12/01/2019

Depreciation in case of succession, amalgamation,  business re-organisation  or demerger. ( Author - Admin )



Depreciation in case of succession, amalgamation,  business re-organisation  or demerger  : In the cases of succession in business and amalgamation of companies, the predecessor and the successor or the amalgamating company and the amalgamated company, as the case may be, are entitled to depreciation allowance on the  same assets, which in aggregate, exceeds the depreciation allowance admissible for a previous year at the prescribed rates. Fifth proviso was inserted in section 32 with effect from the assessment year1997-98 to restrict the aggregate deduction for this allowance in a year to the deduction computed at the prescribed rates and apportion the allowance in the ratio of the number of days for which the assets were used by them. 


1) The above provisions are also applicable from the assessment year 1999-2000 in the case of business reorganisation covered by section 47(xiii)/(xiv)/(xiv)[i.e., where a firm/proprietary concern is succeeded by a company and certain conditions are satisfied]. 

2) A similar provisions has been made with effect from the assessment year 2000-01 in the case of demerged company and resulting company. 

3) The above provisions has been extended with effect from the assessment year 2011-12 to the case of conversion of private company or unlisted public company into limited liability partnership if such conversion satisfies the requirement of section 47 (xiiib).

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