Budget Wish List To Augment M&A Activity

Carry forward of tax losses on the merger of a transferor company in the services sector

The Pandemic has had an adverse impact across all sectors with the service industry not being an exception. While the financial sector is facing headwinds including increase in non-performing assets resulting in increased losses and shortage of liquidity, the real estate sector too has witnessed a tough time due to disruptions in labour supply, logistics and increasing finance cost on unsold inventory.

In the extant Income-tax Act, 1961 ("Act'), on amalgamation, the transferee company can carry forward the accumulated tax losses of the transferor company only where the transferor company owns an 'Industrial Undertaking'. In other words, if the transferor company is part of a service sector such as the financial sector or real estate, the transferee company would not be able to carry forward the accumulated tax losses of the transferor company pursuant to amalgamation.