Modified Return
Introduction
When a business undergoes reorganisation (such as amalgamation, merger, or demerger), the successor entity must file a modified return for the period between the effective date of the business reorganisation and the date of issuance of the final order by the competent authority.
What is Modified Return?
- A Modified Return is a return of income that a successor company must file in cases of business reorganisation, such as amalgamation, merger, or demerger.
- Since these reorganisations often take effect from an earlier date but are approved later by the Competent Authority (Adjudicating Authority, Tribunal, or High Court), the law requires the successor to refile its return to reflect the correct position of income for the period between the effective date of the scheme and the date of the final order.
- This return must be furnished in the prescribed form within six months from the end of the month in which the final order is passed.
Who is Required to File a Modified Return?
- A Modified Return must be filed by the successor company in a business reorganisation if it has already filed a return of income undersection 139for the assessment year falling between the effective date of the scheme and the date of the final order of the Competent Authority.
- The modified return shall be filed irrespective of whether the earlier return was an original, loss, belated, revised, or even updated return.
- The successor must file modified returns for all the previous years covered by the order of reorganisation.
Scope of Modified Return
- Only those changes arising from the order of business reorganization can be included.
- Errors or omissions unrelated to the reorganization cannot be rectified through a modified return.
Form and Time Limit
- Must be filed electronically in Form ITR-A using a digital signature.
- Applies only to business reorganization orders issued on or after April 1, 2022
- For orders issued between June 1, 2016, and March 31, 2022, the CBDT has allowed modified returns under a special order underSection 119.[ Order F.No. 225/5/2021-ITA-II, dated 13-03-2024]
Assessment Based on Modified Return
- If assessment is already completed:The Assessing Officer will modify the assessment based on the modified return.
- If assessment is pending:The Assessing Officer will complete the assessment considering the modified return.
Applicable Tax Rates
- The tax rates applicable will be those relevant to the assessment year for which the modified return is filed.
- Section 170Aoverrides any conflicting provisions in the Income-tax Act.