An NCLT scheme changes the legal identity of the taxpayer. The transferor company ceases to exist, and the transferee company succeeds to its business and liabilities. The income tax returns and the assessments require careful handling, and the scheme should include a clause that permits the transferee company to revise the returns and to respond to the assessments.
The Revised Return
Section 139(5) of the Income-tax Act, 1961 permits a company to file a revised return within the prescribed period. The scheme often includes a clause that expressly permits the transferee company to revise the income tax returns of the transferor company, even beyond the statutory due date, to give effect to the scheme. The clause is designed to address the practical difficulty that arises when the scheme is sanctioned after the due date for the return.
Section 170A
Section 170A, inserted with effect from 1 April 2022, requires the successor entity to file a modified return in the prescribed form within six months of the amalgamation, and the assessment is made on the basis of the modified return. The provision applies to an amalgamation or a demerger, and it provides a statutory mechanism for the successor to file the modified return.
The Assessments
The pending assessments and the appeals of the transferor company are transferred to the transferee company. The transferee company must respond to the notices, produce the records, and pay the tax that is determined. The scheme should provide for the transfer of the tax proceedings and the cooperation of the transferor company’s officers.
A technically sound scheme includes a tax clause that addresses the revised returns, the Section 170A modified return, the pending assessments, and the transfer of the tax records, and it is coordinated with the tax advisor.
Call to Action
Anuj Desai & Associates advises companies on the income tax return and assessment aspects of an NCLT scheme—from the revised return clause and the Section 170A modified return to the transfer of the assessments and the tax proceedings. If your scheme involves significant tax assessments, we can help you manage the transition.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
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