Section 72AA — Banking Co. Amalgamation Loss - Depreciation

Function in the statutory architecture

Section 72AA operates notwithstanding s. 2(1B)(i) to (iii) and s. 72A. It covers three classes of amalgamation: (i) one or more banking companies with another banking institution under a scheme sanctioned by the Central Government under s. 45(7) of the Banking Regulation Act, 1949, or with a banking institution or company following a strategic disinvestment, where the amalgamation takes place within five years from the end of the previous year of the disinvestment; (ii) corresponding new banks under schemes under s. 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980; and (iii) general insurance Government companies under s. 16 of the General Insurance Business (Nationalisation) Act, 1972.

In each case the accumulated loss and unabsorbed depreciation of the amalgamating entities are deemed to be the loss or depreciation of the amalgamated entity for the previous year in which the scheme was brought into force, and the ordinary set-off and carry-forward provisions then apply. Unlike s. 72A, the section imposes no holding-period or continuity conditions.

Operative consequences

• The transfer of loss and depreciation follows from the scheme being brought into force; the s. 72A conditions do not apply.
• Where the scheme is brought into force on or after 1 April 2025, the loss can be carried forward in the successor's hands for not more than eight assessment years from the year in which it was first computed for the original predecessor entity, defined in clause (viii) of the Explanation as the predecessor in the first amalgamation.
• "Accumulated loss" excludes speculation loss and is limited to what the amalgamating entity could have carried forward under s. 72.
• "Strategic disinvestment" takes its meaning from the Explanation to s. 72A(1)(d) (clause (via) of the Explanation).

Status

Operative for assessment year 2026-27. The proviso and clause (viii) of the Explanation were inserted by the Finance Act, 2025, w.e.f. 1-4-2026, as the Act's own note records. The Act's notes also record that clause (i), the words "company or" and clause (via) of the Explanation came from Act No. 8 of 2023, w.e.f. 1-4-2023. The Finance Act, 2026 does not amend s. 72AA.

The Income-tax Act, 1961 governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject, the corresponding provision is s. 117.