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All about the Modified Return (Form ITR-A) in Case of Business Reorganisation:
Section 170A and the associated provisions offer a structured approach to filing modified returns in the case of business reorganization. The modified return of income is to be furnished by a successor entity to a business reorganisation as referred to in section 170A of the Act for an assessment year shall be filed in Form ITR-A.
Section 170A of the income tax Act 1961 is a welcome step which will help the companies in a smooth transition in cases of business reorganisation, i.e., amalgamation, merger and demerge. This ensures compliance with the reorganization order and addresses practical challenges in tax assessments, aiding a smoother transition for companies undergoing amalgamation, merger, or demerger. Key Provisions and Process
1. Section 170A of the Income-tax Act, 1961: Provision of Section 170A Allows entities undergoing business reorganization to file a modified return of income for any relevant assessment year. within six months from the end of the month when the order of reorganization is issued by the competent authority.
2. Introduction and Effect: Form ITR-A Inserted By Finance Act, 2022 with effect from April 1, 2022, To facilitate the implementation of orders issued by tribunals, courts, or an Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, regarding business reorganization.
3. Scope and Applicability: Applies to entities that have filed a return of income under Section 139 for the assessment year relevant to the previous year affected by the reorganization order. The successor entity must file a modified return in accordance with the reorganization order, within the specified six-month period.
4. Rule 12AD of the Income Tax Rules, 1962: Form ITR-A: The modified return must be filed in Form ITR-A by the successor entity as specified in Section 170A.
5. Legislative Intent: Supreme Court judgment in Dalmia Power Ltd. v. Asstt. CIT [2019] Case Details: Involved Dalmia Power Limited and Dalmia Cement (Bharat) Limited, both public limited companies under the Companies Act.
6. Benefits of Section 170A is to Facilitates a seamless transition for companies undergoing business reorganization (amalgamation, merger, demerger). Section 170A has some Practical Difficulties like Addresses and resolves practical issues in completing assessment or reassessment proceedings for transferee and transferor companies post-reorganization.
Steps to File a Modified Return in Case of Business Reorganization
Step -1 Communication with Jurisdictional Assessing Officer: The assessee (taxpayer) must communicate with the Jurisdictional Assessing Officer using a specific proforma to enable electronic filing of the return. This step must be completed by April 30, 2024.
Step 2: Verification by Jurisdictional Assessing Officer : The Jurisdictional Assessing Officer will verify that the return is a result of, and limited to, the order of the competent authority. The Jurisdictional Assessing Officer will enable the filing through the ITBA (Income Tax Business Application) system. The taxpayer will receive confirmation and instructions on their e-filing portal within 30 days of the Jurisdictional Assessing Officer receipt of communication.
Step 3: Electronic Filing of Return : Once enabled, the taxpayer can furnish the return for the relevant assessment year on the e-filing portal. This step must be completed by June 30, 2024.
Key points to be Consideration while filling Prepare Modified Return- Form ITR-A
- This structured approach ensures compliance and facilitates the smooth filing of modified returns due to business reorganization, aiding in a seamless transition and adherence to tax regulations.
- Determine the assessment year to which the reorganization order applies.
- Ensure filing of the modified return within six months from the end of the month when the reorganization order was issued.
- Prepare Modified Return: Use Form ITR-A as prescribed under Rule 12AD of the Income Tax Rules, 1962. As per Rule 12AD of the Income Tax Rules, 1962, the modified return of income for a business reorganization (under Section 170A of the Act) must be filed in Form ITR-A.
- Submit Form ITR-A: File the modified return through the appropriate e-filing portal or as directed by the tax authorities. The Principal Director-General of Income-tax (Systems) or the Director-General of Income-tax (Systems) is responsible for specifying the procedures, formats, and standards.
- The process for filing a modified return due to business reorganization involves specific steps and compliance with prescribed procedures. The secure electronic filing of Form ITR-A under a digital signature, along with adherence to standards set by tax authorities, ensures accurate and compliant submission of the modified return.
- Ensure timely communication with the Jurisdictional Assessing Officer (JAO) to avoid delays. Monitor the e-filing portal for updates and confirmation from the JAO. Complete the electronic filing promptly once the JAO has enabled it. Understand that no separate delay condonation application is needed for specific cases, simplifying the process for returns pertaining to the specified period.
