Section 72A transfers a predecessor's accumulated business loss (excluding speculation loss) and unabsorbed depreciation to its successor. On an amalgamation of (a) a company owning an industrial undertaking, a ship or a hotel with another company, (b) a banking company with a specified bank, (c) public sector companies, or (d) an erstwhile public sector company with another company within five years of the end of the share purchase agreement restriction, these are deemed to be the amalgamated company's for the previous year of amalgamation. Under clause (d) they cannot exceed the public sector company's figures on the date it ceased to be one.
The amalgamating company must have carried on the loss-making business for three or more years and held continuously at least three-fourths of the book value of fixed assets held two years before amalgamation; the amalgamated company must hold at least three-fourths of the book value of the fixed assets acquired, and continue the business, for at least five years, and meet any prescribed conditions (s. 72A(2)). On a demerger, loss directly relatable to the transferred undertakings goes to the resulting company; any other loss is apportioned in the ratio of assets retained and transferred. Sub-sections (6) and (6A) extend the rule to a firm or proprietary concern succeeded by a company under s. 47(xiii) or (xiv), and to a private or unlisted public company converted into an LLP under s. 47(xiiib).
Operative consequences
If any condition in sub-section (2) is not complied with, the set-off or depreciation allowed in any earlier year is deemed to be the amalgamated company's income for the year of non-compliance (s. 72A(3)); the provisos to sub-sections (6) and (6A) apply the same rule to the successor company and LLP.
For an amalgamation or reorganisation effected on or after 1 April 2025, the loss deemed to be the successor's can be carried forward for not more than eight assessment years from the year in which it was first computed for the original predecessor entity (s. 72A(6B), (7)(ab)).
Under the 2025 Act, a set-off allowed before 1 April 2026 under s. 72A is deemed income under that Act in the year a condition is breached (s. 536(2)(o)).
Status
Operative for assessment year 2026-27. Sub-section (6B) and clause (ab) of sub-section (7) were inserted by the Finance Act, 2025, w.e.f. 1-4-2026, as the Act's own note records, so they apply from assessment year 2026-27. The Finance Act, 2026 does not amend s. 72A.
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. 116.
Function in the statutory architecture
Section 72A transfers a predecessor's accumulated business loss (excluding speculation loss) and unabsorbed depreciation to its successor. On an amalgamation of (a) a company owning an industrial undertaking, a ship or a hotel with another company, (b) a banking company with a specified bank, (c) public sector companies, or (d) an erstwhile public sector company with another company within five years of the end of the share purchase agreement restriction, these are deemed to be the amalgamated company's for the previous year of amalgamation. Under clause (d) they cannot exceed the public sector company's figures on the date it ceased to be one.
The amalgamating company must have carried on the loss-making business for three or more years and held continuously at least three-fourths of the book value of fixed assets held two years before amalgamation; the amalgamated company must hold at least three-fourths of the book value of the fixed assets acquired, and continue the business, for at least five years, and meet any prescribed conditions (s. 72A(2)). On a demerger, loss directly relatable to the transferred undertakings goes to the resulting company; any other loss is apportioned in the ratio of assets retained and transferred. Sub-sections (6) and (6A) extend the rule to a firm or proprietary concern succeeded by a company under s. 47(xiii) or (xiv), and to a private or unlisted public company converted into an LLP under s. 47(xiiib).
Operative consequences
Status
Operative for assessment year 2026-27. Sub-section (6B) and clause (ab) of sub-section (7) were inserted by the Finance Act, 2025, w.e.f. 1-4-2026, as the Act's own note records, so they apply from assessment year 2026-27. The Finance Act, 2026 does not amend s. 72A.
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. 116.