Definition of ‘Amalgamation’ under the Income Tax Act: Some Practical Aspects Regarding the Qualifying Conditions

Ms. Shruti K. P.

doi:https://doi.org/10.17492/jpi.vision.v8i2.822106

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Definition of ‘Amalgamation’ under the Income Tax Act: Some Practical Aspects Regarding the Qualifying Conditions

Shruti K. P.

Vol 8 , Issue 2 , July - December 2021 | Pages: 86-95 | Perspective

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https://doi.org/10.17492/jpi.vision.v8i2.822106

Published Online: December 15, 2021

Author Details ( * ) denotes Corresponding author

1. * Shruti K. P., Advocate, Na, Na, Mumbai, Maharashtra, India (nethiar@gmail.com)

Nature of payment of merger consideration is a key aspect with respect to the tax neutrality of mergers. This manuscript briefly examines the concept of amalgamation under the Income-tax Act, 1961, and the immediate implications arising if the specific conditions prescribed under the Act are not fulfilled. It is observed that the tax neutrality of an amalgamation appears to hinge largely on clause (iii) of Section 2(1B) of the IT Act. If an amalgamation does not qualify this clause, the tax neutrality of the transaction may be impacted. Hence, the share swap ratio needs to be computed appropriately to ensure that there are no adverse tax implications to any of the parties in the merger.

Keywords

Merger; Amalgamation; Income Tax Act.