Chapter IV - Computation of Total Income
Section 65
Section 65: interpretation for purposes of Section 64
Section 65 is a pure definitions section that supplies the meaning of every specialised term used in Section 64 - the provision that splits certain tax deductions between a predecessor and successor co-operative bank when a business reorganisation takes place.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
For the purposes of section 64,–– (a) “amalgamation” means the merger of an amalgamating co-operative bank with an amalgamated co-operative bank, if— (i) all the assets and liabilities of the amalgamating co-operative bank or banks immediately before the merger (other than the assets transferred, by sale or distribution on winding up, to the amalgamated co-operative bank) become the assets and liabilities of the amalgamated co-operative bank; (ii) the members holding 75% or more voting rights in the amalgamating co-operative bank become members of the amalgamated co-operative bank; and (iii) the shareholders holding 75% or more in value of the shares in the amalgamating co-operative bank (other than the shares held by the amalgamated co-operative bank or its nominee or its subsidiary, immediately before the merger) become shareholders of the amalgamated co-operative bank; (b) “amalgamating co-operative bank” means— (i) a co-operative bank which merges with another co-operative bank; or (ii) every co-operative bank merging to form a new co-operative bank; (c) “amalgamated co-operative bank” means— (i) a co-operative bank with which one or more amalgamating co-operative banks merge; or (ii) a co-operative bank formed as a result of merger of two or more amalgamating co-operative banks; (d) “business reorganisation” means reorganisation of business involving the amalgamation or demerger of a co-operative bank or conversion of a primary co-operative bank; (e) “conversion” means transition of a primary co-operative bank to a banking company under the scheme of the Reserve Bank of India as may be notified vide its circular number DCBR. CO. LS. PCB. Cir. No. 5/07.01.000/2018-19, dated 27th September, 2018; (f) “converted banking company” means a banking company formed as a result of conversion from primary co-operative bank; (g) “demerger” means the transfer by a demerged co-operative bank of one or more of its undertakings to any resulting co-operative bank, in such manner that— (i) all the assets and liabilities of the undertaking or undertakings immediately before the transfer become the assets and liabilities of the resulting co-operative bank; (ii) the assets and the liabilities are transferred to the resulting co-operative bank at values (other than change in the value of assets consequent to their revaluation) appearing in its books of account immediately before the transfer; (iii) the resulting co-operative bank issues, in consideration of the transfer, its membership to the members of the demerged co-operative bank on a proportionate basis; (iv) the shareholders holding 75% or more in value of the shares in the demerged co-operative bank (other than shares already held by the resulting bank or its nominee or its subsidiary immediately before the transfer), become shareholders of the resulting co-operative bank, otherwise than as a result of the acquisition of the assets of the demerged co-operative bank or any undertaking thereof by the resulting co-operative bank; (v) the transfer of the undertaking is on a going concern basis; and (vi) the transfer is as per the conditions specified by the Central Government, by notification, having regard to the necessity to ensure that the transfer is for genuine business purposes; (h) “demerged co-operative bank” means the co-operative bank whose undertaking is transferred, pursuant to a demerger, to a resulting bank; (i) “predecessor co-operative bank” means the amalgamating co-operative bank or the demerged co-operative bank, or the primary co-operative bank, which has been succeeded as a result of conversion; (j) “primary co-operative bank” shall have the meaning assigned to it in clause (ccv) of section 5 of the Banking Regulation Act, 1949; (k) “resulting co-operative bank” means— (i) one or more co-operative banks to which the undertaking of the demerged co-operative bank is transferred in a demerger; or (ii) any co-operative bank formed as a result of demerger; (l) “successor co-operative bank” means the amalgamated co-operative bank or the resulting bank.
Introduction
This definition section controls whether the deduction-apportionment rule in Section 64 is available. It gives separate meanings to amalgamation, demerger, conversion and the banks on each side.
Key takeaways
Reorganisation definitions
This section defines the co-operative bank, predecessor, successor and business-reorganisation terms used for the deduction-sharing rule in Section 64.
Read with Section 64
A transfer qualifies for that deduction treatment only when the entities and transaction satisfy the defined statutory categories.
Key terms defined
- "Amalgamation" - the merger of an amalgamating co-operative bank with an amalgamated co-operative bank, where all assets/liabilities (other than those sold/distributed on winding up) become those of the amalgamated bank, at least 75% of the members (by voting rights) become members of the amalgamated bank, and at least 75% (by value of shares) of the shareholders become shareholders of the amalgamated bank.
- "Amalgamating co-operative bank" - a co-operative bank that merges with another, or any co-operative bank merging to form a new co-operative bank.
- "Amalgamated co-operative bank" - the bank with which one or more amalgamating banks merge, or the new bank formed by the merger.
- "Business reorganisation" - reorganisation involving the amalgamation or demerger of a co-operative bank, or conversion of a primary co-operative bank.
- "Conversion" - transition of a primary co-operative bank into a banking company under the Reserve Bank of India's notified scheme (RBI circular DCBR.CO.LS.PCB.Cir.No.5/07.01.000/2018-19, dated 27 September 2018).
- "Converted banking company" - a banking company formed as a result of such conversion.
- "Demerger" - the transfer by a demerged co-operative bank of one or more undertakings to a resulting co-operative bank, on a going-concern basis, at book values, with proportionate membership issued to the demerged bank's members, at least 75% (by value of shares) of shareholders continuing as shareholders of the resulting bank, and subject to conditions the Central Government notifies to ensure the transfer is for genuine business purposes.
- "Demerged co-operative bank" - the bank whose undertaking is transferred in a demerger.
- "Predecessor co-operative bank" - the amalgamating bank, the demerged bank, or the primary co-operative bank succeeded through conversion.
- "Primary co-operative bank" - has the meaning assigned in Section 56(ccv) of the Banking Regulation Act, 1949.
- "Resulting co-operative bank" - the bank(s) to which the demerged bank's undertaking is transferred, or the bank formed as a result of demerger.
- "Successor co-operative bank" - the amalgamated bank or the resulting bank.
Identify the transaction route
For an amalgamation, check the statutory movement of assets and liabilities and the member and shareholder continuity tests.
For a demerger, trace the transferred undertaking and resulting co-operative bank; conversion is tied to the specified primary-bank route.
Name the parties correctly
Classify the predecessor and successor by the definitions, not their commercial labels.
Use those identities when allocating Section 64 deductions and documenting the reorganisation-year day count.
Step-by-step flow for applying Section 65
- 1
Which route is involved: amalgamation, demerger or conversion?
These three together make up "business reorganisation" (Section 65(d)).
- 2
Amalgamation: are all three conditions met?
All assets and liabilities pass to the amalgamated bank (other than assets transferred by sale or distribution on winding up). Members with 75% or more of voting rights become its members. Shareholders with 75% or more in value of shares (excluding shares held by the amalgamated bank, its nominee or subsidiary) become its shareholders.
- Any condition fails: Not an amalgamation under Section 65(a).
- All met: Treat it as an amalgamation.
- 3
Demerger: are all six conditions met?
Assets and liabilities pass at book values; membership is issued proportionately; 75% share-value continuity; transfer as a going concern; and conditions notified by the Central Government.
- 4
Conversion: is it a primary co-operative bank becoming a banking company under the RBI scheme cited in Section 65(e)?
- 5
Label the parties
Identify the predecessor co-operative bank and the successor co-operative bank (or converted banking company), then apply Section 64.
Practical checklist
Do
- Keep the merger, demerger or conversion scheme and ownership records with the Section 64 computation.
- Match each entity to the exact predecessor/successor definition.
Avoid
- Do not use a generic corporate merger definition as a substitute for the co-operative-bank tests here.
Illustrative example
Worked example: testing the 75% conditions for an amalgamation
Hypothetical facts (illustration only, not a real taxpayer): Co-operative Bank X merges into Co-operative Bank Y. All of X's assets and liabilities pass to Y. Members holding 82% of the voting rights in X become members of Y. X's shares are worth ₹10 crore in total, of which ₹1 crore is held by Y. Holders of shares worth ₹7 crore become shareholders of Y.
Assets and liabilities
All pass to Y, so condition (i) is met.
Voting rights
82% is at least 75%, so condition (ii) is met.
Share value base
Shares held by Y are excluded: ₹10 crore - ₹1 crore = ₹9 crore.
Share value test
₹7 crore ÷ ₹9 crore = 77.8%, which is at least 75%, so condition (iii) is met.
Outcome
- This is an "amalgamation". X is the predecessor co-operative bank and Y is the successor co-operative bank for Section 64.
- If only ₹6.5 crore of shareholders had moved (72.2% of ₹9 crore), condition (iii) would fail.
Glossary
- Business reorganisation
- The defined amalgamation, demerger or primary co-operative bank conversion covered by Section 65.
- Converted banking company
- A banking company formed by the specified conversion of a primary co-operative bank.
Frequently asked questions
What does "business reorganisation" mean for a co-operative bank under this Act?
Reorganisation involving the amalgamation or demerger of a co-operative bank, or the conversion of a primary co-operative bank into a banking company, as defined in Section 65(d).
What is the minimum shareholder continuity required for an amalgamation to qualify?
At least 75% in value of the shares in the amalgamating co-operative bank (other than shares already held by the amalgamated bank or its nominee/subsidiary) must become shareholders of the amalgamated bank, per Section 65(a)(iii).
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Get expert help on co-operative bank reorganisation tax treatmentLast updated 10 October 2026