Section 72A(5) — the law in short
What the courts have decided on section 72A(5), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — s.2(19AA): the seven conditions of a "demerger", the going-concern requirement, transfer at book value and the Indian Accounting Standards proviso
CBDT Circulars & InstructionsCuts both ways
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?
Section 2(19AA) requires a transfer pursuant to a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956, by a demerged company of one or more of its undertakings to a resulting company, AND seven further conditions: all the property of the undertaking passes; all the liabilities relatable to it pass; the property and liabilities are transferred at values appearing in the demerged company's books immediately before the demerger; the resulting company issues its shares to the demerged company's shareholders on a proportionate basis; shareholders holding not less than three-fourths in value of the shares of the demerged company become shareholders of the resulting company; the transfer of the undertaking is on a going-concern basis; and the demerger accords with any conditions notified under s.72A(5). The book-value condition now carries a proviso which disapplies it where the resulting company records a different value in compliance with the Indian Accounting Standards specified in the Annexure to the Companies (Indian Accounting Standards) Rules, 2015.
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.