MISCELLANEOUSCentral

Section 7 of The Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003

(1)Where any exemption from, or any assessment with respect to, any tax has been granted or made or any benefit by way of set off or carry forward of any unabsorbed depreciation or investment allowance or other allowance or loss has been extended or is available to the Development Bank under the Income-tax Act, 1961 (43 of 1961), such exemption, assessment or benefit shall continue to have effect in relation to the Company.
(2)Where any payment made by the Development Bank is exempted from deduction of tax at source under any provision of the Income-tax Act,1961 (43 of 1961), such exemption will continue to be available as if the provisions of the said Act made applicable to the Development Bank were operative in relation to the Company.
(3)The transfer and vesting of the undertaking of the Development Bank or any part thereof in terms of section 3 shall not be construed as a transfer within the meaning of the Income-tax Act, 1961 (43 of 1961) or any other law for the time being in force.

Summary

Existing tax exemptions and assessments made under the Income-tax Act, 1961 (43 of 1961) will continue to apply to the Company.
Tax benefits for setting off or carrying forward unabsorbed depreciation, investment allowances, other allowances, or losses under the Income-tax Act, 1961 remain available to the Company.
Exemptions on tax deduction at source (meaning tax withheld from payments) for any payment made by the bank will continue to be available to the Company.
The transfer and vesting of the bank's undertaking under section 3 of this Act is not considered a transfer under the Income-tax Act, 1961 or any other law.

Practical examples

1ABC Textiles Limited paid interest on a loan to the old Development Bank, and this interest was exempt from tax deduction at source. When the bank is transferred to the new Company on July 2, 2004, ABC Textiles Limited can continue to make these payments without deducting tax.

2The old Development Bank had an unabsorbed depreciation loss of 50,000,000 rupees from its 2002 operations. After the transfer, the new Company can carry forward this loss to set it off against its future taxable business income.

FAQ

1. Which specific tax law is covered under Section 7?

The Income-tax Act, 1961 (43 of 1961).

2. What happens to the tax assessments and exemptions of the old Development Bank?

They will continue to have full effect in relation to the new Company.

3. Will the new Company still benefit from the unused tax allowances of the old bank?

Yes, benefits like setting off or carrying forward unabsorbed depreciation or investment allowances will continue to have effect for the Company.

Test yourself

Q1.Under which specific tax law must the existing tax exemptions continue to have effect for the Company?

Q2.Which section of this Act is cross-referenced in Section 7 regarding the transfer and vesting of the undertaking?

Q3.What tax allowances can the Company continue to carry forward or set off under Section 7(1)?

Q4.How does Section 7(3) treat the transfer of the bank's undertaking for tax purposes?

Q5.Under Section 7(2), what happens to payments made by the Development Bank that were exempt from deduction of tax at source?

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