Chapter XVII - Special Provisions Relating to Certain Persons
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.
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Need advice on Section 314?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Irrespective of anything to the contrary contained in section 263, if prior to the date of order in respect of business reorganisation, any return of income has been furnished under the provisions of the said section by an entity for any tax year to which such order applies, 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.
(2) Where the assessment or reassessment proceedings for a tax year to which the order in respect of the business reorganisation applies,––
(a) have been completed on the date of furnishing of the modified return as per the provisions of sub-section (1), the Assessing Officer shall pass an order modifying the total income of the relevant tax year determined in such assessment or reassessment, in accordance with such order in respect of business reorganisation and taking into account the modified return so furnished;
(b) are pending on the date of furnishing of the modified return as per sub-section (1), the Assessing Officer shall pass an order assessing or reassessing the total income of the relevant tax year as per the order in respect of the business reorganisation and taking into account the modified return so furnished.
(3) Subject to any other provisions of this section, in an assessment or reassessment made in respect of a tax year under this section, all other provisions of this Act shall apply and the tax shall be chargeable at the rate or rates as applicable to such tax year.
(4) For the purposes of this section,—
(a) “business reorganisation” means the reorganisation of business involving the amalgamation or demerger or merger of business of one or more persons;
(b) “order in respect of business reorganisation” means an order of a High Court or tribunal or an Adjudicating Authority as defined in section 5(1) of the Insolvency and Bankruptcy Code, 2016; and
(c) “successor” means all resulting companies in a business reorganisation, whether or not the company was in existence prior to such business reorganisation.
Introduction
A qualifying business reorganisation order can require the successor to file a modified return for an affected tax year. The six-month window runs from the end of the month in which the Tribunal or court order was issued.
Key takeaways
Modified return after reorganisation
The successor files a modified return for an affected tax year within six months from the end of the month in which the qualifying Tribunal or court order was issued.
Assessments can be modified
If assessment was already completed, the Assessing Officer modifies the order to give effect to the reorganisation order and return.
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.
Step-by-step flow for modified returns after a business reorganisation order under Section 314
- 1
Is there an order of a High Court, tribunal or Adjudicating Authority on an amalgamation, demerger or merger?
Section 314(4)(a) and (b) define "business reorganisation" and "order in respect of business reorganisation".
- No: Section 314 does not apply.
- Yes: Go to the next step.
- 2
Had a return been furnished for a tax year covered by the order before the date of the order?
- No: The modified return requirement in Section 314(1) is not triggered for that year.
- Yes: Go to the next step.
- 3
Successor furnishes a modified return
Under Section 314(1), the successor (all resulting companies, Section 314(4)(c)) furnishes a modified return within six months from the end of the month in which the order was issued, in the form and manner prescribed, limited to the order.
- 4
Was the assessment or reassessment for that year completed or pending on the date the modified return was furnished?
- Completed: The Assessing Officer passes an order modifying the total income in line with the order and the modified return (Section 314(2)(a)). Go to step 5.
- Pending: The Assessing Officer assesses or reassesses the total income as per the order, taking the modified return into account (Section 314(2)(b)). Go to step 5.
- 5
Apply the rest of the Act
Under Section 314(3), all other provisions of the Act apply and tax is charged at the rates applicable to that tax year.
Practical checklist
Do
- Record the date and month-end of the final reorganisation order.
- Limit the modified return to changes required by that order and file within the prescribed period.
Avoid
- Count six months directly from the order date instead of from the end of its month.
Illustrative example
Worked example: amalgamation order after the return was filed
Hypothetical facts (illustration only, not a real taxpayer): X Ltd. furnished its return for tax year 2026-27 on an assumed date of 31 October 2027. On 15 February 2028 the tribunal issues an order amalgamating X Ltd. into Y Ltd. that applies to tax year 2026-27. X Ltd.'s assessment for that year is still pending.
Order covered
The amalgamation is a business reorganisation and the tribunal order is an order in respect of it (Section 314(4)).
Who files
Y Ltd., as the resulting company, is the successor under Section 314(4)(c).
Time limit
The order was issued in February 2028. Six months from the end of that month (29 February 2028) runs to the end of August 2028, so Y Ltd. must furnish the modified return by then, in the prescribed form and limited to the order.
Assessment
The assessment is pending, so the Assessing Officer assesses the total income as per the order, taking the modified return into account (Section 314(2)(b)), at the rates applicable to tax year 2026-27.
Outcome
- Y Ltd. files a modified return by 31 August 2028.
- The pending assessment is completed on the basis of the amalgamation order and the modified return.
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.
Need help applying this provision to your situation?
Get help with M&A and business reorganisation tax filingsLast updated 9 October 2026