KP (P) Ltd., a domestic Company having two undertakings engaged in manufacture cement and steel, decided to hive off cement division to SA(P) Ltd, a domestic Indian Company by way of demerger. The net book value of asset

The conditions which are to be satisfied under the Income-tax Act, 1961 for a demerger are as under: All the property of the undertaking, being transferred by the demerged Company, immediately before the demerger, becomes the property of the resulting company by virtue of the demerger. All the liabilities relating the undertaking, being transferred by the demerged company, immediately before the demerger, becomes the liabilities of the resulting company by virtue of the de-merger. The property and the liabilities of the undertaking or undertakings being transferred by the demerged Company are transferred at the values appearing in its books of account immediately before demerger. (Revaluation is to be ignored) The resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged Company on a proportionate basis. This condition is not applicable where resulting Company itself is holding the shares in demerged Company. The shareholders holding not less than 75% in value of the shares in the demerged Company becomes the shareholders of resulting Company or companies by virtue of de merger. The transfer of undertaking is on a going concern basis.