Pre-Book Today & Enjoy Exclusive Discounts!
Avoid Last-Minute Rush
Faster Refund Processing
Hassle-Free Filing with Experts
Section 170A of the Income Tax Act is a vital provision for business entities undergoing amalgamations, mergers, demergers, or reorganizations. This section allows for the filing of modified returns during a specific timeframe, bridging the gap created by the uncertainty of issuing reorganization orders. In this guide, we will understand the significance of Section 170A, its importance, the introduction of Form ITR-A, and the timeline for filing this modified return.
Section 170A of the Income Tax Act is a newly inserted section that was introduced on April 1, 2022. This section allows business entities to file modified returns in case they have undergone any amalgamation, merger, demerger, or business reorganization. This return can be filed between the date of issuance of an order of the final authority and the date of effectivity of the order. The main purpose of this section is to remove the anomaly of the indefinite timeline involved in issuing reorganization orders.
Whenever a business reorganization takes place, and a person carrying on a business (predecessor) is succeeded by any other person (successor), who thereafter carries on the business, then -
Section 170(2) states that in case the predecessor cannot be located, the income assessment for the year of succession and the year just before it will be carried out on the successor in the same way as it would have been done on the predecessor, and the provisions of this Act will apply accordingly, despite anything mentioned in sub-section (1).
Section 170(2A) states that any proceeding or reassessment initiated on the predecessor will be deemed to be initiated on the successor, and all the provisions will apply accordingly.
Given the chaos that comes along with business reorganizations, there was a need for a structured approach to handling income tax returns. Before the introduction of ITR-A, the successor was required to file ITR under section 139 for the previous financial year.
However, in the case of reorganization of a business, it led to a lot of confusion and ambiguity while determining the exact tax liability.
CBDT recognized this gap and also the need for a more structured approach towards filing ITR for reorganized businesses. To address this issue, CBDT brought about section 170A of the Income Tax Act in the form of a modified ITR-A that can be filed by reorganized businesses.
As outlined in section 170A of the Income Tax Act, there is a specific time limit within which the successor entity has to file a modified return after business reorganization. As per this section, the successor entity must file a modified ITR using Form ITR-A within 6 months from the end of the month in which the reorganization order was passed.
Rule 12AD of the Income Tax Act states that -
Section 170A, in conjunction with Section 170(2A), provides a structured framework for addressing tax matters in the ever-evolving landscape of business transitions. By simplifying and organizing the income tax filing process, Section 170A contributes to greater clarity, transparency, and efficiency in the taxation of reorganized businesses, ultimately benefiting both taxpayers and the tax authorities. If you are still confused about the applicability of section 170A, then you can consider seeking expert help.
Section 170A is very significant in business reorganization as it involves providing the successor entity with the power to submit a modified Income Tax Return under section 170A in Form ITR-A within 6 months from the last date of the month in which the business reorganization order is issued.
Filing a modified Income Tax Return helps businesses to provide accurate information and file correct and modified ITR in line with the implications of the reorganization order. This helps ensure compliance with tax regulations and facilitates a smooth ITR assessment process.
If there is a succession, any assessments, reassessments, or proceedings started on the predecessor during the succession process will be treated as if they were started on the successor. The rules of this Act will apply to the successor in a similar way as they would have applied to the predecessor.
