Effect of order of tribunal or court in respect of business reorganisation
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 314(1) of Income Tax Act 2025
314(1) Irrespective of anything to the contrary contained in section 263, if prior to the date of order in respect of business reorganisation, any return of income has been furnished under the provisions of the said section by an entity for any tax year to which such order applies, the successor shall furnish, within six months from the end of the month in which the order was issued, a modified return in such form and manner, as prescribed, in accordance with and limited to the said order.
Section 314(2) of Income Tax Act 2025
314(2) Where the assessment or reassessment proceedings for a tax year to which the order in respect of the business reorganisation applies,––
- (a) have been completed on the date of furnishing of the modified return as per the provisions of sub-section (1), the Assessing Officer shall pass an order modifying the total income of the relevant tax year determined in such assessment or reassessment, in accordance with such order and taking into account the modified return so furnished;
- (b) are pending on the date of furnishing of the modified return as per sub-section (1), the Assessing Officer shall pass an order assessing or reassessing the total income of the relevant tax year as per the order of the business reorganisation and taking into account the modified return so furnished.
Section 314(3) of Income Tax Act 2025
314(3) Subject to any other provisions of this section, in an assessment or reassessment made in respect of a tax year under this section, all other provisions of this Act shall apply and the tax shall be chargeable at the rate or rates as applicable to such tax year.
Section 314(4) of Income Tax Act 2025
314(4) In this section,—
- (a) “business reorganisation” means the reorganisation of business involving the amalgamation or demerger or merger of business of one or more persons;
- (b) “order in respect of business reorganisation” means an order of a High Court or tribunal or an Adjudicating Authority as defined in section 5(1) of the Insolvency and Bankruptcy Code, 2016; and
- (c) “successor” means all resulting companies in a business reorganisation, whether or not the company was in existence prior to such business reorganisation.
FAQs on Section 314 of Income Tax Act 2025
What is the purpose of Section 314 of the Income Tax Act, 2025?
Section 314 deals with the effect of a court or tribunal order in cases of business reorganisation. It lays down the procedure for filing modified returns and modifying assessments to reflect the impact of such reorganisation.
What is considered a “business reorganisation” under Section 314?
“Business reorganisation” includes amalgamation, demerger, or merger of businesses of one or more persons.
What is meant by “order in respect of business reorganisation”?
It refers to an order issued by a High Court, tribunal, or Adjudicating Authority as defined under section 5(1) of the Insolvency and Bankruptcy Code, 2016.
Who is considered a “successor” in a business reorganisation?
The term “successor” refers to all resulting companies from a business reorganisation, regardless of whether they existed before the reorganisation.
What is the obligation of a successor if a return was filed before the business reorganisation order?
The successor must file a modified return within six months from the end of the month in which the reorganisation order was issued, as per Section 314(1).
What should the modified return reflect?
The modified return must align with and be limited to the terms specified in the order of the business reorganisation.
What happens if assessment or reassessment was already completed before filing the modified return?
As per Section 314(2)(a), the Assessing Officer shall issue a modification order to adjust the assessed total income based on the reorganisation order and the modified return.
What happens if assessment or reassessment is still pending when the modified return is filed?
According to Section 314(2)(b), the Assessing Officer must assess or reassess the total income based on the reorganisation order and taking into account the modified return.
Do regular provisions of the Income Tax Act, 2025 apply to such modified assessments?
Yes, Section 314(3) states that all other provisions of the Act apply, and tax is to be charged at the rates applicable for that tax year.
Is the six-month timeline for filing a modified return strict?
Yes, the modified return must be filed within six months from the end of the month in which the reorganisation order is issued.
Can this provision override Section 263 of the Income Tax Act, 2025?
Yes, Section 314(1) specifically states it applies irrespective of anything contrary in Section 263.
Are there prescribed forms and manner for filing the modified return?
Yes, the modified return must be furnished in such form and manner as may be prescribed, though these specifics would be issued through rules or notifications under the Act.
