Accumulated losses and depreciation of Demerger :

Accumulated losses and depreciation relatable to the undertaking being transferred in a scheme of demerger is allowed to be carried forward and set off in the hands of the resulting company.

In case such past losses cannot be directly attributed to the undertaking being transferred, the Act provides for the apportionment of the same between the demerged company and the resulting company in the same proportion in which the value of the assets have been transferred.

Depreciation in the hands of the resulting company: The depreciable assets base for tax purposes in the hands of the resulting company would be tax written down value in the hands of the demerged company.

Reduction from book value of assets in the hands of the demerged company: The tax depreciable assets base for the demerged company will be reduced by the tax written down value of the assets transferred in the demerger process.

Cost of acquisition of shares in the resulting company: In a demerger transaction, the shareholders of the demerged company are allotted shares in the resulting company by virtue of the demerger.

The cost of acquisition of the shares of the demerged company in the hands of the shareholders will be calculated by apportioning the cost of acquisition of the shares of the demerged company in the ratio of net assets transferred (to the resulting company) to the net worth of the demerged company.