what is the difference b/w merger & reverse merger
2 Replies
Jitender
(Chartered Accountant)
(8724 Points)
Replied 24 March 2008
reverse merger is also a merger. it is done to gain the benefit from sec72A of income tax act where a good co is merged with a loss making co.
Samir
(Chartered Accountant)
(145 Points)
Replied 25 March 2008
reverse merger is also a merger. In this case, a profit making company gets merged with a loss making company.
Some of the salient Features of Reverse Merger (or when can one opt for reverse merger?):
(a) In merger, to make it income tax compliant, conditions laid down in Sec.72A has to be fulfilled along with criteria laid down in Sec.2(1B). But, it is not important in Reverse Merger to comply with provisions of Sec.72A.
(b) Normally, in case of Service Industry, to get benefit of losses of an undertaking, concept of reverse merger applies as the provisions of Sec.72A as regards carry forward of business losses and unabsorbed depreciation is not applicable in case of non-industrial undertaking, which excludes service industry in specific terms under definition of industrial undertaking u/s.72A(7).
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