Section 117 — Treatment of accumulated losses and unabsorbed depreciation in scheme of amalgamation in certain cases. Successor to s.72AA of the 1961 Act.
Section 117 is in Chapter VII — Set Off or Carry Forward and Set Off of Losses, which runs from section 108 to section 121.
Sub-section (1) overrides section 2(6)(a) to (c) and section 116 for three kinds of amalgamation: one or more banking companies with any other banking institution under a scheme sanctioned by the Central Government under section 45(7) of the Banking Regulation Act, 1949, or with any other banking institution or a company following a strategic disinvestment where the amalgamation occurs within five years from the end of the tax year in which the disinvestment was carried out; one or more corresponding new banks with any other corresponding new bank under a scheme under section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or 1980; and one or more Government companies with any other Government company under a scheme under section 16 of the General Insurance Business (Nationalisation) Act, 1972. In each case the accumulated loss and unabsorbed depreciation of the amalgamating entity are deemed to be the loss or allowance for depreciation of the successor for the tax year in which the scheme was brought into force, and the Act's ordinary set off and carry forward provisions then apply.
Sub-section (2) puts a clock on the loss so inherited where the scheme is brought into force on or after 1 April 2025. Any loss forming part of the accumulated loss of the predecessor entity that is deemed to be the successor's loss may be carried forward in the successor's hands for not more than eight tax years immediately succeeding the tax year for which that loss was first computed for the original predecessor entity.
Sub-section (3) defines the terms. "Accumulated loss" is so much of the predecessor's loss under the head "Profits and gains of business or profession", excluding losses of a speculation business, as it would have been entitled to carry forward and set off under section 112 had the amalgamation not occurred, and "unabsorbed depreciation" is the depreciation allowance that remains to be allowed and would have been allowed to it. "Original predecessor entity" means the predecessor entity in respect of the first amalgamation. The remaining clauses borrow banking company, banking institution, corresponding new bank, general insurance business and Government company from the Banking Regulation Act, 1949, the 1970 and 1980 acquisition Acts and the Companies Act, 2013 read with the General Insurance Business (Nationalisation) Act, 1972, and take strategic disinvestment from section 116(3)(c)(i).
Amalgamations directed by the Central Government under banking and general insurance statutes are not commercial mergers the transferee chose, so the Act carries the accumulated loss and unabsorbed depreciation across without the conditions section 116 would otherwise impose. Sub-section (2) then stops that concession becoming perpetual: the eight-year clock runs from the year the loss was first computed for the original predecessor entity, so a chain of successive amalgamations cannot restart it.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Window for a post-disinvestment amalgamation | Within five years from the end of the tax year in which the strategic disinvestment is carried out | Amalgamation of a banking company with any other banking institution or a company following a strategic disinvestment | Sub-section (1)(a)(ii) |
| Carry forward period for the inherited loss | Not more than eight tax years | Counted from the tax year for which the loss was first computed for the original predecessor entity, not from the amalgamation; applies to schemes brought into force on or after 1 April 2025 | Sub-section (2) |
The eight-year clock is the point of sub-section (2), and it is measured from the wrong end for anyone expecting a fresh start: the count runs from the tax year for which the loss was first computed for the original predecessor entity, defined in sub-section (3)(g) as the predecessor in the first amalgamation. A loss already four years old when the scheme takes effect therefore has four years left in the successor's hands, and a second amalgamation does not reset it. Note also what is inherited and what is not — accumulated loss under sub-section (3)(a) is business loss only, excluding speculation business losses, and is measured by what the predecessor could itself have carried forward under section 112; unabsorbed depreciation travels separately under clause (i). The five-year window in sub-section (1)(a)(ii) runs from the end of the tax year of the disinvestment, so it is not a five-year period from the disinvestment date.
A banking company's business loss of Rs. 300 crore is first computed for tax year 2025-26. A Central Government scheme amalgamates it with a banking institution with effect from a date in tax year 2028-29. Sub-section (1) deems the Rs. 300 crore to be the successor's loss for that year, but sub-section (2) allows it to be carried forward only up to the eighth tax year immediately succeeding 2025-26 — so roughly five years of life remain, not eight from the amalgamation. Any speculation business loss of the predecessor does not travel at all, because sub-section (3)(a) excludes it from accumulated loss.
The successor entity meets this section in its own return and loss schedules for the year the scheme is brought into force, and in any assessment where the Assessing Officer tests how many years of the inherited loss remain by reference to the original predecessor entity's first computation.
any other banking institution or a company following a strategic disinvestment, wherein the amalgamation occurs within five years from the end of the tax year during which such disinvestment is carried out
shall be carried forward in the hands of the successor entity for not more than eight tax years immediately succeeding the tax year for which such loss was first computed for original predecessor entity
"original predecessor entity" means predecessor entity in respect of the first amalgamation
See the full 1961 to 2025 concordance.
See the circulars index.