Section 314
Section 314: effect of a tribunal or court order on business reorganisation
Section 314 deals with the tax follow-through after a court or tribunal (or the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016) approves an amalgamation, demerger or merger. Once that order is issued, the resulting company must file a modified return, and the tax department revises assessments to match the order.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
Filing a modified return within six months
Irrespective of section 263, if a return of income was already furnished under that section by an entity for a tax year covered by a business reorganisation order, the successor must furnish a modified return - in the prescribed form and manner, and limited to and in accordance with the order - within six months from the end of the month in which the order was issued.
How the Assessing Officer responds to the modified return
If assessment or reassessment for a tax year covered by the order has already been completed by the time the modified return is furnished, the Assessing Officer passes an order modifying the relevant tax year's total income to align with the business reorganisation order and the modified return.
If assessment or reassessment for that tax year is still pending when the modified return is furnished, the Assessing Officer instead passes an order assessing or reassessing the total income of that year in line with the business reorganisation order and the modified return.
Other provisions of the Act still apply
Subject to Section 314's specific provisions, all other provisions of the Act apply to an assessment or reassessment made under this section for a tax year, and tax is chargeable at the rate(s) applicable to that tax year.
Key definitions
- "Business reorganisation" means the reorganisation of business involving the amalgamation, demerger or merger of the business of one or more persons.
- "Order in respect of business reorganisation" means an order of a High Court, tribunal, or an Adjudicating Authority as defined in section 5(1) of the Insolvency and Bankruptcy Code, 2016.
- "Successor" means all resulting companies in a business reorganisation, whether or not the company existed before the reorganisation.
Frequently asked questions
How long does a successor company have to file a modified return after a reorganisation order?
Six months from the end of the month in which the business reorganisation order was issued, as set out in Section 314(1).
What happens if assessment for the relevant year is already completed when the modified return arrives?
Under Section 314(2)(a), the Assessing Officer passes an order modifying the total income already determined in that assessment or reassessment, to align it with the business reorganisation order and the modified return.
Does "business reorganisation" cover amalgamations and demergers?
Yes - Section 314(4)(a) defines it as reorganisation of business involving the amalgamation, demerger or merger of business of one or more persons.
Related sections
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