Section 314 — Effect of order of tribunal or court in respect of business reorganisation. Successor to s.170A of the 1961 Act.
Section 314 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
Sub-section (1) applies irrespective of anything to the contrary in section 263. Where, before the date of an order in respect of a business reorganisation, a return of income has been furnished under section 263 by an entity for any tax year to which that order applies, the successor must furnish a modified return, in the prescribed form and manner, within six months from the end of the month in which the order was issued, in accordance with and limited to that order.
Sub-section (2) tells the Assessing Officer what to do with it. Where the assessment or reassessment proceedings for a tax year to which the order applies have been completed on the date the modified return is furnished, he shall pass an order modifying the total income determined in that assessment or reassessment, in accordance with the reorganisation order and taking the modified return into account. Where those proceedings are pending on that date, he shall pass an order assessing or reassessing the total income as per the reorganisation order and taking the modified return into account.
Sub-section (3) applies all other provisions of the Act to such an assessment or reassessment, and charges tax at the rate or rates applicable to the tax year in question. Sub-section (4) defines "business reorganisation" as the reorganisation of business involving the amalgamation or demerger or merger of business of one or more persons; "order in respect of business reorganisation" as an order of a High Court, a tribunal, or an Adjudicating Authority as defined in section 5(1) of the Insolvency and Bankruptcy Code, 2016; and "successor" as all resulting companies in a business reorganisation, whether or not the company was in existence prior to it.
A court or tribunal order sanctioning a merger, demerger or resolution plan usually takes effect from a date already covered by filed returns, so those returns become inaccurate through no fault of the filer. The section gives the successor a defined route to correct them — a modified return, limited to what the order does — and obliges the Assessing Officer to give effect to it whether the assessment is already complete or still running, instead of leaving the correction to reassessment or rectification.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Time to furnish the modified return | Within six months from the end of the month in which the order was issued | Where a return had been furnished under section 263 before the date of the order in respect of the business reorganisation, for a tax year to which the order applies | Sub-section (1) |
| Rate of tax on the modified assessment | The rate or rates as applicable to that tax year | In an assessment or reassessment made in respect of a tax year under this section | Sub-section (3) |
The six months run from the end of the month in which the order was issued, not from when it was received or from when it takes effect, and the return must be "in accordance with and limited to" the order — it is not an opportunity to revise anything else in the original return. Which sub-section (2) limb applies is decided on the date the modified return is furnished: an assessment already completed by then is modified under clause (a), while a pending proceeding is completed under clause (b) taking the modified return into account. Tax is charged at the rates of the original tax year, not the year of the order, so the reorganisation does not move the income into a later rate. The definitions are wide in one direction and narrow in another: "successor" covers all resulting companies including one incorporated only for the reorganisation, but "order in respect of business reorganisation" is confined to an order of a High Court, a tribunal, or an Adjudicating Authority under section 5(1) of the Insolvency and Bankruptcy Code, 2016, so a scheme effected without such an order does not attract the section.
A tribunal order approving a merger is issued on 20 March 2027 and takes effect from a date for which the transferor company had already filed returns under section 263. The successor must file modified returns for those years by 30 September 2027 — six months from the end of March. If the assessment for one of those years was already completed on the day the modified return is filed, the Assessing Officer passes an order under sub-section (2)(a) modifying the total income already determined; if it was still pending, he completes it under sub-section (2)(b) taking the modified return into account. Either way the tax is at the rates of the original tax year.
You meet this as the modified return filed after a High Court, tribunal or Insolvency and Bankruptcy Code Adjudicating Authority order sanctioning a merger, demerger or resolution, and as the consequential order the Assessing Officer passes under sub-section (2).
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 may be prescribed, in accordance with and limited to the said order
"successor" means all resulting companies in a business reorganisation, whether or not the company was in existence prior to such business reorganisation
the tax shall be chargeable at the rate or rates as applicable to such tax year
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.