Merger – Filing of ITRs and Section 170A Compliance

[Ramanathan Seshan]

Dear Experts,

Company B Pvt. Ltd. has been merged into Company A Pvt. Ltd. with the following details:

• Appointed Date: 01/04/2023

• NCLT Order Date: 20/11/2024

• Effective Date (as per NCLT Order): 01/01/2025

• Company B continued to operate independently up to 31/12/2024.

Additional info: Company B is a profit-making entity with no carry forward of losses.

Based on this, I have a few questions regarding income tax return (ITR) filing and compliance under Section 170A:

1. Does Company A need to file a separate ITR for FY 2024–25?

2. Does Company B need to file a separate ITR for FY 2024–25?

3. For which financial years is Company A required to file a modified return under Section 170A?

4. If Company A is not required to file a separate ITR for FY 2024–25, would filing a return under Section 170A alone be sufficient?

5. Given that Company B is profit-making and has no carry forward of losses, does that change the ITR filing requirements in any way?

Regards,

S Ram

[YAGAY andSUN]

As per the provisions of the Income Tax Act, 1961, when a merger or amalgamation takes place by way of an order of the NCLT, the treatment of income tax return filing is governed by Section 170 and Section 170A, along with related judicial interpretations.

Since the appointed date of the merger is 01.04.2023, and the effective date as per NCLT order is 01.01.2025, Company B legally stands merged into Company A from 01.01.2025. However, the appointed date being backdated to 01.04.2023, has significance in the context of financial reporting and tax compliance post-NCLT order.

As per Section 170A, when a business reorganization (like amalgamation) occurs and the return of income for the assessment year relevant to the previous year in which the reorganization takes place has already been filed, the successor company (Company A) must file a modified return within 6 months from the end of the month in which the NCLT order is issued. Since the NCLT order was dated 20.11.2024, the modified return under Section 170A (for AY 2024–25) must be filed by 31.05.2025.

Accordingly, for FY 2023–24 (AY 2024–25), both Company A and Company B may have originally filed separate returns. Post NCLT order, Company A is required to file a modified return under Section 170A for AY 2024–25 incorporating the merged position from the appointed date (01.04.2023). Thus, Company B’s return for AY 2024–25 gets subsumed, and Company A’s 170A return replaces the original returns.

For FY 2024–25 (AY 2025–26), since Company B ceased to exist from 01.01.2025, it does not file a separate return. Company A must file the ITR for the full financial year, including income and transactions of Company B from 01.04.2024 to 31.12.2024, and its own income for the entire year.

The fact that Company B is profit-making and has no carry forward of losses does not alter the filing obligations, but it simplifies the modified return under Section 170A, as there are no complexities related to loss adjustment or carry forward.

Summary:

– Company A must file a modified return under Section 170A for AY 2024–25 by 31.05.2025.

– Company B need not file any ITR for FY 2024–25 (AY 2025–26).

– Company A must file a single ITR for FY 2024–25, covering both entities.

– Profit position or absence of losses in Company B does not change these requirements.

AI Summary

Private company merger requires modified income tax return filing under Section 170A by May 2025 deadline A private company merger query addressed income tax return filing requirements post-NCLT order. The merged entity had an appointed date of April 2023, NCLT order in November 2024, and effective date of January 2025. The transferee company operated independently until December 2024. Expert response clarified that the successor company must file a modified return under Section 170A for the assessment year by May 2025, incorporating the merged position from the appointed date. For the subsequent financial year, only the successor company files returns covering both entities' income. The transferor company's profit-making status without carry-forward losses simplifies compliance but doesn't alter filing obligations under merger provisions.