Core concepts
- 01M&A structures: merger, demerger, slump sale, share purchase, asset purchase — tax differs.
- 02Section 2(1B) merger — tax neutrality conditions; Sec 47 exemptions.
- 03Sec 72A — carry forward of losses on amalgamation (industrial undertakings).
- 04Stamp duty + GST implications on slump sale / asset sale.
- 05Valuation: DCF, market multiples, asset-based; Indian Companies Act Rule 11UA.
Flowchart summary
M&A Tax Planning Tree | Choose Structure | +-- Merger (Sec 2(1B)) -- tax neutral +-- Demerger (Sec 2(19AA)) -- conditions +-- Slump Sale (Sec 50B) -- gain taxable +-- Share Sale -- shareholder taxed | Consider: Stamp duty, GST, Sec 72A loss carry-fwd
Exam-critical pointers
- ⭐Sec 2(1B) merger: all assets/liabilities transferred + shareholders holding ≥ 75% become shareholders of amalgamated co.
- ⭐Demerger Sec 2(19AA): resulting co issues shares pro-rata; book values retained.
- ⭐Stamp duty often paid in state where assets are located — significant for asset transfers.
- ⭐Buy-back tax (Sec 115QA) makes share buyback unattractive vs dividend (post-2020).
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