Section 35DD

Section 35DD — the law in short

What the courts have decided on section 35DD, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Coforge Ltd (formerly NIIT Technologies Ltd) v ACIT High CourtHelps taxpayerNo later treatment found
  My company is the resulting company in a demerger and it bore the legal and professional costs of the scheme. The Assessing Officer says only the demerged company can claim s.35DD. Is he right?
  No, at least where the resulting company was already in existence. The Delhi High Court held that the word 'assessee' in s.35DD(1) is not confined to the demerged company; the legislature used it having regard to the various ways demerger schemes are structured. It also held that where the one-fifth deduction was allowed in the earlier years of the block, it should not have been disallowed in later years on reasoning that does not comport with a plain reading of the section.
• Statutory position — s.44DB: when a co-operative bank amalgamates, demerges or converts, the year's deduction under ss.32, 35D, 35DD and 35DDA is split by days, not lost CBDT Circulars & InstructionsCuts both waysNo later treatment found
  Our co-operative bank amalgamated in October. The successor is claiming the whole year's depreciation and amortisation. Is that right, and what happens to our part of it?
  It is not right, and the section says so arithmetically. Section 44DB provides that the deduction under section 32, section 35D, section 35DD or section 35DDA shall, in a case where business reorganisation of a co-operative bank has taken place during the financial year, be allowed in accordance with that section. The predecessor co-operative bank gets A x B / C, where A is the amount of the deduction that would have been allowable had the business reorganisation not taken place, B is the number of days from the beginning of the financial year up to the day before the reorganisation, and C is the total number of days in that financial year. The successor co-operative bank, or the converted banking company, gets the same formula with B taken as the number of days from the date of the reorganisation to the end of the financial year. The section then provides for the continued application of sections 35D, 35DD and 35DDA to the successor for the remaining years. The Explanation defines 'business reorganisation' as the reorganisation of business involving the amalgamation or demerger of a co-operative bank or the conversion of a primary co-operative bank, and defines the amalgamating, amalgamated, predecessor and successor banks, 'co-operative bank' by reference to the Banking Regulation Act, 1949, 'demerger', and 'conversion' by reference to a Reserve Bank of India circular of 27 September 2018.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.