Rule 60 — Conditions for carrying forward or set-off of accumulated loss and unabsorbed depreciation allowance in case of amalgamation. Made under s.116 of the Income-tax Act, 2025.
Rule 60 gives effect to Section 116 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) prescribes the conditions referred to in section 116(4)(b)(iii). The amalgamated company that comes to own an industrial undertaking of the amalgamating company by way of amalgamation must achieve a level of production of at least 50% of the installed capacity of that undertaking before the end of four years from the date of amalgamation, and must continue to maintain that minimum level of production till the end of five years from the date of amalgamation. It must also furnish to the Assessing Officer a certificate in Form No. 29, duly verified by an accountant as defined in section 515(3)(b), with reference to the books of account and other documents showing particulars of production, along with the return of income for the relevant tax year during which the prescribed level of production is achieved and for subsequent relevant tax years falling within five years from the date of amalgamation.
Sub-rule (2) provides a relaxation. On an application made by the amalgamated company, the Central Government may relax the condition of achieving the level of production or the period during which it is to be achieved, or both, in suitable cases, having regard to the genuine efforts made by the amalgamated company to attain the prescribed level of production and the circumstances preventing those efforts from achieving it.
Sub-rule (3) defines "installed capacity" for the rule as the capacity of production existing on the date of amalgamation.
Section 116 lets an amalgamated company carry forward and set off the accumulated loss and unabsorbed depreciation of the amalgamating company, and section 116(4)(b)(iii) makes that conditional on such other conditions as may be prescribed for ensuring that the amalgamation is for the genuine business revival of the amalgamating company. The test this rule chooses is production: an undertaking acquired and then left idle has not been revived, whatever the commercial rationale on paper. It fixes the level at half the capacity that existed on the date of amalgamation, gives four years to reach it and requires it to hold for five, and asks for an accountant's certificate rather than the company's own assertion.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Minimum level of production to be achieved | At least 50% of the installed capacity of the undertaking | Installed capacity means the capacity of production existing on the date of amalgamation | Sub-rule (1)(a)(i) read with sub-rule (3) |
| Time to achieve that level | Before the end of four years from the date of amalgamation | Relaxable by the Central Government under sub-rule (2) on an application by the amalgamated company | Sub-rule (1)(a)(i) |
| Period for which the level must be maintained | Till the end of five years from the date of amalgamation | Continuation of the minimum level of production once achieved | Sub-rule (1)(a)(ii) |
| Years for which Form No. 29 must accompany the return | The year the level is achieved and subsequent years falling within five years from the date of amalgamation | Certificate verified by an accountant with reference to books of account and other documents showing particulars of production | Sub-rule (1)(b) |
Two different clocks run from the same date. The 50% level must be reached before the end of four years from the date of amalgamation, and it must then be maintained till the end of five years from that date, so reaching the level in year four leaves a further year in which it cannot be allowed to slip. Fifty per cent is measured against the capacity existing on the date of amalgamation, not against capacity as later expanded or contracted, which fixes the benchmark at the outset. The certificate is a recurring obligation, not a one-time filing: Form No. 29 goes with the return for the year the level is achieved and for every subsequent year inside the five, and it must be verified by an accountant against books and production records. Relief for a company that cannot get there is not with the Assessing Officer — sub-rule (2) puts it with the Central Government, on the company's application, and the Government may relax the level or the period or both, having regard to the genuine efforts made and the circumstances that prevented them from succeeding.
A company acquires an industrial undertaking by amalgamation on 1 October, when the undertaking's capacity of production is 20,000 units a year. Under sub-rule (1)(a)(i) it must produce at least 10,000 units a year before the end of four years from that date, and it reaches that level in the third year. It files Form No. 29, verified by an accountant, with its return for that third year and again for the fourth and fifth years. If production falls to 8,000 units in the fifth year, the condition in sub-rule (1)(a)(ii) is broken even though the level had been reached in time; its route is an application to the Central Government under sub-rule (2), not a plea to the Assessing Officer.
An amalgamated company meets it as the Form No. 29 certificate filed with its return each year within the five-year window, and in any assessment where the set-off of the amalgamating company's accumulated loss or unabsorbed depreciation is examined.
achieve the level of production of at least 50% of the installed capacity of the said undertaking before the end of four years from the date of amalgamation
continue to maintain the said minimum level of production till the end of five years from the date of amalgamation
"installed capacity" means the capacity of production existing on the date of amalgamation