Income Tax Act to be amended to facilitate merger of Air India and Indian

New Delhi: The finance ministry will allow a key amendment in the Income Tax Act to take place which will enable state-run carriers Air India and Indian Airlines to carry forward unabsorbed depreciation once their proposed merger takes place.

According to officials, the finance ministry will amend section 72A of the Income Tax Act that will enable the carrying forward of unabsorbed depreciation, but such a provision will be applicable only for the planned merger of Air India and Indian Airlines, and will not extend to amalgamations of private airlines. Officials clarified that the amendment is only meant to act as a catalyst for the merger of the two state-run carriers.

Current provisions of the Income Tax Act do not allow merged companies in the airline business to carry forward their tax and unabsorbed depreciations for setting up a merged entity. It has been the civil aviation ministry's argument that this provision deters mergers and acquisitions in the airline business and further that any amendment to section 72A should also extend to other carriers for at least five years.