The Commissioner has revised our assessment under section 263 saying the scheme was an acquisition and not a demerger, so the section 72A(4) losses go. What did the Tribunal make of that argument?
The Tribunal allowed the assessee's appeal. It held that the Principal Commissioner had drawn his inferences without taking cognizance of the Composite Scheme of Arrangement on the record, that a scheme of arrangement approved by the court carries the force of a statute, and that a restructuring in the telecom sector could not be branded an exercise to claim set-off of brought forward losses by a bald allegation. It recorded that section 2(19AA) refers to the provisions of the Companies Act for determining whether there is a demerger, and that the basic requirement for eligibility under section 72A(4) is that the transfer of the undertaking be in pursuance of a scheme of arrangement under the Companies Act by the demerged company. On the facts it found that the demerged company had been engaged in the consumer wireless mobile business, had been incurring loss since inception, that the entire business loss related to that undertaking alone, and that all the assets and liabilities relating to the demerged business had been transferred and vested in the assessee.
Decided by the ITAT (Shri M. Balaganesh, Accountant Member and Shri Anubhav Sharma, Judicial Member (Income Tax Appellate Tribunal, Delhi Bench 'H', New Delhi)) on 2025-02-21, reported as ITA No. 1160/Del/2024 (ITAT Delhi); assessment year 2020-21; heard 23 January 2025; no law-report citation printed on the document. It bears on section 263, section 2(19AA), section 72A, section 72A(4), section 47 of the Income Tax Act 1961, in Revision & Rectification, Assessment & Scrutiny and How Tax Law Is Read matters.
The order is worth carrying for two opposite reasons. First, the Principal Commissioner's reasoning, which the Tribunal set out in full and rejected, is the sharpest available statement of how the Revenue attacks a demerger on the section 2(19AA) conditions: that the resulting company issued not equity but redeemable, non-participating, non-voting preference shares mandatorily redeemable after eighteen months, so that the three-fourths shareholder condition was satisfied on paper and nullified in substance; that preference shares of that kind are in the nature of debt instruments rather than equity; that the scheme did not list the assets transferred; and that liabilities said to have been taken over were in fact only indemnified, indemnification of a liability not being the same as taking it over. Any practitioner structuring a demerger should test the scheme against those four criticisms before the Commissioner does. Second, the Tribunal's answer shows what defeats such a revision: the scheme itself on the record, evidence that the loss belonged to the transferred undertaking alone, and a special purpose balance sheet of the demerged undertaking showing all assets and liabilities transferred. What the order does NOT do is decide that a court-sanctioned scheme is automatically a demerger for the Act. The Tribunal's stated ground was that the Principal Commissioner had drawn inferences without examining the arrangement — a failure of the section 263 exercise — and it went on to make findings on the underlying facts. The paragraph in which it says section 2(19AA) refers to the Companies Act is a description of the opening words of the definition, which do require a scheme of arrangement; the definition's seven further conditions were not held to be dispensed with, and an entry that read this order as holding they were would be wrong.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The consumer wireless mobile business undertaking of Tata Teleservices Ltd (TTSL) was demerged into the assessee under a Composite Scheme of Arrangement approved by the NCLT. In the assessment the Assessing Officer allowed the assessee's claim to carry forward and set off the brought forward business loss and unabsorbed depreciation of the demerged undertaking under section 72A(4). By an order under section 263 dated 19 January 2024 the Principal Commissioner held the assessment erroneous and prejudicial to the interests of the Revenue on this and other issues, and directed the Assessing Officer to withdraw the allowance. His reasoning, reproduced by the Tribunal from the effect-giving order, was that the transaction was an acquisition of business and not a demerger; that one of the conditions of section 2(19AA) is that at least seventy-five per cent of the shareholders of the demerged company become shareholders of the resulting company; that the scheme approved by the NCLT provided for the issue not of equity shares but of redeemable, non-participating, non-voting preference shares mandatorily redeemable after eighteen months from issue, so that those shareholders would cease to be shareholders of the resulting company; that preference shares of that kind are in the nature of debt instruments and not equity; that the scheme did not provide a list of the assets transferred; that although the net asset value of the business was arrived at Rs. 1263.9 crores, preference shares of only Rs. 33 crores were issued on the assumption that certain liabilities had been taken over, whereas those liabilities appeared to have been only indemnified by the resulting company, and indemnification of a liability is not the same as taking it over; and that the Assessing Officer had failed to conduct the necessary enquiries. The assessee's case was that the entire business loss of TTSL related to the consumer wireless mobile business undertaking alone and so stood transferred in full, and that the unabsorbed depreciation was apportioned between the demerged company and the assessee in the proportion in which the assets had been retained and transferred, in terms of section 72A(4).
The appeal was allowed, the grounds covered by the specific issues being determined in favour of the assessee, with consequences to follow (para 20). On the demerger ground, the Tribunal held that when the Principal Commissioner's observations were considered against the relevant provisions he had taken no cognizance of vital material in the form of the Composite Scheme of Arrangement on the record, and had reached his conclusion without citing anything from the record or relevant material to show that the demerger was the outcome of extraneous factors rather than a genuine reorganisation of the business (para 11.7). It held that a scheme of arrangement approved by the court carries the force of a statute (para 11.7), and that the restructuring among telecom companies in a period of sectoral turmoil could not be alleged to be for an ulterior motive of claiming set-off by a bald allegation (para 11.8). It recorded that section 2(19AA) specifically refers to the provisions of the Companies Act for determining whether there is a demerger, and that the basic requirement for eligibility under section 72A(4) is that the transfer of the undertaking be in pursuance of a scheme of arrangement under the Companies Act by the demerged company, so that the Principal Commissioner had drawn inferences without examining the various aspects of the arrangement (para 11.9). On the facts it found it sufficiently established that TTSL was engaged in the consumer wireless mobile business, had been continuously incurring loss since inception, that the entire business loss related to that undertaking alone, that only the assets relating to that undertaking were considered for unabsorbed depreciation, and that all the assets and liabilities relating to the demerged business had been transferred by the demerged company and vested in the assessee, supported by the special purpose balance sheet of the demerged undertaking (para 11.10).
The Tribunal set out the Principal Commissioner's reasoning in full and then measured it against the material on the file. Its first point was evidential: the Composite Scheme of Arrangement was in the paper book and the Principal Commissioner had not taken it into account, so his inference that the demerger was not a genuine reorganisation rested on nothing in the record. It then invoked the settled position that a scheme of arrangement approved by the court carries the force of a statute, citing decisions of the Delhi Bench in Aamby Valley Ltd v ACIT and Priapus Developers (P) Ltd v ACIT and Indus Towers Ltd v DCIT. It addressed the allegation that the merger was a strategy to claim set-off by observing that tax authorities should be cognizant of the state of the sector, that the turmoil among telecom companies had affected their financials severely, and that restructuring among them for valid reasons could not be branded an ulterior motive by a bald allegation. It then located the definitional question: section 2(19AA) refers to the Companies Act for determining whether there is a demerger, and the basic requirement for section 72A(4) is a transfer in pursuance of a scheme of arrangement under that Act by the demerged company, which the Principal Commissioner had not examined. Finally it made findings on the facts the Principal Commissioner had disputed — that the loss belonged to the transferred undertaking alone, that only its assets were taken for unabsorbed depreciation, and that the special purpose balance sheet showed all the assets and liabilities of the demerged business as transferred. The reasoning between paragraph 11.10 and the disposal is not described here.
Then what is relevant is that Section 2(19AA) of the Act specifically refers to the provisions of Companies Act for the purpose of determining if it is a case of demerger and the basic requirement to fulfill the eligibility of section 72A(4) of the Act is that the transfer of undertaking should be in pursuance of a scheme of arrangement under the Companies Act by demerged company.
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Handle my notice → Ask a CA on WhatsAppThe Tribunal allowed the assessee's appeal. It held that the Principal Commissioner had drawn his inferences without taking cognizance of the Composite Scheme of Arrangement on the record, that a scheme of arrangement approved by the court carries the force of a statute, and that a restructuring in the telecom sector could not be branded an exercise to claim set-off of brought forward losses by a bald allegation. It recorded that section 2(19AA) refers to the provisions of the Companies Act for determining whether there is a demerger, and that the basic requirement for eligibility under section 72A(4) is that the transfer of the undertaking be in pursuance of a scheme of arrangement under the Companies Act by the demerged company. On the facts it found that the demerged company had been engaged in the consumer wireless mobile business, had been incurring loss since inception, that the entire business loss related to that undertaking alone, and that all the assets and liabilities relating to the demerged business had been transferred and vested in the assessee. This was decided by the ITAT (Shri M. Balaganesh, Accountant Member and Shri Anubhav Sharma, Judicial Member (Income Tax Appellate Tribunal, Delhi Bench 'H', New Delhi)) and bears on section 263, section 2(19AA), section 72A, section 72A(4), section 47 of the Income Tax Act 1961. It is reported as ITA No. 1160/Del/2024 (ITAT Delhi); assessment year 2020-21; heard 23 January 2025; no law-report citation printed on the document. The order is worth carrying for two opposite reasons. First, the Principal Commissioner's reasoning, which the Tribunal set out in full and rejected, is the sharpest available statement of how the Revenue attacks a demerger on the section 2(19AA) conditions: that the resulting company issued not equity but redeemable, non-participating, non-voting preference shares mandatorily redeemable after eighteen months, so that the three-fourths shareholder condition was satisfied on paper and nullified in substance; that preference shares of that kind are in the nature of debt instruments rather than equity; that the scheme did not list the assets transferred; and that liabilities said to have been taken over were in fact only indemnified, indemnification of a liability not being the same as taking it over. Any practitioner structuring a demerger should test the scheme against those four criticisms before the Commissioner does. Second, the Tribunal's answer shows what defeats such a revision: the scheme itself on the record, evidence that the loss belonged to the transferred undertaking alone, and a special purpose balance sheet of the demerged undertaking showing all assets and liabilities transferred. What the order does NOT do is decide that a court-sanctioned scheme is automatically a demerger for the Act. The Tribunal's stated ground was that the Principal Commissioner had drawn inferences without examining the arrangement — a failure of the section 263 exercise — and it went on to make findings on the underlying facts. The paragraph in which it says section 2(19AA) refers to the Companies Act is a description of the opening words of the definition, which do require a scheme of arrangement; the definition's seven further conditions were not held to be dispensed with, and an entry that read this order as holding they were would be wrong. If it applies to you, the first step is this: In a section 263 proceeding on a demerger, put the Composite Scheme of Arrangement itself, and the sanction order, squarely on the record and show that the Commissioner has not engaged with them. That was the Tribunal's first ground.
The consumer wireless mobile business undertaking of Tata Teleservices Ltd (TTSL) was demerged into the assessee under a Composite Scheme of Arrangement approved by the NCLT. In the assessment the Assessing Officer allowed the assessee's claim to carry forward and set off the brought forward business loss and unabsorbed depreciation of the demerged undertaking under section 72A(4). By an order under section 263 dated 19 January 2024 the Principal Commissioner held the assessment erroneous and prejudicial to the interests of the Revenue on this and other issues, and directed the Assessing Officer to withdraw the allowance. His reasoning, reproduced by the Tribunal from the effect-giving order, was that the transaction was an acquisition of business and not a demerger; that one of the conditions of section 2(19AA) is that at least seventy-five per cent of the shareholders of the demerged company become shareholders of the resulting company; that the scheme approved by the NCLT provided for the issue not of equity shares but of redeemable, non-participating, non-voting preference shares mandatorily redeemable after eighteen months from issue, so that those shareholders would cease to be shareholders of the resulting company; that preference shares of that kind are in the nature of debt instruments and not equity; that the scheme did not provide a list of the assets transferred; that although the net asset value of the business was arrived at Rs. 1263.9 crores, preference shares of only Rs. 33 crores were issued on the assumption that certain liabilities had been taken over, whereas those liabilities appeared to have been only indemnified by the resulting company, and indemnification of a liability is not the same as taking it over; and that the Assessing Officer had failed to conduct the necessary enquiries. The assessee's case was that the entire business loss of TTSL related to the consumer wireless mobile business undertaking alone and so stood transferred in full, and that the unabsorbed depreciation was apportioned between the demerged company and the assessee in the proportion in which the assets had been retained and transferred, in terms of section 72A(4). The matter was decided on 2025-02-21 by the ITAT (Shri M. Balaganesh, Accountant Member and Shri Anubhav Sharma, Judicial Member (Income Tax Appellate Tribunal, Delhi Bench 'H', New Delhi)). On those facts the ITAT held as follows. The appeal was allowed, the grounds covered by the specific issues being determined in favour of the assessee, with consequences to follow (para 20). On the demerger ground, the Tribunal held that when the Principal Commissioner's observations were considered against the relevant provisions he had taken no cognizance of vital material in the form of the Composite Scheme of Arrangement on the record, and had reached his conclusion without citing anything from the record or relevant material to show that the demerger was the outcome of extraneous factors rather than a genuine reorganisation of the business (para 11.7). It held that a scheme of arrangement approved by the court carries the force of a statute (para 11.7), and that the restructuring among telecom companies in a period of sectoral turmoil could not be alleged to be for an ulterior motive of claiming set-off by a bald allegation (para 11.8). It recorded that section 2(19AA) specifically refers to the provisions of the Companies Act for determining whether there is a demerger, and that the basic requirement for eligibility under section 72A(4) is that the transfer of the undertaking be in pursuance of a scheme of arrangement under the Companies Act by the demerged company, so that the Principal Commissioner had drawn inferences without examining the various aspects of the arrangement (para 11.9). On the facts it found it sufficiently established that TTSL was engaged in the consumer wireless mobile business, had been continuously incurring loss since inception, that the entire business loss related to that undertaking alone, that only the assets relating to that undertaking were considered for unabsorbed depreciation, and that all the assets and liabilities relating to the demerged business had been transferred by the demerged company and vested in the assessee, supported by the special purpose balance sheet of the demerged undertaking (para 11.10).
The Tribunal set out the Principal Commissioner's reasoning in full and then measured it against the material on the file. Its first point was evidential: the Composite Scheme of Arrangement was in the paper book and the Principal Commissioner had not taken it into account, so his inference that the demerger was not a genuine reorganisation rested on nothing in the record. It then invoked the settled position that a scheme of arrangement approved by the court carries the force of a statute, citing decisions of the Delhi Bench in Aamby Valley Ltd v ACIT and Priapus Developers (P) Ltd v ACIT and Indus Towers Ltd v DCIT. It addressed the allegation that the merger was a strategy to claim set-off by observing that tax authorities should be cognizant of the state of the sector, that the turmoil among telecom companies had affected their financials severely, and that restructuring among them for valid reasons could not be branded an ulterior motive by a bald allegation. It then located the definitional question: section 2(19AA) refers to the Companies Act for determining whether there is a demerger, and the basic requirement for section 72A(4) is a transfer in pursuance of a scheme of arrangement under that Act by the demerged company, which the Principal Commissioner had not examined. Finally it made findings on the facts the Principal Commissioner had disputed — that the loss belonged to the transferred undertaking alone, that only its assets were taken for unabsorbed depreciation, and that the special purpose balance sheet showed all the assets and liabilities of the demerged business as transferred. The reasoning between paragraph 11.10 and the disposal is not described here. In the words reproduced by the source cited on this page: "Then what is relevant is that Section 2(19AA) of the Act specifically refers to the provisions of Companies Act for the purpose of determining if it is a case of demerger and the basic requirement to fulfill the eligibility of section 72A(4) of the Act is that the transfer of undertaking should be in pursuance of a scheme of arrangement under the Companies Act by demerged company." The decision followed or applied Aamby Valley Ltd v. ACIT (ITAT Delhi, 22 February 2019, ITA No. 1148/Del/2017) — cited; Priapus Developers (P) Ltd v. ACIT, 176 ITD 223 (Delhi Trib.) — cited; Indus Towers Ltd (formerly Bharti Infratel Ltd) v. DCIT (ITAT Delhi, 10 December 2024, ITA No. 1962/Del/2023) — cited.
It was decided by the ITAT on 2025-02-21 and is reported as ITA No. 1160/Del/2024 (ITAT Delhi); assessment year 2020-21; heard 23 January 2025; no law-report citation printed on the document. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 263, section 2(19AA), section 72A, section 72A(4), section 47, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed, the grounds covered by the specific issues being determined in favour of the assessee, with consequences to follow (para 20). On the demerger ground, the Tribunal held that when the Principal Commissioner's observations were considered against the relevant provisions he had taken no cognizance of vital material in the form of the Composite Scheme of Arrangement on the record, and had reached his conclusion without citing anything from the record or relevant material to show that the demerger was the outcome of extraneous factors rather than a genuine reorganisation of the business (para 11.7). It held that a scheme of arrangement approved by the court carries the force of a statute (para 11.7), and that the restructuring among telecom companies in a period of sectoral turmoil could not be alleged to be for an ulterior motive of claiming set-off by a bald allegation (para 11.8). It recorded that section 2(19AA) specifically refers to the provisions of the Companies Act for determining whether there is a demerger, and that the basic requirement for eligibility under section 72A(4) is that the transfer of the undertaking be in pursuance of a scheme of arrangement under the Companies Act by the demerged company, so that the Principal Commissioner had drawn inferences without examining the various aspects of the arrangement (para 11.9). On the facts it found it sufficiently established that TTSL was engaged in the consumer wireless mobile business, had been continuously incurring loss since inception, that the entire business loss related to that undertaking alone, that only the assets relating to that undertaking were considered for unabsorbed depreciation, and that all the assets and liabilities relating to the demerged business had been transferred by the demerged company and vested in the assessee, supported by the special purpose balance sheet of the demerged undertaking (para 11.10). It arises in Revision & Rectification, Assessment & Scrutiny and How Tax Law Is Read matters, on section 263, section 2(19AA), section 72A, section 72A(4), section 47 of the Income Tax Act 1961, and was decided by Shri M. Balaganesh, Accountant Member and Shri Anubhav Sharma, Judicial Member (Income Tax Appellate Tribunal, Delhi Bench 'H', New Delhi). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Prepare a special purpose balance sheet of the demerged undertaking showing every asset and liability transferred. The Tribunal relied on one, and it answers the criticism that a scheme does not list what moved. Establish that the accumulated loss belongs to the transferred undertaking alone if you are claiming all of it. Where it does not, apportion the unabsorbed depreciation under section 72A(4)(b) in the proportion in which the assets have been retained and transferred, and show the working. Test the consideration before the Commissioner does. Redeemable, non-participating, non-voting preference shares mandatorily redeemable after a short period are the precise target of the Revenue's argument recorded in this order at para 11.5, and they should be justified or avoided at the drafting stage. Distinguish between taking over a liability and indemnifying it. The Revenue's case here was that indemnification does not satisfy the transfer of liabilities required by section 2(19AA)(ii), and the scheme should not leave that open. Do not cite this order for the proposition that court sanction supplies the section 2(19AA) conditions. It does not so hold, and the seven conditions in the definition have to be satisfied independently.
Searched for later treatment; none was found. That is not the same as a source affirming it. No later decision citing this order has been found, and no appeal under s.260A to the Delhi High Court against it is disclosed. Nothing else reported under the assessee's name bears on the point: the Bharti Infratel judgment of the Delhi High Court of 15 January 2019 is unconnected and the remaining matters are older Tribunal orders, so no Bench has taken up its treatment of s.2(19AA) and s.72A(4) in a revision context. Read it with that in mind. The order is a revision case and the ratio is about the Commissioner's approach rather than about the conditions of a demerger: the Tribunal held that he had reached his conclusion without taking cognizance of the Composite Scheme of Arrangement on the record, that a scheme of arrangement approved by the court carries the force of a statute, and that a restructuring in the telecom sector could not be branded an exercise to claim set-off of brought forward losses by a bald allegation. It does not hold that redeemable, non-participating, non-voting preference shares mandatorily redeemable after eighteen months satisfy the three-fourths shareholder condition as a matter of law; what it holds is that the Commissioner did not make out his case on the material before him. An assessee who reads it as clearance for that structure is reading it too widely, and the Commissioner's four criticisms — the character of the consideration, the absence of a list of assets in the scheme, indemnification as against assumption of liabilities, and the substance of the shareholding test — remain the shape of the Revenue's attack. The order is of February 2025 on assessment year 2020-21, so it is recent as well as untested. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry states the demerger ground only. The Tribunal's reasoning at paragraphs 11.11 to 19, and whatever it concluded on the other issues covered by the section 263 order, are not set out here, so the entry must not be relied on for anything beyond the section 2(19AA) and section 72A(4) ground. The header is: Delhi Bench 'H', Shri M. Balaganesh, Accountant Member and Shri Anubhav Sharma, Judicial Member, ITA No. 1160/Del/2024, assessment year 2020-21, heard on 23 January 2025 and pronounced on 21 February 2025. No law-report citation is printed on it. Two attributions matter. The long passage at paragraph 11.5 is the Principal Commissioner's own section 263 reasoning, reproduced by the Tribunal from the Assessing Officer's effect-giving order. It is presented in this entry as the Revenue's argument and is not a holding of anybody; a reader who lifts it as the Tribunal's own view will be quoting the case against himself. Paragraph 11.9 is the Tribunal's own, and it is the sentence recording that section 2(19AA) "specifically refers to the provisions of Companies Act" for determining whether there is a demerger; the order's own spelling "fulfill" appears in it and has not been corrected. The disposal is at paragraph 20: "As a consequence of aforesaid determination of the grounds covered by specific issues in favour of assessee, the appeal is allowed with consequences to follow as per determination of issues, as above." Read the order for what it is. It is a revision case, and the ground on which the revision fell is that the Principal Commissioner drew his inferences without taking cognizance of the Composite Scheme of Arrangement that was on the record. That is a finding about the section 263 exercise, not a ruling that a court-sanctioned scheme is automatically a demerger for the Act. The Tribunal went on to make findings on the facts the Principal Commissioner had disputed — that the loss belonged to the transferred undertaking alone, that only its assets were taken for unabsorbed depreciation, and that the special purpose balance sheet showed all assets and liabilities as transferred — but it did not hold that the seven further conditions in section 2(19AA) were dispensed with, and it did not rule on whether mandatorily redeemable preference shares satisfy the three-fourths shareholder condition or on whether an indemnity amounts to a transfer of liabilities. Those two questions, which are the sharpest in the Principal Commissioner's reasoning, remain open, and a scheme being drafted now should be built to answer them rather than to rely on this order. Section 47 is the companion relief and is not discussed in the order. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed, the grounds covered by the specific issues being determined in favour of the assessee, with consequences to follow (para 20). On the demerger ground, the Tribunal held that when the Principal Commissioner's observations were considered against the relevant provisions he had taken no cognizance of vital material in the form of the Composite Scheme of Arrangement on the record, and had reached his conclusion without citing anything from the record or relevant material to show that the demerger was the outcome of extraneous factors rather than a genuine reorganisation of the business (para 11.7). It held that a scheme of arrangement approved by the court carries the force of a statute (para 11.7), and that the restructuring among telecom companies in a period of sectoral turmoil could not be alleged to be for an ulterior motive of claiming set-off by a bald allegation (para 11.8). It recorded that section 2(19AA) specifically refers to the provisions of the Companies Act for determining whether there is a demerger, and that the basic requirement for eligibility under section 72A(4) is that the transfer of the undertaking be in pursuance of a scheme of arrangement under the Companies Act by the demerged company, so that the Principal Commissioner had drawn inferences without examining the various aspects of the arrangement (para 11.9). On the facts it found it sufficiently established that TTSL was engaged in the consumer wireless mobile business, had been continuously incurring loss since inception, that the entire business loss related to that undertaking alone, that only the assets relating to that undertaking were considered for unabsorbed depreciation, and that all the assets and liabilities relating to the demerged business had been transferred by the demerged company and vested in the assessee, supported by the special purpose balance sheet of the demerged undertaking (para 11.10).
TaxSphere, “Bharti Airtel Limited v. PCIT, Delhi-1 (ITAT Delhi) — a section 263 revision holding a demerger was really an acquisition, and why it did not survive”, https://taxnotice.vittsphere.com/caselaw/case/bharti-airtel-263-revision-of-demerger-loss-set-off-2-19aa-and-72a-4/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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The Assessing Officer refused to consider our revised return claiming the demerged undertaking's brought forward losses. Does section 72A(4) transfer them from the appointed date, and does the revised return matter?
We hived off a division under a court-sanctioned scheme and claimed section 47(vib) and section 72A(4). The Assessing Officer says it is not a "demerger". What exactly does section 2(19AA) require, and what is the position where Ind AS forced us to record the assets at a different value?
The NCLT has sanctioned our scheme and the order calls it an amalgamation. The Assessing Officer says it is not an amalgamation for income-tax and has refused section 47 and section 72A. Can he do that?
The department has invoked GAAR on a demerger that the NCLT sanctioned after notice to the income-tax authorities, and s.72A(4) expressly allowed the loss to move with the undertaking. I have no right of appeal against the reference or the directions. What can I actually do?
