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.
