We amalgamated a loss-making service company into ours. The Assessing Officer says section 72A does not apply at all because there is no industrial undertaking. Is that right, and what does the section actually cover?
Section 72A(1) does not apply to every amalgamation. It applies to an amalgamation of (a) a company owning an industrial undertaking or a ship or a hotel with another company, (b) a banking company within s.5(c) of the Banking Regulation Act, 1949 with a specified bank, (c) one or more public sector companies with one or more public sector companies, or (d) an erstwhile public sector company with one or more companies where the share purchase agreement entered into under strategic disinvestment restricted immediate amalgamation and the amalgamation is carried out within five years from the end of the previous year in which that restriction ends. "Industrial undertaking" is exhaustively defined in s.72A(7)(aa) as an undertaking engaged in the manufacture or processing of goods, the manufacture of computer software, the business of generation or distribution of electricity or any other form of power, the business of providing telecommunication services (basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services), mining, or the construction of ships, aircrafts or rail systems.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2025-04-01, reported as Section 72A(1) and section 72A(7)(aa) of the Income-tax Act, 1961, as amended up to 2025. It bears on section 72A, section 72A(1), section 72A(7), section 72A(2), section 72, section 72AA, section 2(1B) of the Income Tax Act 1961, in How Tax Law Is Read, Assessment & Scrutiny and Deductions & Disallowances matters.
This is the threshold nobody checks. A great deal of advice on s.72A goes straight to the conditions in sub-section (2) without asking whether sub-section (1) is engaged at all, and for a trading company, a financial services company, a distribution company or a professional services company the answer is often no — none of those is within the closed list in s.72A(7)(aa), and none is a ship or a hotel. If sub-section (1) is not engaged, the accumulated loss and unabsorbed depreciation of the amalgamating company are lost outright and the conditions in sub-section (2) never arise. Three further points. First, the definition of "accumulated loss" in s.72A(7)(a) is confined to loss under the head "Profits and gains of business or profession" and expressly excludes loss sustained in a speculation business, and it is limited to what the amalgamating company itself would have been entitled to carry forward and set off under s.72 had the amalgamation not taken place — so the transferee inherits no better a right than the transferor had. Second, clause (d) is not a general relief: it is confined to an erstwhile public sector company whose share purchase agreement under strategic disinvestment restricted immediate amalgamation, and it carries its own proviso capping the inherited loss and unabsorbed depreciation at the amount standing in the public sector company as on the date it ceased to be a public sector company as a result of the strategic disinvestment. Third, "specified bank" in clause (b) is itself defined in s.72A(7)(c) and is narrow — the State Bank of India, a subsidiary bank, or a corresponding new bank under the 1970 or 1980 Acquisition and Transfer of Undertakings Acts. A merger of two private banks is not within clause (b), and the separate regime in s.72AA, which applies where the Central Government sanctions a scheme under s.45(7) of the Banking Regulation Act, must be considered instead.
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Section 72A(1) reads: Where there has been an amalgamation of— (a) a company owning an industrial undertaking or a ship or a hotel with another company; or (b) a banking company referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a specified bank; or (c) one or more public sector company or companies with one or more public sector company or companies; or (d) an erstwhile public sector company with one or more company or companies, if the share purchase agreement entered into under strategic disinvestment restricted immediate amalgamation of the said public sector company and the amalgamation is carried out within five years from the end of the previous year in which the restriction on amalgamation in the share purchase agreement ends, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly: Provided that the accumulated loss and the unabsorbed depreciation of the amalgamating company, in case of an amalgamation referred to in clause (d), which is deemed to be the loss or, as the case may be, the allowance for un-absorbed depreciation of the amalgamated company, shall not be more than the accumulated loss and unabsorbed depreciation of the public sector company as on the date on which the public sector company ceases to be a public sector company as a result of strategic disinvestment. Sub-section (7) defines "accumulated loss" (clause (a)) as so much of the loss of the predecessor firm or proprietary concern or private or unlisted public company before conversion into a limited liability partnership or the amalgamating company or the demerged company, under the head "Profits and gains of business or profession" (not being a loss sustained in a speculation business), which that entity would have been entitled to carry forward and set off under s.72 if the reorganisation, conversion, amalgamation or demerger had not taken place; "industrial undertaking" (clause (aa)) as any undertaking engaged in (i) the manufacture or processing of goods; (ii) the manufacture of computer software; (iii) the business of generation or distribution of electricity or any other form of power; (iiia) the business of providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services; (iv) mining; (v) the construction of ships, aircrafts or rail systems; "original predecessor entity" (clause (ab)); "unabsorbed depreciation" (clause (b)); and "specified bank" (clause (c)) as the State Bank of India, a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, or a corresponding new bank constituted under s.3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or of the Act of 1980.
Section 72A(1) is engaged only by an amalgamation falling within one of its four clauses. "Industrial undertaking" bears the closed meaning in s.72A(7)(aa), and an undertaking outside that list is not brought in by being an undertaking in the ordinary sense. The figure that crosses over is limited by s.72A(7)(a) and (b) to what the amalgamating company itself could have carried forward, excludes speculation loss, and for a clause (d) amalgamation is further capped by the proviso at the amount standing as on the date the company ceased to be a public sector company on strategic disinvestment.
Not applicable — this is a statement of statutory text. No judicial reasoning is involved.
"industrial undertaking" means any undertaking which is engaged in—
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Handle my notice → Ask a CA on WhatsAppSection 72A(1) does not apply to every amalgamation. It applies to an amalgamation of (a) a company owning an industrial undertaking or a ship or a hotel with another company, (b) a banking company within s.5(c) of the Banking Regulation Act, 1949 with a specified bank, (c) one or more public sector companies with one or more public sector companies, or (d) an erstwhile public sector company with one or more companies where the share purchase agreement entered into under strategic disinvestment restricted immediate amalgamation and the amalgamation is carried out within five years from the end of the previous year in which that restriction ends. "Industrial undertaking" is exhaustively defined in s.72A(7)(aa) as an undertaking engaged in the manufacture or processing of goods, the manufacture of computer software, the business of generation or distribution of electricity or any other form of power, the business of providing telecommunication services (basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services), mining, or the construction of ships, aircrafts or rail systems. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 72A, section 72A(1), section 72A(7), section 72A(2), section 72, section 72AA, section 2(1B) of the Income Tax Act 1961. It is reported as Section 72A(1) and section 72A(7)(aa) of the Income-tax Act, 1961, as amended up to 2025. This is the threshold nobody checks. A great deal of advice on s.72A goes straight to the conditions in sub-section (2) without asking whether sub-section (1) is engaged at all, and for a trading company, a financial services company, a distribution company or a professional services company the answer is often no — none of those is within the closed list in s.72A(7)(aa), and none is a ship or a hotel. If sub-section (1) is not engaged, the accumulated loss and unabsorbed depreciation of the amalgamating company are lost outright and the conditions in sub-section (2) never arise. Three further points. First, the definition of "accumulated loss" in s.72A(7)(a) is confined to loss under the head "Profits and gains of business or profession" and expressly excludes loss sustained in a speculation business, and it is limited to what the amalgamating company itself would have been entitled to carry forward and set off under s.72 had the amalgamation not taken place — so the transferee inherits no better a right than the transferor had. Second, clause (d) is not a general relief: it is confined to an erstwhile public sector company whose share purchase agreement under strategic disinvestment restricted immediate amalgamation, and it carries its own proviso capping the inherited loss and unabsorbed depreciation at the amount standing in the public sector company as on the date it ceased to be a public sector company as a result of the strategic disinvestment. Third, "specified bank" in clause (b) is itself defined in s.72A(7)(c) and is narrow — the State Bank of India, a subsidiary bank, or a corresponding new bank under the 1970 or 1980 Acquisition and Transfer of Undertakings Acts. A merger of two private banks is not within clause (b), and the separate regime in s.72AA, which applies where the Central Government sanctions a scheme under s.45(7) of the Banking Regulation Act, must be considered instead. If it applies to you, the first step is this: Before you touch sub-section (2), establish that the amalgamating company owned an industrial undertaking, a ship or a hotel, or that the amalgamation is within clause (b), (c) or (d). Put the s.72A(7)(aa) list against the amalgamating company's actual activity.
Section 72A(1) reads: Where there has been an amalgamation of— (a) a company owning an industrial undertaking or a ship or a hotel with another company; or (b) a banking company referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a specified bank; or (c) one or more public sector company or companies with one or more public sector company or companies; or (d) an erstwhile public sector company with one or more company or companies, if the share purchase agreement entered into under strategic disinvestment restricted immediate amalgamation of the said public sector company and the amalgamation is carried out within five years from the end of the previous year in which the restriction on amalgamation in the share purchase agreement ends, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly: Provided that the accumulated loss and the unabsorbed depreciation of the amalgamating company, in case of an amalgamation referred to in clause (d), which is deemed to be the loss or, as the case may be, the allowance for un-absorbed depreciation of the amalgamated company, shall not be more than the accumulated loss and unabsorbed depreciation of the public sector company as on the date on which the public sector company ceases to be a public sector company as a result of strategic disinvestment. Sub-section (7) defines "accumulated loss" (clause (a)) as so much of the loss of the predecessor firm or proprietary concern or private or unlisted public company before conversion into a limited liability partnership or the amalgamating company or the demerged company, under the head "Profits and gains of business or profession" (not being a loss sustained in a speculation business), which that entity would have been entitled to carry forward and set off under s.72 if the reorganisation, conversion, amalgamation or demerger had not taken place; "industrial undertaking" (clause (aa)) as any undertaking engaged in (i) the manufacture or processing of goods; (ii) the manufacture of computer software; (iii) the business of generation or distribution of electricity or any other form of power; (iiia) the business of providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services; (iv) mining; (v) the construction of ships, aircrafts or rail systems; "original predecessor entity" (clause (ab)); "unabsorbed depreciation" (clause (b)); and "specified bank" (clause (c)) as the State Bank of India, a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, or a corresponding new bank constituted under s.3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or of the Act of 1980. The matter was decided on 2025-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Section 72A(1) is engaged only by an amalgamation falling within one of its four clauses. "Industrial undertaking" bears the closed meaning in s.72A(7)(aa), and an undertaking outside that list is not brought in by being an undertaking in the ordinary sense. The figure that crosses over is limited by s.72A(7)(a) and (b) to what the amalgamating company itself could have carried forward, excludes speculation loss, and for a clause (d) amalgamation is further capped by the proviso at the amount standing as on the date the company ceased to be a public sector company on strategic disinvestment.
Not applicable — this is a statement of statutory text. No judicial reasoning is involved. In the words reproduced by the source cited on this page: ""industrial undertaking" means any undertaking which is engaged in—"
It was decided by the CBDT Circulars & Instructions on 2025-04-01 and is reported as Section 72A(1) and section 72A(7)(aa) of the Income-tax Act, 1961, as amended up to 2025. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 72A, section 72A(1), section 72A(7), section 72A(2), section 72, section 72AA, section 2(1B), 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 cuts both ways and is cited by both sides. Section 72A(1) is engaged only by an amalgamation falling within one of its four clauses. "Industrial undertaking" bears the closed meaning in s.72A(7)(aa), and an undertaking outside that list is not brought in by being an undertaking in the ordinary sense. The figure that crosses over is limited by s.72A(7)(a) and (b) to what the amalgamating company itself could have carried forward, excludes speculation loss, and for a clause (d) amalgamation is further capped by the proviso at the amount standing as on the date the company ceased to be a public sector company on strategic disinvestment. It arises in How Tax Law Is Read, Assessment & Scrutiny and Deductions & Disallowances matters, on section 72A, section 72A(1), section 72A(7), section 72A(2), section 72, section 72AA, section 2(1B) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. 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. Treat s.72A(7)(aa) as a closed list. Trading, distribution, financing, leasing and most services are outside it; telecommunication services and computer software manufacture are inside it because they are named. If the amalgamating company had more than one activity, identify which one owned the accumulated loss, because s.72A(2)(a)(i) asks whether the company was engaged in "the business, in which the accumulated loss occurred or depreciation remains unabsorbed" for three or more years. Strip speculation losses out of the figure at the outset: s.72A(7)(a) excludes them from "accumulated loss". Do not claim more than the amalgamating company could itself have carried forward under s.72. The definition ties the inherited figure to the transferor's own entitlement. For a bank merger, check whether it is within clause (b) read with the s.72A(7)(c) definition of "specified bank"; if it is not, look to s.72AA and the Banking Regulation Act s.45(7) route rather than to s.72A. For an erstwhile public sector company, produce the share purchase agreement, identify the restriction on immediate amalgamation and the date it ended, and apply the proviso's cap on the inherited figure.
Still good law. The text stated here is the most recent of section 72A that has been reached, and its clause (d) and present clause (c) are corroborated by the two texts immediately preceding it. No Finance Act text has been read, and no footnote naming the amending Act for clause (c) or clause (d) could be obtained, so this entry states the text and not its legislative history. The editor's note sets out the bracketing that places the insertion of clause (d) between the 2022 and 2023 texts without dating it. Sub-section (1) must now be read with sub-section (6B), inserted by the Finance Act, 2025 (Act No. 7 of 2025) with effect from 1 April 2026, which for an amalgamation or business reorganisation effected on or after 1 April 2025 caps the carry-forward at eight assessment years from the year the loss was first computed for the original predecessor entity. That is the single most important qualification on this page, and the library carries it as a separate entry. No check of judicial treatment of s.72A(1) or of the definition of 'industrial undertaking' in s.72A(7)(aa) has been carried out. That definition is where most of the litigation on this sub-section has been, so the absence matters: whether a particular undertaking is engaged in the manufacture or processing of goods is a question on which authority exists and has not been looked for here. What would displace the entry: an amendment to sub-section (1) or to sub-section (7)(aa), or a decision on the reach of clause (d), which is recent and 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.
Sub-section (1), with clauses (a) to (d) and its proviso, and sub-section (7), with definitions (a), (aa), (ab), (b) and (c), are taken from the section under the heading 'Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc' in the Income-tax Act, 1961. A later text of the section also exists, printing the same heading, with its sub-section numbering running (1), (2), (3), (4), (5), (6), (6A), (6B), (7). A WRONG-INSTRUMENT WARNING, and it bites hard on this section. Material filed under the number '72A' is not always the Income-tax Act at all: there is a section 72A of the INFORMATION TECHNOLOGY ACT, 2000, headed 'Penalty for disclosure of information in breach of lawful contract', and a section 72A of the PREVENTION OF MONEY LAUNDERING ACT, 2002, headed 'Interministerial Co-ordination Committee'. Check the Act named at the head of whatever text you have before reading a word of it. Clause (c) of sub-section (1) is printed in its present form — 'one or more public sector company or companies with one or more public sector company or companies' — in the current text. A narrower earlier form, confined to public sector companies 'engaged in the business of operation of aircraft', appears in the 2007 and 2010 texts, and the 2006 text has no clause (c) at all. That is history and not the current position, but it decides the answer for an old year. No footnote naming the Act that inserted clause (d) or the present clause (c) has been obtained, so no amending Act or commencement date is stated for either. What can be said is a bracketing: clause (d) and the words 'erstwhile public sector company' are ABSENT from every text read up to 2022 and PRESENT in the texts for 2023 onwards, which places the change between those two and does not date it. Amending-Act footnotes are printed on this family of texts, so the dating is obtainable; it simply has not been obtained here. 'decided_on' is the start of the assessment year for which the current text speaks; 'bench' and 'favours' are inapplicable to a statutory entry. One further point of structure. Sub-section (1) opens 'notwithstanding anything contained in any other provision of this Act' and then deems the accumulated loss and unabsorbed depreciation of the amalgamating company to be those of the amalgamated company for the previous year in which the amalgamation was effected. It does not itself impose the conditions in sub-section (2); those are separate, and an entry that reads sub-section (1) alone will miss them. 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.
Section 72A(1) is engaged only by an amalgamation falling within one of its four clauses. "Industrial undertaking" bears the closed meaning in s.72A(7)(aa), and an undertaking outside that list is not brought in by being an undertaking in the ordinary sense. The figure that crosses over is limited by s.72A(7)(a) and (b) to what the amalgamating company itself could have carried forward, excludes speculation loss, and for a clause (d) amalgamation is further capped by the proviso at the amount standing as on the date the company ceased to be a public sector company on strategic disinvestment.
TaxSphere, “Statutory position — s.72A(1) and s.72A(7)(aa): which amalgamations carry accumulated loss and unabsorbed depreciation across, and the closed definition of "industrial undertaking"”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-72a-1-which-amalgamations-carry-losses-and-what-an-industrial-undertaking-is/ (validity last checked 2026-09-08)
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We are planning an amalgamation this year and the target has losses that are already several years old. Does the eight-year clock restart in our hands?
We took over an amalgamating company's brought-forward losses. What exactly must we satisfy under section 72A(2) and Rule 9C, and if we fail, in which year does the department take the set-off back?
Five regional rural banks were merged into our bank by a Central Government notification. The officer says s.72AA is only for banking companies and that s.72AB for cooperative societies only came in from assessment year 2008-09, so the merged banks' accumulated losses die. Is there any authority the other way?
The Assessing Officer has denied our section 72A set-off in the very first year after the merger because we have not yet reached fifty per cent of installed capacity and have not filed Form No. 62. Can he do that before the four years are up?
