Home | | Merchant Banking and Financial Services | Major Issues of M&A in India

Chapter: Business Science - Merchant Banking and Financial Services - Other Fee Based Management Introduction

| Study Material, Lecturing Notes, Assignment, Reference, Wiki description explanation, brief detail |

Major Issues of M&A in India

Business combinations and re-structuring in the form of merger, etc. have been attempted to face the challenge of increasing competition and to achieve synergy in business operations. The major issues of M&A are as follows:

Major Issues of M&A in India

 

Business combinations and re-structuring in the form of merger, etc. have been attempted to face the challenge of increasing competition and to achieve synergy in business operations. The major issues of M&A are as follows:

Depreciation The acquiring firm claims depreciation in respect of fixed assets transferred to it by the target firm. The depreciation allowance is available on the written down value of fixed assets. Further, the depreciation charge is based on the consideration paid and without any revaluation.

 

R&D Expenditure It is possible for the acquiring firm to claim the benefit of tax deduction under section 35 of the Income Tax Act, 1961 in respect of transfer of any asset representing capital expenditure on R&D.

 

Tax Exemption The fixed assets transferred to the acquiring firm by the target firm are exempt from capital gains tax. This is however subject to the condition that the acquiring firm is an Indian Company and that shares are swapped for shares in the target firm. Further, as the swap of shares is not considered as sale by the shareholders, profit or loss on such swap is not taxable in the hands of the shareholders of the amalgamated company.

 

Carry Forward Losses The Indian Income Tax Act, 1961 contains highly favorable provision with regard to merger of a sick company with a healthy company. For instance, section 72A (1) of the Act gives the advantage of carry forward of losses of the target firm. The benefit is however available only:

• Where the acquiring from is an Indian Company;

• Where the target firm is not financially viable;

• Where the merger is in public interest,

• Where the merger facilities the revival of the business of the target firm; and

• Where the scheme of amalgamation is approved by a specified authority.


Study Material, Lecturing Notes, Assignment, Reference, Wiki description explanation, brief detail


Copyright © 2018-2020 BrainKart.com; All Rights Reserved. Developed by Therithal info, Chennai.