Section 35DD of ITA, 1961 : Section 35Dd: Amortisation Of Expenditure In Case Of Amalgamation Or Demerger

Explanation using Example

Imagine XYZ Pvt. Ltd., an Indian company, undergoes a merger with ABC Corp. on April 10, 2021. In the process, XYZ Pvt. Ltd. incurs expenses amounting to INR 500,000 exclusively for the amalgamation process. According to Section 35DD of the Income-tax Act, 1961, XYZ Pvt. Ltd. can claim a deduction of INR 100,000 (which is one-fifth of the expenditure) per year for five consecutive years starting from the financial year 2021-22. This helps XYZ Pvt. Ltd. spread the financial impact of the amalgamation over a period of time. However, they cannot claim this expenditure under any other provision of the Income-tax Act, ensuring no double benefit is availed for the same expense.