Pigeon Limited was amalgamated with Laksh Limited on 01.04.2024. All the conditions of section 2(1B) were satisfied. Pigeon Limited has the…

Computation of total income of Laksh Limited for the A.Y. 2025-26 Particulars ₹ (in lakhs) Business income before setting off brought forward losses of Pigeon Ltd. 160.00 Add: Excess depreciation claimed in the scheme of amalgamation of Pigeon Limited with Laksh Limited. Value at which assets are transferred by Pigeon Ltd. 150 WDV in the books of Pigeon Ltd. 100 Excess accounted 50 Excess depreciation claimed in computing taxable income of Laksh Ltd. [50lakhs × 15%] [Explanation 2 to section 43(6)] 7.50 167.50 Set-off of brought forward business loss of Pigeon Ltd. (See Notes 2 & 4) (125.00) Set-off of unabsorbed depreciation under section 32(2) read with section 72A (See Notes 2 & 4) (20.00) Set-off of unabsorbed capital expenditure under section 35(1)(iv) read with section 35(4) (See Note 5) (2.50) Business income 20.00 Notes: It is presumed that the amalgamation is within the meaning of section 72A of the Income-tax Act, 1961.In the case of amalgamation of companies, the unabsorbed losses and unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected and such business loss and unabsorbed depreciation shall be carried forward and set-off by the amalgamated company for a period of 8 years and indefinitely, respectively.As per section 72A(7), the accumulated loss to be carried forward specifically excludes loss sustained in a speculative business. Therefore, speculative loss of 5.5 lakhs of Pigeon Ltd. cannot be carried forward by Laksh Ltd.Section 72(2) provides that where any allowance or part thereof unabsorbed under section 32(2) (i.e., unabsorbed depreciation) or section 35(4) (i.e., unabsorbed scientific research capital expenditure) is to be carried forward, effect has to be first given to brought forward business losses under section 72.Section 35(4) provides that the provisions of section 32(2) relating to unabsorbed depreciation shall apply in relation to deduction allowable under section 35(1)(iv) in respect of capital expenditure on scientific research related to the business carried on by the assessee. Therefore, unabsorbed capital expenditure on scientific research can be set-off and carried forward in the same manner as unabsorbed depreciation.The restriction contained in section 73 is only regarding set-off of loss computed in respect of speculative business. Such a loss can be set-off only against profits of another speculation business and not non-speculation business. However, there is no restriction under the Income-tax Act, 1961 regarding set-off of normal business losses against speculative income. Therefore, normal business losses can be set-off against profits of a speculative business. Consequently, there is no loss or allowance to be carried forward by Laksh Ltd. to the A.Y. 2026-27