Rule 60: Amalgamation production and loss carry-forward conditions
Rule 60 prescribes production and certification conditions for the section 116 amalgamation provision on accumulated losses and unabsorbed depreciation. It applies to the amalgamated company owning the transferred industrial undertaking.
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Rule 60 - Conditions for carrying forward or set-off of accumulated loss and unabsorbed depreciation allowance in case of amalgamation
(1) The conditions referred to in section 116(4)(b)(iii) shall be the following:— (a) the amalgamated company, owning an industrial undertaking of the amalgamating company by way of amalgamation, shall– (i) achieve the level of production of at least 50% of the installed capacity of the said undertaking before the end of four years from the date of amalgamation; and (ii) continue to maintain the said minimum level of production till the end of five years from the date of amalgamation; and (b) the amalgamated company shall furnish to the Assessing Officer a certificate in Form No. 29, duly verified by an accountant as defined in section 515(3)(b), with reference to the books of account and other documents showing particulars of production, along with the return of income for the relevant tax year during which the prescribed level of production is achieved and for subsequent relevant tax years falling within five years from the date of amalgamation.
(2) For the purposes of sub-rule (1)(a), the Central Government, on an application made by the amalgamated company, may relax the condition of achieving the level of production or the period during which the same is to be achieved, or both, in suitable cases having regard to the genuine efforts made by the amalgamated company to attain the prescribed level of production and the circumstances preventing such efforts from achieving the same.
(3) For the purposes of this rule, "installed capacity" means the capacity of production existing on the date of amalgamation;
Rule breakdown
Identify the undertaking and parent-section claim
The rule supplies conditions referred to in section 116(4)(b)(iii). Identify the industrial undertaking acquired by amalgamation and the particular loss or depreciation claim.
These conditions supplement the parent Act requirements; meeting the production target alone does not establish every condition for carry-forward or set-off.
Fix installed capacity at the amalgamation date
Installed capacity means the production capacity existing on the date of amalgamation. Use that defined baseline for the target.
Retain technical capacity records and the amalgamation date. Do not substitute a later expanded or reduced capacity figure without applying the statutory definition.
Reach the target and maintain it
The amalgamated company must reach at least 50% of installed capacity before the end of four years from amalgamation and maintain that minimum production level until the end of five years from that date.
These are distinct achievement and maintenance requirements. Record production consistently against the identified undertaking and baseline.
Furnish Form 29 with the relevant returns
A certificate in Form No. 29, verified by the defined accountant by reference to books and production records, must accompany the return for the year in which the target is achieved and subsequent relevant tax years within the five-year period.
Keep the production ledgers, accountant’s working and certificates aligned with the returns. A one-time certificate does not replace subsequent certificates where the rule requires them.
Application for relaxation and practical example
The Central Government may, on the amalgamated company’s application, relax the achievement level or the time for achieving it, or both, in suitable cases considering genuine efforts and the circumstances preventing success. Relaxation is not automatic.
Hypothetical: installed capacity at amalgamation is 100,000 units. The ordinary target is at least 50,000 units before the four-year point, with the stated maintenance requirement through five years. Record any approved relaxation and its actual scope separately.
Key takeaways
50% production target
Use installed capacity existing at amalgamation.
Four-year achievement, five-year maintenance
Both periods run from the amalgamation date.
Form 29 certificates
The achievement year and subsequent relevant years require the stated certification.
Relaxation needs a decision
A genuine-effort application does not itself alter the conditions.
Practical checklist
- Preserve the amalgamation-date capacity evidence.
- Track production and the achievement and maintenance periods.
- Obtain and furnish the required Form 29 certificates.
- Document genuine efforts and any approved relaxation.
Avoid
- Do not assume the target alone establishes all section 116 conditions.
- Do not treat a relaxation application as an approval.
FAQs
Which installed capacity is used?
Capacity existing on the amalgamation date, as defined in sub-rule (3).
Is reaching 50% once sufficient?
The rule separately requires maintenance of the minimum level until the end of five years from amalgamation.
Can the company grant itself more time?
No. The Central Government may grant the specified relaxation on an application in suitable cases.
Which form certifies production?
Form No. 29, duly verified by the accountant referred to in the rule.
Glossary
- Installed capacity
- The production capacity existing on the date of amalgamation.
- Form 29
- The prescribed accountant-verified production certificate.
- Amalgamated company
- The company owning the industrial undertaking by way of the amalgamation addressed by the rule.