Section 314 · Special persons
Section 314 of the Income-tax Act, 2025 — Effect of Order of Tribunal or Court in Respect of Business Reorganisation
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVII
📜 What the law says — Section 314, Income-tax Act 2025
314. (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 (31 of 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.
7. —Partition
Assessment after partition of Hindu undivided family.
In plain language
What Section 314 is about
Section 314 of the Income-tax Act, 2025 deals with the effect of an order of a tribunal or court in respect of a business reorganisation. In plain words: when a company merges, demerges or amalgamates with another under an order of a High Court, a Tribunal (like the NCLT) or an Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, the tax return that was already filed becomes out of date. Section 314 gives the successor entity a legal window to file a corrected ("modified") return that reflects the reorganisation, and it directs the Assessing Officer (AO) to re-work the assessment accordingly.
This section is the Income-tax Act, 2025 successor to Section 170A of the Income-tax Act, 1961. The substance is essentially carried forward unchanged; only the numbering and drafting are new.
Why this section exists
Court and tribunal orders sanctioning mergers or demergers are often backdated — the "appointed date" of the scheme can be a date in an earlier year. So by the time the order comes, returns for that period may already be filed on the old structure. Earlier, taxpayers had no clean mechanism to update these returns and were caught between the order and the return. Section 314 fixes that by expressly allowing a modified return for the affected tax year(s).
Who it applies to
- Successor companies in a business reorganisation — this covers all resulting companies, whether or not they existed before the reorganisation.
- Cases where the reorganisation is under an order of a High Court, Tribunal or IBC Adjudicating Authority — not voluntary/private arrangements without such an order.
- The reorganisation must be an amalgamation, demerger or merger of the business of one or more persons.
Key condition — the six-month window
- The successor must file the modified return within 6 months from the end of the month in which the reorganisation order is issued.
- The modified return is filed for the tax year(s) to which the order applies, provided a return was earlier due/filed for that year.
- It is furnished in the prescribed form and manner — the notified form is Form ITR-A, filed electronically and verified as prescribed (Rule 12AD under the old regime; the 2025 rules carry the equivalent procedure, referenced in draft Rule 177).
What the Assessing Officer must do
- If the assessment/reassessment is already completed: the AO shall modify the total income already determined, in line with the reorganisation order and the modified return.
- If the assessment/reassessment is pending: the AO shall pass a fresh assessment or reassessment order determining total income in accordance with the order and the modified return.
- All other provisions of the Act (appeals, interest, penalties, time-limit machinery for the fresh order) apply to such assessment/reassessment.
How it interacts with other provisions
Section 314 works alongside the substantive tax-neutrality rules for restructuring — the provisions on amalgamation and demerger (carry-forward of losses, cost of assets, capital gains exemption on qualifying amalgamations/demergers). Section 314 is procedural: it does not decide whether a merger is tax-neutral; it only aligns the return and assessment with the court/tribunal order once the scheme is sanctioned. It also connects with the general return-filing sections and the assessment/reassessment provisions of the 2025 Act.
Practical implications
- Diarise the order date — the six-month clock starts from the end of that month, so track it precisely to avoid losing the right to file the modified return.
- Keep the scheme, appointed date and NCLT/High Court order ready; the modified return must reconcile with them.
- For an IBC resolution, the Adjudicating Authority order triggers the same mechanism — useful where a resolution applicant takes over a company.
- Because assessments get re-worked, watch for consequential interest and refund adjustments once total income is re-determined.
💡 Example
Worked example 1 — Amalgamation with a backdated appointed date. Alpha Ltd amalgamates into Beta Ltd under an NCLT order dated 10 May 2026, with an appointed date of 1 April 2025 (i.e. it affects tax year 2025-26). Beta Ltd had already filed its own return for 2025-26 on the old structure. Under Section 314, Beta (the successor) can file a modified return in Form ITR-A for tax year 2025-26. The six-month window runs from the end of May 2026, so the last date is 30 November 2026. Suppose the merger adds Alpha's income of ₹40,00,000 and allows carry-forward of Alpha's eligible business loss of ₹15,00,000; Beta's revised total income is re-computed and the AO modifies the completed assessment to reflect ₹40,00,000 additional income net of the ₹15,00,000 set-off.
Worked example 2 — Pending assessment. Gamma Ltd demerges its manufacturing unit into a new company, Delta Ltd, under a High Court order dated 20 January 2026. Delta's assessment for the relevant year is still pending. Delta files the modified return by 31 July 2026 (6 months from end of January 2026). Because the assessment is not yet complete, the AO passes a fresh assessment order computing Delta's total income in line with the demerger scheme and the modified return, rather than merely amending an old order.
A short story. Rakesh, CFO of a mid-sized company, panicked when the NCLT sanctioned his merger six months after year-end — the returns were already filed. His CA calmed him: "Section 314 is exactly for this. We file Form ITR-A within six months of the order month, the officer re-works the assessment to the scheme, and everything lines up." They filed on time, the losses were carried forward correctly, and there was no dispute — because the return finally matched the court's order.
| Aspect | Section 314, Income-tax Act 2025 | Section 170A, Income-tax Act 1961 (old) |
|---|
| Subject | Effect of tribunal/court order in business reorganisation | Effect of order of tribunal/court in business reorganisation |
| Who files | Successor (all resulting companies, whether pre-existing or new) | Same |
| Trigger | Order of High Court, Tribunal or IBC Adjudicating Authority | Same |
| Covered transactions | Amalgamation, demerger or merger | Same |
| Return to file | Modified return in Form ITR-A (electronic, verified) | Modified return in Form ITR-A (Rule 12AD) |
| Time limit to file | 6 months from end of month in which order is issued | Same |
| AO — completed assessment | Modify total income already determined | Same |
| AO — pending assessment | Pass fresh assessment/reassessment order | Same |
Related sections
Section 313 — Assessment of income in search and requisition / related assessment machinery Section 315 — Method of accounting and related computation provisions Section 5(1), Insolvency and Bankruptcy Code — Definition of Adjudicating Authority Section 170 — Succession to business otherwise than on death Form ITR-A — Modified return of income for business reorganisation Rule for modified return of income under business reorganisation
Frequently asked questions
What is the time limit to file a modified return under Section 314?
Within 6 months from the end of the month in which the business reorganisation order is issued by the High Court, Tribunal or IBC Adjudicating Authority. For example, an order in May 2026 gives a deadline of 30 November 2026.
Which form is used for the modified return?
The modified return is filed in Form ITR-A, electronically and duly verified in the prescribed manner. It is furnished by the successor entity for the tax year(s) affected by the reorganisation order.
Is Section 314 the same as the old Section 170A?
Yes, in substance. Section 314 of the Income-tax Act, 2025 replaces Section 170A of the Income-tax Act, 1961, carrying forward the same rules on modified returns and re-working of assessments with only new numbering and drafting.
Who is a 'successor' under Section 314?
A successor means all resulting companies in a business reorganisation, whether or not the company existed before the reorganisation. This covers amalgamated companies as well as new companies created on a demerger or merger.
What does the Assessing Officer do after the modified return is filed?
If the assessment was already completed, the AO modifies the total income already determined. If it is still pending, the AO passes a fresh assessment or reassessment order in line with the order and the modified return.
Does Section 314 apply to insolvency resolutions?
Yes. Because the definition includes an order of the Adjudicating Authority under Section 5(1) of the Insolvency and Bankruptcy Code, 2016, a reorganisation under an approved resolution plan can also trigger the modified-return mechanism.
Does Section 314 decide whether my merger is tax-free?
No. Section 314 is procedural — it aligns the return and assessment with the court/tribunal order. Whether the amalgamation or demerger is tax-neutral is governed by the separate substantive provisions on amalgamation, demerger, loss carry-forward and capital gains.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 05 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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