In what should come as a big relief to those interested in acquiring IDBI Bank, finance minister Nirmala Sitharaman on Wednesday announced that the winner will be able to carry forward accumulated losses and unabsorbed depreciation, a key demand made by the bidders.

Currently, Section 72A of the Income Tax Act allows carry forward and set off of an accumulated loss (against profit) and unabsorbed depreciation allowance in the case of amalgamation or demerger. However, it is not available in the case of strategic disinvestment. This is now being permitted.

"To facilitate further strategic disinvestment, it is proposed to amend the definition of strategic disinvestment in section 72A of the Income Tax Act so as to provide that strategic disinvestment shall mean the sale of shareholding by the central government, the state government or public sector company in a public sector company or a company which results in a reduction of its shareholding below 51 per cent, and transfer of control to the buyer,” the budget papers said.

The government is also proposing to amend section 72AA of the Income Tax Act to allow carry-forward of accumulated losses and unabsorbed depreciation allowance in the case of amalgamation of one or more banking company with any other banking institution or a company subsequent to a strategic disinvestment. This is if such amalgamation takes place within five years of the strategic disinvestment.

The amendment will take effect from April, 1, 2023 and will apply to the assessment year 2023-24 and subsequent assessment years.