Amended and updated notes on section 115JG of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to conversion of an Indian branch of foreign company into subsidiary Indian company.
Chapter XIIBB (Section 115JG) of the Income Tax Act 1961 deals with the provisions related to special provisions relating to conversion of Indian branch of a foreign bank into a subsidiary company. Section 115JG of IT Act 1961-2023 provides for conversion of an Indian branch of foreign company into subsidiary Indian company.
Recently, we have discussed in detail section 115JF (Interpretation in this Chapter) of IT Act 1961. Today, we learn the provisions of section 115JG of Income-tax Act 1961. The amended provision of section 115JG is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 115JG of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-115JG: Conversion of an Indian branch of foreign company into subsidiary Indian company
Section 115JG(1) of Income Tax Act
Where a foreign company is engaged in the business of banking in India through its branch situate in India and such branch is converted into a subsidiary company thereof, being an Indian company (hereafter referred to as an Indian subsidiary company) in accordance with the scheme framed by the Reserve Bank of India, then, notwithstanding anything contained in the Act and subject to the conditions as may be notified by the Central Government in this behalf,—
- (i) the capital gains arising from such conversion shall not be chargeable to tax in the assessment year relevant to the previous year in which such conversion takes place;
- (ii) the provisions of this Act relating to treatment of unabsorbed depreciation, set off or carry forward and set off of losses, tax credit in respect of tax paid on deemed income relating to certain companies and the computation of income in the case of the foreign company and Indian subsidiary company shall apply with such exceptions, modifications and adaptations as may be specified in that notification.
Section 115JG(2) of Income Tax Act
In case of failure to comply with any of the conditions specified in the scheme or in the notification issued under sub-section (1), all the provisions of this Act shall apply to the foreign company and the said Indian subsidiary company without any benefit, exemption or relief under sub-section (1).
Section 115JG(3) of Income Tax Act
Where, in a previous year, any benefit, exemption or relief has been claimed and granted to the foreign company or the Indian subsidiary company in accordance with the provisions of sub-section (1) and, subsequently, there is failure to comply with any of the conditions specified in the scheme or in the notification issued under sub-section (1), then,—
- (i) such benefit, exemption or relief shall be deemed to have been wrongly allowed;
- (ii) the Assessing Officer may, notwithstanding anything contained in this Act, re-compute the total income of the assessee for the said previous year and make the necessary amendment; and
- (iii) the provisions of section 154 shall, so far as may be, apply thereto and the period of four years specified in sub-section (7) of that section being reckoned from the end of the previous year in which the failure to comply with the condition referred to in sub-section (1) takes place.
Section 115JG(4) of Income Tax Act
Every notification issued under this section shall be laid before each House of Parliament.