Conversion of Indian branch to subsidiary: capital gains exemption and transfer of tax attributes subject to compliance.

Conversion of an Indian branch into an Indian subsidiary under an RBI sanctioned scheme exempts capital gains on the conversion if prescribed conditions are met and transfers the branch's tax attributes to the subsidiary. Assets and liabilities transfer at book value, depreciation and asset cost bases carry over, accumulated business losses and unabsorbed depreciation become losses of the subsidiary with fresh carry forward potential, and MAT credit transfers for a fresh carry forward period. Noncompliance with conditions results in denial or recovery of benefits and recomputation of income.

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