The finance bill has proposed tax benefit for bank mergers. A bank merged with another loss-making bank will get the benefit of Income Tax Act provisions relating to set-off and carry forward of loss and unabsorbed depreciation. | |
| Oriental Bank of Commerce (OBC), which was asked to rescue the Global Trust Bank by way of merger, will benefit from this amendment. |
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| Clause 19 of the Income Tax Act seeks to insert a new section 72AA in the Income-tax Act relating to carry forward and set-off of accumulated loss and unabsorbed depreciation allowance in scheme of amalgamation of banking company in certain cases, stated the finance bill. |
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| As of now, only companies enjoy the benefit of setting off losses against profits between two merged entities to avail of a tax exemption. |
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| The proposed new amendment will be effective retrospectively from 1st April, 2005 and shall accordingly apply for assessment year 2005-06 and subsequent years. |
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| Therefore, Oriental Bank of Commerce will benefit from it. |
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| The Indian Banks' Association's report on consolidation had recommended amendment of Section 72 A of the Income Tax Act to extend the available benefits of set-off of accumulated losses and unabsorbed depreciation to all amalgamations. |
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