further purchase of 200 shares at the rate of Rs. 300 per share in 1984-84.D Ltd issued bonus shares in 1987-88 in the proportion 1:4. XY Ltd. Company, in a scheme of amalgamation in 2010-11,made a proposal o acquire the shares of D Ltd. As per offer given below:
Ltd. for every two shares of D. Ltd. The market value of shares of XY Ltd. On the date of offer is Rs.350 per share. Compute the capital gain if any arising to Mahendra if he accepts the offer. [ C.I.I. for 1981-82 is 100, for 1984-84 is 125 and for 2010-11 is 711].
Solution :
i.) Cash received (Rs. 600 * 625) ii.) Value of shares in XY Ltd. (350*312 shares) Total Sale Price Less : Cost of acquisition Long term Capital loss 3,75,000 1,09,200 4,84,200 7,67,880 2,83,680
DEMERGER
Definition of Demerger
The term Demerger signifies spinnings of or hiving off the existing divisions of the company
into a seperate company. Thus,demerger is a split or division of the company.The division hived off could be transferred to the new company or it can be sold to the existing company. Demerger takes place due to various reasons like internal restructuring or family settlements. Undertaken as a tool of tax-Planning.
To recognise demergers , number of amendments were Made by the finance act, 1999 on the basis of following principles.
a)Demergers, should be tax neutral and should not attract any additional liability to tax. b)In demergers tax benefits & concessions available to any undertaking should be available to the said undertaking on its transfer to the resulting company. c)Govt. May prescribe certain guidelines to ensure that demergers are made for genuine business purposes.
d) Loss and unabsorbed depreciation should be carried forward by the resulting company if these are directly relatable to the undertaking proposed to be transferred. e)Benefits for the demergers proposed to be extended to authorities or boards set up by central or state govt.
transferred by the demerged company, immediately before the demerger , becomes the property of the resulting company by virtue of the demerger. All the liabilities relatable to the undertaking ,being transferred by the demerged company, immediately before the demerger,becomes the liabilities of the resulting company by virtue of demerger.
consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis. The transfer of the undertaking is on a going concern basis. The shareholder holding not less than threefourth in value of the shares in the demerged company becomes shareholder of the resulting company by virtue of demerger.
demerged company is transferred in a demerger and , the resulting company in consideration of such transfer of undertakings, issues shares to the shareholders of the demerged company.
Section 47 of the Income Tax Act ,1961 contains certain transactions which are not treated as transfer and hence no capital gain shall be deemed to have arisen. Following are not regarded as transfers: 1. Any transfer of a capital asset owned by a demerged company to the resulting Indian company under a scheme of demerger[sec 47 (vi b)].
2. In case of demerger of foreign companies is taking place and capital asset in the nature of shares of an Indian company held by such demerged company are transferred to resulting company , it shall not be treated as transfer if : Shareholders holding not less than 3/4th in value of shares . There is no tax on such capital gain in the country in which such foreign demerged company is incorporated.[Section 47 (vi c)]
Resulting company =Cost of acquisition Of the shares held by the assessee in the demerged company x Net book value of the assets transferred/ Net worth of the demerged company immediately before demerger.
period of holding of new shares . In case, an assessee gets shares in an Indian company, in consideration of demerger, for counting the period of holding of such shares, there shall be included the period for which the shares held in the demerged company were held by the assessee.
demerged company.[Section 49 (2D)] The cost of acquisition of original shares held by the shareholders in the demerged company shall be deemed to have been reduced by the amount as so arrived at under section 49(2c).
operate telecommunications services[sec35ABB(7)] b)Treatment of preliminary expenses [sec35D(5A) c)Treatment of expenditure on prospecting , etc. Of certain minerals[sec35E(7A)
d)Treatment of voluntary retirement expenses [sec35DDA(3) e)Treatment of bad debts [sec36(1)(vii)] f)Amortisation of expenditure in case of demerger [sec35DD]
demerged company, to be held under court supervision, Justice Singh directed that the same be held on 12 November. The court also directed that separate meetings of the equity shareholders and the unsecured and secured creditors of the resulting company PVR Limited, which are to be held under the supervision of the court, shall also be held on 12 November. The court further directed the applicants to publish the advance notice in relation with the proposed meetings in leading newspapers minimum 21days in advance before the scheduled date of meetings and that notices of said meetings be sent by ordinary post, also 21 days in advance.
THANK YOU