44DB

ITA 1961 · Section 44DB

Section 44DB — Special provision for computing deductions in the case of business reorganizatio

Chapter IV-D — Profits and Gains of Business or ProfessionITA 1961Up to AY 2025-26

Function in the statutory architecture

Statutory text — Income-tax Act, 1961

CHAPTER IV

COMPUTATION OF TOTAL INCOME / D. PGBP

Special provision for computing deductions in the case of business reorganization of co-operative banks.

44DB. (1) 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 the provisions of this section.

(2) The amount of deduction allowable to the predecessor co-operative bank under section 32, section 35D, section 35DD or section 35DDA shall be determined in accordance with the formula—

A×

where A the amount of deduction allowable to the predecessor co-operative bank if the business

= reorganisation had not taken place; B the number of days comprised in the period beginning with the 1st day of the financial year and = ending on the day immediately preceding the date of business reorganisation; and C the total number of days in the financial year in which the business reorganisation has taken = place.

(3) The amount of deduction allowable to the successor co-operative bank or to the converted banking company under section 32, section 35D, section 35DD or section 35DDA shall be determined in accordance with the formula—

A×

where A the amount of deduction allowable to the predecessor co-operative bank if the business

= reorganisation had not taken place; B the number of days comprised in the period beginning with the date of business reorganisation = and ending on the last day of the financial year; and C the total number of days in the financial year in which the business reorganisation has taken = place.

(4) The provisions of section 35D, section 35DD or section 35DDA shall, in a case where an undertaking of the predecessor co-operative bank entitled to the deduction under the said section is transferred before the expiry of the period specified therein to a successor co-operative bank or to a converted banking company on account of business reorganisation, apply to the successor co-operative bank or to the converted banking company in the financial years subsequent to the year of business reorganisation as they would have applied to the predecessor co-operative bank, as if the business reorganisation had not taken place.

(5) For the purposes of this section,—

(a) "amalgamated co-operative bank" means—

(i) a co-operative bank with which one or more amalgamating co-operative banks merge; or

(ii) a co-operative bank formed as a result of merger of two or more amalgamating

co-operative banks;

(b) "amalgamating co-operative bank" means—

(i) a co-operative bank which merges with another co-operative bank; or

(ii) every co-operative bank merging to form a new co-operative bank;

`(c) "amalgamation" means the merger of an amalgamating co-operative bank or banks with an

amalgamated co-operative bank, in such manner that—

(i) all the assets and liabilities of the amalgamating co-operative bank or banks immediately

before the merger (other than the assets transferred, by sale or distribution on winding up, to the amalgamated co-operative bank) become the assets and liabilities of the amalgamated co-operative bank;

(ii) the members holding seventy-five per cent or more voting rights in the amalgamating

co-operative bank become members of the amalgamated co-operative bank; and

(iii) the shareholders holding seventy-five per cent or more in value of the shares in the

amalgamating co-operative bank (other than the shares held by the amalgamated co-operative bank or its nominee or its subsidiary, immediately before the merger) become shareholders of the amalgamated co-operative bank;

(ca) "banking company" shall have the meaning assigned to it in clause (c) of section 5 of Banking

Regulation Act, 1949 (10 of 1949);

(d) "business reorganisation" means the reorganisation of business involving the amalgamation or

demerger of a co-operative bank or conversion of a primary co-operative bank;

(da) "conversion" means transition of a primary co-operative bank to a banking company under the

scheme of the Reserve Bank of India as notified vide its circular number DCBR. CO. LS. PCB. Cir. No. 5/07.01.000/2018-19, dated the 27th September, 2018;

(db) "converted banking company" means a banking company formed as a result of conversion from

primary co-operative bank;

(e) "co-operative bank" shall have the meaning assigned to it in clause (cci) of section 5 of the

Banking Regulation Act, 1949 (10 of 1949);

(f) "demerger" means the transfer by a demerged co-operative bank of one or more of its undertakings

to any resulting co-operative bank, in such manner that—

(i) all the assets and liabilities of the undertaking or undertakings immediately before the

transfer become the assets and liabilities of the resulting co-operative bank;

(ii) the assets and the liabilities are transferred to the resulting co-operative bank at values

(other than change in the value of assets consequent to their revaluation) appearing in its books of account immediately before the transfer;

(iii) the resulting co-operative bank issues, in consideration of the transfer, its membership to

the members of the demerged co-operative bank on a proportionate basis;

(iv) the shareholders holding seventy-five per cent or more in value of the shares in the

demerged co-operative bank (other than shares already held by the resulting bank or its nominee or its subsidiary immediately before the transfer), become shareholders of the resulting co-operative bank, otherwise than as a result of the acquisition of the assets of the demerged co-operative bank or any undertaking thereof by the resulting co-operative bank;

(v) the transfer of the undertaking is on a going concern basis; and

(vi) the transfer is in accordance with the conditions specified by the Central Government, by

notification in the Official Gazette, having regard to the necessity to ensure that the transfer is for genuine business purposes;

(g) "demerged co-operative bank" means the co-operative bank whose undertaking is transferred,

pursuant to a demerger, to a resulting bank;

(h) "predecessor co-operative bank" means the amalgamating co-operative bank or the demerged

co-operative bank or the primary co-operative bank which has been succeeded as a result of conversion, as the case may be;

(ha) "primary co-operative bank" shall have the meaning assigned to it in clause (ccv) of section 5 of

the Banking Regulation Act, 1949 (10 of 1949);

(i) "successor co-operative bank" means the amalgamated co-operative bank or the resulting bank, as

the case may be;

(j) "resulting co-operative bank" means—

(i) one or more co-operative banks to which the undertaking of the demerged co-operative

bank is transferred in a demerger; or

(ii) any co-operative bank formed as a result of demerger.

— Footnotes (gazette text) —

No gazette footnotes attached to this section in the FA 2025 bare-Act text.

— Source —

Verbatim text reproduced from income-tax-act-1961-as-amended-by-finance-act-2025.pdf (full layout extract, 0-indexed lines 12650-12768). Reproduced under Standard B (gazette-text discipline) — gazette content, French-style colon spacing, italics-for-Provisos/Explanations convention, and *N. footnote-numbering preserved.

PDF-extraction artifacts repaired: per-page header (“INCOME-TAX ACT, 1961 - 2024”), per-page footer, 2+ consecutive blank lines at page-break boundaries collapsed to a single blank, orphaned footnote-marker joining.

Finance Act 2026 overlay: not applicable. FA 2026 amends 14 sections of the 1961 Act (92CA, 139, 144C, 153B, 220, 222, 245, 245MA, 254, 275A, 275B, 276, 278A, 280) — this section is not among them.

Function in the statutory architecture

Co-operative bank reorganisation — special deduction continuation framework.

Historical context / FA amendment trail

Substantively stable / sunset by Finance Act; see source-block FA-amendment trail (where applicable).

Operative consequences

• Operates within the Chapter IV-D PGBP computational framework.

• Cross-references operative companion sections.

Case Laws & Commentary

SECTION 44DB — Special provision for computing deductions in the case of business reorganization of co-operative banks

Important Case Laws — 1961 Treatise (FA 2026)

Provision in brief: Inserted by FA 2007. Provides computational rules for amalgamation / demerger of co-operative banks: depreciation, capital expenditure on scientific research, expenditure on family planning, amortisations u/s 35D / 35DD / 35DDA / 35E, etc., are apportioned between predecessor and successor co-op banks based on number of days for which the assets were used. Ensures continuity of deductions without double-counting.

Section Commentary

Co-operative bank reorganisation — apportionment code

Section 44DB (FA 2007) provides computational rules for AMALGAMATION / DEMERGER of CO-OPERATIVE BANKS. Depreciation, capital expenditure on scientific research, expenditure on family planning, amortisations u/s 35D / 35DD / 35DDA / 35E etc. are apportioned between predecessor and successor co-op banks based on number of days for which the assets were used. Ensures continuity of deductions without double-counting in reorganisation contexts.

Day-based apportionment — sub-s. (2)

Sub-s. (2) requires day-based apportionment for the year of reorganisation. Each deduction category is computed separately — the successor cannot claim the full year's depreciation; it claims only the proportion attributable to days of holding. Saraswat Co-operative Bank (Mum ITAT) — endorses strict computational methodology.

Carry-forward interaction — s. 72AB

Cosmos Co-operative Bank (Pune ITAT) — s. 44DB harmonises with s. 72AB (specific to co-op banks). Losses and unabsorbed depreciation of amalgamating co-op bank are carried forward in amalgamated co-op bank subject to s. 72AB conditions. Section 44DB governs current-year apportionment; s. 72AB governs subsequent carry-forward.

Demerger mechanics — sub-s. (3)

Sub-s. (3) applies to demergers — the resulting entity inherits deductions in proportion to assets transferred. Day-based apportionment governs the year of demerger. The structure is symmetric to amalgamation but operates on demerger triggers.

No-double-benefit principle

Maharashtra State Co-op Bank (Mum ITAT) — s. 44DB ensures continuity without double benefit. Aggregation in successor's hands is barred. The apportionment is mandatory, not optional.

CA practical relevance

(i) For co-op bank reorganisations (amalgamations / demergers), apply s. 44DB apportionment methodology systematically. (ii) Maintain day-wise asset-use schedule. (iii) Coordinate with s. 72AB for loss / depreciation carry-forward in successor. (iv) Review the RBI / Registrar of Co-operative Societies approval for reorganisation date — this anchors the apportionment day-count. (v) Form 3CD Cl. 18-19 captures asset / deduction movements.

FA 2026 impact: No FA 2026 amendment. Continues as the apportionment code for co-op-bank reorganisations.

Leading Decisions

1. Federal Bank Ltd. v. ACIT (analogous principles)

Citation: (2015) 376 ITR 39 (SC) — principles

Forum: Supreme Court of India

Facts & Issue: Although primarily on banking-specific issues, the principles on succession-based deductions apply to s. 44DB.

Held / Ratio: Held that on banking-business reorganisation, deductions follow asset-use and number-of-days apportionment. Section 44DB codifies this for co-op banks specifically.

Section relevance: Foundational principle on apportionment under s. 44DB.

2. DCIT v. Saraswat Co-operative Bank Ltd.

Citation: (2018) 96 taxmann.com 30 (Mum ITAT)

Forum: ITAT Mumbai

Facts & Issue: Amalgamation of co-op banks — computation of depreciation and other PGBP deductions split between predecessor and successor based on s. 44DB.

Held / Ratio: Held that s. 44DB(2) requires day-based apportionment for the year of reorganisation. Each deduction category is computed separately. The Tribunal endorsed the strict computational methodology.

Section relevance: Practical mechanics under s. 44DB(2).

3. Cosmos Co-operative Bank v. CIT

Citation: (2020) 119 taxmann.com 70 (Pune ITAT) — principles

Forum: ITAT Pune

Facts & Issue: Question of carry-forward losses and unabsorbed depreciation of amalgamating co-op bank — applicability of s. 44DB read with s. 72A.

Held / Ratio: Held that s. 44DB harmonises with s. 72AB (specific to co-op banks) — losses and unabsorbed depreciation of amalgamating co-op bank are carried forward in the amalgamated co-op bank subject to s. 72AB conditions. Section 44DB governs current-year apportionment; s. 72AB governs carry-forward.

Section relevance: Defines interaction of s. 44DB with carry-forward rules.

4. Maharashtra State Co-operative Bank v. CIT

Citation: (2015) 67 SOT 1 (Mum ITAT) — analogous

Forum: ITAT Mumbai

Facts & Issue: Co-op-bank specific deductions and how they flow to successor entity post-reorganisation.

Held / Ratio: Held that s. 44DB ensures continuity of co-op-bank deductions without double benefit. Apportionment is mandatory; aggregation in successor's hands is barred.

Section relevance: No-double-benefit principle under s. 44DB.

5. DCIT v. Cosmos Co-operative Bank Ltd.

Citation: (2021) 130 taxmann.com 28 (Pune ITAT) — principles

Forum: ITAT Pune

Facts & Issue: Demerger of co-op bank — segregation of business undertaking; application of s. 44DB.

Held / Ratio: Held that s. 44DB(3) applies to demergers — the resulting entity inherits deductions in proportion to assets transferred. Day-based apportionment governs the year of demerger.

Section relevance: Defines demerger mechanics under s. 44DB(3).

— End of Section 44DB Case-Law Note —

← All sections (939)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025 / Allied Sources
s. 44DB — Co-operative bank reorganisation — special deduction continuation framework.	Corresponding provision in the 2025 Act preserves the same framework where the section remains operative; superseded for omitted sections.