The Central Board of Direct Taxes (CBDT) has issued a significant order that will bring relief to companies that went through business reorganization like mergers, demergers etc. pursuant to orders from authorities like NCLT issued before April 1, 2022.
This order provides a compliance mechanism for these companies which were falling outside the scope of section 170A of the Income Tax Act inserted last year. Section 170A allowed filing of modified returns only for reorganizations approved between April 1, 2022 to September 30, 2022.
Prior to April 1, 2022, there was no specific provision in the Income Tax Act to permit companies to revise their tax returns after a court-approved merger, demerger etc. They had to follow the erstwhile cumbersome process of filing revised returns manually with the tax department. The Finance Act, 2022 introduced Section 170A to simplify this process, but it applied only prospectively to restructurings approved on or after April 1, 2022, leaving the older cases in a lurch.
As per the CBDT order dated March 13, 2024, such successor companies can now electronically file modified returns of income for the relevant assessment years to reflect the impact of the reorganization.
The successor companies have to first communicate to the jurisdictional Assessing Officer using a prescribed proforma by April 30, 2024, requesting enablement of e-filing.
The Assessing Officer will verify whether the revised return pertains to and is limited to the restructuring scheme. Upon satisfaction, the facility for e-filing will be enabled on the tax portal, preferably within 30 days.
The successor company can then electronically file its modified return of income for the relevant assessment year(s) by June 30, 2024 using the functionality “U/s 119(2)(b) – after condonation of delay / Court Order or Sanction Order of Business reorganisation…issued prior to 01.04.2022” on the e-filing website.
No separate application under section 119(2)(b) is required to be filed with CBDT in such cases.
The CBDT has provided a detailed proforma covering aspects like names of predecessor/successor entities, corporate details, previous returns filed, particulars of the restructuring order etc. Verification of correctness of facts is required while submitting this proforma.
The CBDT’s latest order bridges this gap and provides a mechanism for successor companies to align their tax returns with the reorganization schemes sanctioned by tribunals/courts before April 1, 2022. This is a taxpayer-friendly move that will allow companies to efficiently true up their tax records without any fresh substantive adjustments. Impacted companies should make a note of the timelines and proactively initiate the process at the earliest to avail this one-time window.
CBDT Income Tax Order dated 13/03/2024: Modified ITR Filing Allowed to Companies Reorganized Before April 2022
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