Section 65 — Interpretation for Section 64 | ITA 2025

Section 65 — INTERPRETATION FOR SECTION 64 (CO-OPERATIVE BANK REORGANISATION DEFINITIONS)

Section 65 is the definition section for the s. 64 reorganisation regime — substantive equivalent of 1961 s. 44DB Explanation. It defines: (a) amalgamation; (b) demerger; (c) conversion of co-operative bank to banking company; (d) predecessor / successor; (e) related concepts. Each definition is fact-specific and tracks the conditions necessary for tax-neutral treatment.

Statutory text — Income-tax Act, 2025

Marginal note — Interpretation for purposes of section 64

For the purposes of section 64,—

(a) “amalgamation” means the merger of an amalgamating co-operative bank with an amalgamated co-operative bank, if—

(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 amalga- mated co-operative bank) become the assets and liabilities of the amalgamated co-operative bank;

(ii) the members holding 75% or more voting rights in the amalgam- ating co-operative bank become members of the amalgamated co-operative bank; and

(iii) the shareholders holding 75% 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 amal- gamated co-operative bank;

(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) “amalgamated co-operative bank” means—

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

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

(d) “business reorganisation” means reorganisation of business involving the amalgamation or demerger of a co-operative bank or conversion of a primary co-operative bank;

(e) “conversion” means transition of a primary co-operative bank to a banking company under the scheme of the Reserve Bank of India as may be notified vide its circular number DCBR. CO. LS. PCB. Cir. No. 5/07.01.000/2018-19, dated 27th September, 2018;

(f) “converted banking company” means a banking company formed as a result of conversion from primary co-operative bank;

(g) “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-op- erative 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 trans- fer, its membership to the members of the demerged co-operative bank on a proportionate basis;

(iv) the shareholders holding 75% 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 as per the conditions specified by the Central Gov- ernment, by notification, having regard to the necessity to ensure that the transfer is for genuine business purposes;

(h) “demerged co-operative bank” means the co-operative bank whose undertaking is transferred, pursuant to a demerger, to a resulting bank;

(i) “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;

(j) “primary co-operative bank” shall have the meaning assigned to it in clause (ccv) of section 56 of the Banking Regulation Act, 1949 (10 of 1949);

(k) “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;

(l) “successor co-operative bank” means the amalgamated co-operative bank or the resulting bank.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 65	INCOME-TAX ACT, 1961 — s. 44DB Explanation
Amalgamation — assets / liabilities transfer + ≥ 75% members continue	1961 s. 44DB Expl. (a)
Demerger — undertaking transfer + assets/liab proportionate transfer	1961 s. 44DB Expl. (b)
Conversion of co-op bank to banking company	1961 s. 44DB Expl. (c)

KEY DEFINITIONAL TESTS

(a) AMALGAMATION — requires: (i) all assets / liabilities of amalgamating co-operative bank transfer to amalgamated co-operative bank; (ii) ≥ 75% of members of amalgamating bank become members of amalgamated bank; (iii) RBI / Registrar approval. (b) DEMERGER — requires: (i) all assets / liabilities of UNDERTAKING transfer to resulting co-operative bank; (ii) liabilities transferred proportionately; (iii) consideration to demerged bank's members. (c) CONVERSION — co-operative bank merges with / is succeeded by a banking company under Banking Regulation Act / Multi-State Co-op Societies Act.

PLANNING NOTES

(i) For any cooperative-bank consolidation transaction, run the s. 65 definition test BEFORE structuring — fail any condition and tax-neutrality (s. 64 deduction continuation) is lost. (ii) 75%-membership-continuity threshold is the most-litigated — document member-list pre and post merger. (iii) Demerger requires proportionate liability transfer — disproportion (e.g., NPAs only to one entity) breaks definition. (iv) RBI's Master Direction on Amalgamation of Cooperative Banks (2019) governs regulatory approval — sequencing critical.

CROSS-REFERENCES

Section 64 — Substantive provision (this is its definition section).
Section 70 — General amalgamation / demerger definitions (interaction).
Banking Regulation Act, 1949 — conversion mechanism.
Multi-State Co-operative Societies Act, 2002.
RBI Master Direction — Amalgamation of Cooperative Banks, 2019.

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