Demerger may not be tax-neutral if holding company issues shares: Mumbai ITAT

Mumbai ITAT ruled demerger share issuance by holding company invalidates loss carry-forward. A subsidiary receiving business must issue shares for tax neutrality. This decision affects corporate restructuring and group reorganizations. Companies must now re-evaluate demerger structures and their tax implications. The ruling clarifies statutory conditions for tax-neutral demergers under the Income-tax Act.

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