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CMA Final · Direct Tax Laws and International Taxation · Assessment of Companies

Under section 314 of the Income-tax Act, 2025, which statement about assessments following an order in respect of business reorganisation is correct?

The Assessing Officer modifies the total income by an order if the assessment is already complete, and assesses or reassesses on the basis of the modified return if proceedings are pending. Rates remain those of the relevant tax year, and successor includes newly formed resulting companies.

  1. AThe tax is chargeable at the rates applicable to the tax year in which the order was issued
  2. BThe Assessing Officer passes a modifying order if the assessment was already completed, or assesses afresh on the modified return if it is pendingCorrect
  3. CThe term 'successor' covers only resulting companies that existed before the reorganisation
  4. DAn order of the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 is excluded from 'order in respect of business reorganisation'

Explanation

Section 314(2) provides that where the assessment is completed on the date the modified return is furnished, the Assessing Officer passes an order modifying total income; where it is pending, he assesses or reassesses on the order and the modified return. Tax rates are those of the relevant tax year, not the order year. Successor includes companies not in existence earlier, and the definition of order includes the Adjudicating Authority.

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