Income Tax Act 2058

Chapter 8 Assessment of Net Profit from Property and Liability

Section 47A : Special arrangement due to merger of business
1)In the case of merger or acquisition of entities of the same nature carrying on banking and financial business or insurance business, the provisions of clauses (a), (b), (d), (e), (f) and (g) of sub-section (2) of Section 57 and sub-section (3) of the same Section shall not apply.
Provided that if there remains any loss of the entity not in existence due to the merger which could not be deducted, such loss shall be deducted pro rata in the upcoming seven years. If the entity so deducting the loss in equal instalments is re-divided prior to the deduction of the whole loss, tax shall be paid in the amount deducted for such loss at the rate of tax prevailing in the fiscal year in which merger or acquisition took place.
2) If the property and liability are disposed of upon the merger of the entities pursuant to sub-section (1), it shall be as follows:
a) In the case of stock-in-trade and business assets, –
(1) Amount equal to net expenses for the property immediately before the disposal shall be deemed to have been received by such a person for such disposal and
(2) Amount equal to that mentioned in sub-clause (1) shall be deemed to have been spent by the person acquiring property.
b) In case of disposal of depreciable property, –
(1) Amount equal to the remaining value of the group of descending system pursuant to Section 4 of Schedule II at the time of disposal shall be deemed to have been received for such disposal and
(2) Amount equal to that mentioned in sub-clause (1) shall be deemed to have been spent by the person acquiring property.
c) In case of disposal of liability,-
(1) Amount equal to the market value immediately before the disposal or to the net income of liability, whichever is lesser, shall be deemed to have been spent by that person for such disposal and
(2) Amount equal to that mentioned in sub-clause (1) shall be deemed to have been received by the person bearing liability as a result of bearing such liability.
(d) The entity amalgamating the business or the entity being amalgamated shall, in computing the cost of property and liability, compute only the cost of the property and liability maintained at the time of operating such amalgamated business (before a merger or acquisition) by the amalgamated entity pursuant to clauses (a), (b) and (c).
3) In the case of an additional lump sum payment to be made for the purpose of granting retirement in a group to the employees working in the entity disposed upon being amalgamated or the entity post the merger pursuant to sub-section (1), tax deduction shall be made from the payment by giving exemption of fifty percent of the rate by which tax has to be deducted from the retirement payment (except the payment to be made through retirement fund or as mentioned in terms of conditions of the employee).
4) If the shareholders existing in the entity being disposed of after amalgamation pursuant to sub-section (1) dispose of their shares through sale within two years of such amalgamation, no capital gain tax shall be levied in the gain earned from such disposed of shares.
5) No tax shall be levied on dividends distributed to the shareholders existing at the time of amalgamation of the entity pursuant to sub-section (1) within two years of such amalgamation.
6) The entity of the same category willing to be amalgamated pursuant to sub-section (1) shall provide the letter of intent for amalgamation to the Inland Revenue Department not later than the end of Ashad 2079.
7) The entity submitting the letter of intent for amalgamation pursuant to sub-section (6) to be amalgamated pursuant to sub-section (1) shall complete the procedure not later than the end of Ashad 2080.
8) The entities that are amalgamated after the commencement of this Section but have not utilised the facility referred to in this Section may also utilise the facility accordingly.
9) The provision of this Section shall not be deemed to be applicable to an entity that does not submit the letter of intent within the time specified in sub-section (6) and to an entity that does not complete the process of amalgamation within the date mentioned in sub-section (7).