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Consider the given statements under the Income-tax Act, 2025: (I) An Indian company that incurs…

Section 52 of the Income-tax Act, 2025 (Table: Sl. No. 1) allows expenditure incurred by an Indian company wholly and exclusively for amalgamation to be deducted in equal…

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Consider the given statements under the Income-tax Act, 2025:
(I) An Indian company that incurs expenditure wholly and exclusively for the purposes of amalgamation is allowed a deduction of it in equal instalments over five tax years.
(II) Where the amalgamated company, as successor in business, obtains the benefit of cessation or remission of a trading liability of the amalgamating company that had been allowed as a deduction, the benefit is taxable in the hands of the amalgamated company.

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Answer and explanation

Correct answer A

Section 52 of the Income-tax Act, 2025 (Table: Sl. No. 1) allows expenditure incurred by an Indian company wholly and exclusively for amalgamation to be deducted in equal instalments over five tax years, beginning with the year of amalgamation. Section 38(4) taxes a benefit from cessation or remission of a trading liability in the hands of the successor in business, and section 38(6)(b) defines successor in business to include the amalgamated company. Hence "Both (I) and (II) are true." Section 52 corresponds to section 35DD of the repealed Income-tax Act, 1961.

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