Section 72AB — Cooperative Bank Amalgamation -- Loss…

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

Provisions relating to carry forward and set-off of accumulated loss and unabsorbed depreciation allowance in business reorganisation of co-operative banks.

72AB. (1) The assessee, being a successor co-operative bank, shall, in a case where the amalgamation has

taken place during the previous year, be allowed to set off the accumulated loss and the unabsorbed

depreciation, if any, of the predecessor co-operative bank as if the amalgamation had not taken place, and

all the other provisions of this Act relating to set off and carry forward of loss and allowance for

depreciation shall apply accordingly.

(2) The provisions of this section shall apply if—

(a) the predecessor co-operative bank—

(i) has been engaged in the business of banking for three or more years; and

(ii) has held at least three-fourths of the book value of fixed assets as on the date of the

business reorganisation, continuously for two years prior to the date of business

reorganisation;

(b) the successor co-operative bank—

(i) holds at least three-fourths of the book value of fixed assets of the predecessor

co-operative bank acquired through business reorganisation, continuously for a minimum

period of five years immediately succeeding the date of business reorganisation;

(ii) continues the business of the predecessor co-operative bank for a minimum period of five

years from the date of business reorganisation; and

(iii) fulfils such other conditions as may be prescribed to ensure the revival of the business of

the predecessor co-operative bank or to ensure that the business reorganisation is for

genuine business purpose.

(3) The amount of set-off of the accumulated loss and unabsorbed depreciation, if any, allowable to the

assessee being a resulting co-operative bank shall be,—

(i) the accumulated loss or unabsorbed depreciation of the demerged co-operative bank if the whole of

the amount of such loss or unabsorbed depreciation is directly relatable to the undertakings

transferred to the resulting co-operative bank; or

(ii) the amount which bears the same proportion to the accumulated loss or unabsorbed depreciation of

the demerged co-operative bank as the assets of the undertaking transferred to the resulting

co-operative bank bears to the assets of the demerged co-operative bank if such accumulated loss

or unabsorbed depreciation is not directly relatable to the undertakings transferred to the resulting

co-operative bank.

(4) The Central Government may, for the purposes of this section, by notification in the Official Gazette,

specify such other conditions as it considers necessary, other than those prescribed under sub-clause (iii) of

clause (b) of sub-section (2), to ensure that the business reorganisation is for genuine business purposes.

(5) The period commencing from the beginning of the previous year and ending on the date immediately

preceding the date of business reorganisation, and the period commencing from the date of such business

reorganisation and ending with the previous year shall be deemed to be two different previous years for the

purposes of set off and carry forward of loss and allowance for depreciation.

(6) In a case where the conditions specified in sub-section (2) or notified under sub-section (4) are not

complied with, the set off of accumulated loss or unabsorbed depreciation allowed in any previous year to

the successor co-operative bank shall be deemed to be the income of the successor co-operative bank

chargeable to tax for the year in which the conditions are not complied with.

(7) For the purposes of this section,—

(a) "accumulated loss" means so much of loss of the amalgamating co-operative bank or the demerged

co-operative bank, as the case may be, under the head "Profits and gains of business or profession"

(not being a loss sustained in a speculation business) which such amalgamating co-operative bank

or the demerged co-operative bank, would have been entitled to carry forward and set-off under

the provisions of section 72 as if the business reorganisation had not taken place;

(b) "unabsorbed depreciation" means so much of the allowance for depreciation of the amalgamating

co-operative bank or the demerged co-operative bank, as the case may be, which remains to be

allowed and which would have been allowed to such bank as if the business reorganisation had not

taken place;

(c) the expressions "amalgamated co-operative bank", "amalgamating co-operative bank",

"amalgamation", "business reorganisation", "co-operative bank", "demerged co-operative bank",

"demerger", "predecessor co-operative bank", "successor co-operative bank" and "resulting

co-operative bank" shall have the meanings respectively assigned to them in section 44DB.

Function in the statutory architecture

Section 72AB applies to business reorganisations of co-operative banks. Where an amalgamation takes place during the previous year, the successor co-operative bank may set off the accumulated loss and unabsorbed depreciation of the predecessor co-operative bank as if the amalgamation had not taken place. On a demerger, the resulting co-operative bank gets the whole of the loss or depreciation that is directly relatable to the undertakings transferred; otherwise it gets the proportion that the assets transferred bear to the assets of the demerged bank.

The section applies only if the predecessor bank has carried on banking for three or more years and has held at least three-fourths of the book value of its fixed assets continuously for two years before the reorganisation, and the successor bank holds at least three-fourths of the book value of the fixed assets acquired, and continues the business, for a minimum of five years, and meets any prescribed conditions. The Central Government may notify further conditions. The expressions used take their meanings from s. 44DB.

Operative consequences

The previous year is split at the date of reorganisation: the two periods are deemed to be two different previous years for set-off and carry forward (s. 72AB(5)).
If the conditions in sub-section (2), or those notified under sub-section (4), are not complied with, the set-off allowed in any earlier year is deemed to be the successor bank's income for the year of non-compliance (s. 72AB(6)).
"Accumulated loss" excludes speculation loss and is limited to what the amalgamating or demerged bank could have carried forward under s. 72.
Under the 2025 Act, a set-off allowed before 1 April 2026 under s. 72AB is deemed income under that Act in the year a condition is breached (s. 536(2)(p)).

Status

Operative for assessment year 2026-27. Not omitted and not time-limited. The Finance Act, 2026 does not amend s. 72AB.

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. 118.

← ITA 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 72AB(1) — set-off of predecessor co-operative bank's loss on amalgamation	s. 118(1)
s. 72AB(3) — demerger of a co-operative bank	s. 118(2)
s. 72AB(2) and (4) — conditions and notified conditions	s. 118(3) and (4)
s. 72AB(6) — deemed income on breach	s. 118(5); s. 536(2)(p) for set-off allowed before 1 April 2026
s. 72AB(5) and (7) — split previous year; definitions	s. 118(6) and (7)

Section 72AB — Cooperative Bank Amalgamation -- Loss - Depreciation Carry-Forward

Function in the statutory architecture

Operative consequences

Status