M/s DTA Private Limited, an existing manufacturing company having two units named X and Y split up both units into two separate companies as X Limited and Y Limited in the month of December, 2023. The relevant informatio

Computation of Taxable Profits of the Resulting Companies Particulars X Limited Y Limited Business Profits earned during F.Y. 2023-24 22,75,000 17,26,300 Speculation Profits earned F.Y. 2023-24 22,000 26,500 Less: Unabsorbed Depreciation (3,15,000) (2,28,000) Accumulated Business Losses (12,50,000) (8,26,500) Preliminary Expenses (remaining for 3 years) (9000) (3000) Expenses of demerger (1/5th allowed as per section 35DD) (15,000) (7,000) Total Deductions 15,89,000 10,64,500 Balance Taxable Profit 7,08,000 6,88,300 Note. Unabsorbed Capital Expenditure Scientific Research cannot be brought forward by demerged companies. (ITO vs. Mahyco Vegetable Seeds Ltd (2009) 308 ITR (AT) 205, Mumbai Accumulated loss as per section 72A of Income Tax Act, does not include speculation business loss. So, these are not eligible for carry forward and set off by resulting companies. Preliminary expenses remaining for write off will be apportioned in the ratio of respective book values of the demerging units at the time of demerger and will be written off for the remaining period in the same manner as would have been allowed to the demerged company. Same is calculated hereunder: Total books values of both units: 72,00,000+24,00,000=96,00,000 Apportionment of Preliminary Expenses: X Limited=36,000*72,00,000/96,00,000=27,000 Y Limited= 36,000*24,00,000/96,00,000=9,000 Preliminary Expenses allowed to be written off during the F.Y. 2023-24: X Limited = 27,000/3 = 9000 Y Limited = 9,000/3=3000