Id number: 1016/2016/1459

CODE: CT2

Name: Prakhar Keshar

Semester: VIII

Date: 21/11/2020

Question 1. Every corporate which needs to pay advance payment of Tax under the Income Tax
Act, 1961? Explain the concept of advance payment of Tax?

Answer:

What is Advance Payment of Tax:

Advance payment of tax is another is another technique for assortment of duty by the Focal
Government as paid ahead of time burdens. Such development charge is notwithstanding
derivation of duty at source or assortment of assessment at source. Plan of advance installment of
expense is otherwise called 'pay as you acquire' plot that is the assesse is needed to pay charge
throughout procuring of pay in the earlier year itself, however such pay is chargeable to burden
during the evaluation year.

Advance expense is payable on current pay in portions during the earlier year. Each individual
who is obligated to pay advance expense under Section 208 (regardless of whether already or
consistently evaluated) will, voluntarily, pay, at the very latest every one of the due dates endorsed
in Section 211, the fitting rate, determined in the segment, the development charge on his present
pay, determined in the way indicated in Section 209. Under Section 210(2), an individual who
pays any portion or portions of advance expense, may increment or diminish the measure of
advance assessment payable in the leftover portion or portions as per his gauge of his present pay
and the development charge payable subsequently, and make installment of the said sum in the
excess portion or portions as needs be.
Who should file it?

If you are a salaried employee, you need not pay advance expense as your boss deducts it at source,
known as TDS (charge deducted at source). Advance expense is material when an individual has
kinds of revenue other than his compensation. For example, if an assesse acquires through capital
increases on shares, interest on fixed stores, rewards from lottery or races, and capital additions on
house property other than his standard business/salaried pay, at that point he needs to pay advance
duty on all pay subsequent to changing costs or misfortunes. While managers apply TDS on pay
rates, advance expense is paid on pay that isn't dependent upon TDS. Experts (independently
employed) and financial specialists should pay burdens ahead of time as, given their business pay,
the risk can be immense. The equivalent infers for organizations and corporates.

How to file advance tax?

Individuals may pay advance tax using tax payment challans at bank branches authorized by the
Income Tax (I-T) Department. It can be deposited with the Reserve Bank of India, State Bank of
India, ICICI Bank, HDFC Bank, Indian Overseas Bank, Indian Bank, Allahabad Bank, Syndicate
Bank, Axis Bank, Punjab National Bank, Punjab & Sind Bank, and other authorized banks. There
are 926 branches in India that accept advance tax payments. Individuals may also pay it online
through the I-T department or the National Securities Depository Ltd (NSDL).

Provisions of Advance payment of tax under Income tax act, 1961:

Liability to pay advance tax:

As per Section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more,
shall pay his tax in advance, in the form of “advance tax”. In this part you can gain knowledge on
various provisions relating to payment of advance tax by a taxpayer.

Person not liable to pay advance tax:

As discussed above, every person whose estimated tax liability for the year is Rs. 10,000 or more
is liable to pay advance tax. However, a resident senior citizen (i.e., an individual of the age of 60
years or above during the relevant financial year) not having any income from business or
profession is not liable to pay advance tax.

Illustration

Mr. Kumar is running a provision store. The turnover of the store for the financial year 2019-20
amounted to Rs. 1,84,00,000. He wants to declare income under section 44AD at 8% of the
turnover. He does not have any other source of income. Will he be liable to pay advance tax? **
Mr. Kumar satisfies the criteria of section 44AD in respect of provision store business and, hence,
he can adopt the provisions of section 44AD and declare income at 8% of the turnover. A taxpayer
opting for the presumptive taxation scheme of section 44AD is also liable to pay advance tax in
respect of business covered under section 44AD. Thus, if Mr. Kumar adopts the provisions of
section 44AD, he is also liable to pay advance tax in respect of income generated from provision
store business.

Mode of payment of advance tax:

As per Rule 125 of the Income-tax Rules, 1962 a corporate taxpayer (i.e., a company) shall pay
taxes through the electronic payment mode using the internet banking facility of the authorized
banks. Taxpayers other than a company, who are required to get their accounts audited, shall pay
taxes through the electronic payment mode using the internet banking facility of the authorized
banks. Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. by
depositing the challan at the receiving bank.

Payment of advance tax:

Advance tax can be paid by the taxpayer either on his own account or in pursuance of an order of
the Assessing Officer. The taxpayer who is liable to pay advance tax is required to estimate his
current income and pay advance tax on his own account. In such a case, he is not required to submit
any estimate or statement of income to the tax authorities. After making payment of first or second
or third instalment of advance tax (as the case may be), if there is a change in the tax liability, then
the taxpayer can revise the quantum of advance tax in the remaining instalment(s) and pay the tax
as per revised estimates. Tax can be computed on the current income (estimated by the taxpayer)
at the rates in force during the financial year. From the tax so computed, tax deducted or collected
at source will be deducted and the balance tax payable will be used to compute the advance tax
liability. Also, relief of tax allowed under section 90 or section 90A or any deduction under section
91 or any tax credit allowed to be set off as per section 115JAA or section 115JD shall also be
deducted while computing the advance tax liability.

Payment of advance tax in pursuance of an order of the Assessing Officer:

If taxpayer fails to pay advance tax (or advance tax paid is lower than the required amount) and
he has already been assessed by way of regular assessment in respect of the total income of any
previous year, then the Assessing Officer may pass an order under section 210(3) requiring him
to pay advance tax on his current year’s income (specifying the amount of instalments in which
tax should be paid). Such an order may be passed during the financial year, but not later than the
last day of February. On receipt of the notice from the Assessing Officer to pay advance tax, if
the taxpayer’s estimate is lower than the estimate of the Assessing Officer, then the taxpayer can
submit his own estimate of current income/advance tax and pay tax accordingly. In such a case,
he has to send intimation in Form No. 28A to the Assessing Officer. Alternatively, if the advance
tax on current income as per own estimate of the taxpayer is likely to be higher than the amount
estimated by the Assessing Officer, the taxpayer shall pay such higher amount as advance tax in
accordance with his own calculation. In such a case, no intimation to the Assessing Officer is
required. The Assessing Officer can revise his order issued to the taxpayer to pay advance tax (as
discussed above) under section 210(4). Such revision can be done, if subsequent to the passing of
an order to pay advance tax but before 1st March of the relevant financial year a return of income
in respect of any later year has been furnished by the taxpayer or any assessment for any later year
has been completed at a higher figure. On receipt of such order, the procedure to be followed by
the taxpayer will be same as discussed earlier.
Conclusion:

The provisions relating to payment of advance income tax help both the government and the
taxpayers. By collecting the tax in easy instalments it aids the taxpayers as they do not have to
stress about paying a lump sum amount at a time. The process also speeds up the collection process
and increases the state fund as the government earns an interest on the collected tax on a regular
basis. The quarterly schedule saves taxpayers from defaulting on their income tax payments and
helps businesses manage their finances systematically.

Question 2. In the recent days the concept of business restructuring has grown importance in the
field of corporate Law? Explain the concept of Amalgamation with reference to the Tax
Implication prescribed under the Income Tax Act?

Answer:

India Inc. is increasingly adopting permutations and combinations in the form of mergers and
amalgamations route in a bid to enhance value, consolidate businesses and achieve the elusive
synergy of operations. Amalgamations, being a business combination, attracts special treatment in
the various fiscal statutes. The very word ‘amalgamation’ signifies the creation of an entity which
either took in its fold the existing business of other entities or the creation of a new entity by
pooling the business of various entities. This change-a legal metamorphosis-brings into focus
certain new paradigms that normally arise when legal entities undergo a physical change. Given
the historical perspective of the concept of amalgamation, the fiscal statues, right from the
beginning contained special provisions so as to minimize the ambiguities in ascertaining tax
liabilities of the combined entity. And, moreover, income tax is vital amongst all tax laws which
affect the amalgamation of companies from angle of tax saving and treatment of the same in books
of accounts.

Implications under the Income Tax Act, 1961 of Mergers and Amalgamations:

In any scheme of amalgamation, tax considerations, as already mentioned, predominate and

inevitably direct the manner in which the entire scheme has to be designed. Any failure to take
proper account of the tax implications might make the concerned companies and their shareholders
repent later when they will not be in a position to retrace their steps. Thus tax planning in cases of
amalgamations of companies is perhaps the most vital aspect of decision-making involved in
framing of the scheme of amalgamation.8 The requirements under Company law are by and large
procedural in nature and although it is the fulfillment of those requirements that results in the
scheme of amalgamation being legally allowed to materialize, it is the framing of the scheme of
amalgamation with a special emphasis on tax considerations which would determine in the long
run the success or failure of the scheme.

Lord Tomlin in IRC v. Duke of Westminster, held that ‘every man is entitled to do what he can
to order his affairs so that the tax attaching under appropriate acts is less than it otherwise would
be.’ Thus, the amalgamating and the amalgamated company as well as their shareholders are
entitled to so arrange their affairs and transactions (which form an integral part of the scheme of
amalgamation) as to ensure that either the liability to tax is not attracted or the tax liability which
is attracted is the least. This is because of the fact that no tax.

What is meaning of Amalgamation:

According to Section 2(1B) 11 of the Income Tax Act, 1961, amalgamation in relation to
companies means the merger of one or more companies with another company or the merger of
two or more companies to form one company (the company or companies which so merge being
referred to as the amalgamating company or companies and the company with which they merge
or which is formed as a result of the merger, as the amalgamated company) in such a manner that:

 All the property of the amalgamating company or companies immediately before the
amalgamation becomes the property of the amalgamated company by virtue of amalgamation;
 All the liabilities of the amalgamating company or companies immediately before the
amalgamation become the liabilities of the amalgamated company by virtue of amalgamation;
 Shareholders holding not less than 3/4th in value of the shares in amalgamating company or
companies (other than shares held therein immediately before the amalgamation or by a
nominee for the amalgamated company or its subsidiary) become shareholders of the
amalgamated company by virtue of the amalgamation;
Otherwise than as a result of the acquisition of the property of one company by another pursuant
to the purchase of such property by the other company or as a result of distribution of such property
to the other company after the winding up of first mentioned company.

WHEN AN AMALGAMA1ION IS NOT TREATED AS AMALGAMATION U/S2 (1B)

1. Where amalgamation is as a result of the acquisition of the property of one company by another
company pursuant to the purchase of such property by the other company; or

2. Where amalgamation is as a result of the distribution of such property to the other company
after the winding up of the first mentioned company.

Provisions related to Amalgamation under Income tax act, 1961:

 Section 35ABB: There is no tax liability on transfer of a license to operate telecommunication

services by amalgamating company to amalgamated company.

 Section 42: There is no lax liability on transfer of a business of prospecting for or extraction
or production of petroleum and natural gas by the amalgamating company if the amalgamated
company is an Indian company.

 Section 47(vi): There shall be no capital gain arising to amalgamating company consequent to
transfer of capital asset to Indian amalgamated company.

 Section 47(via): Any transfer, in a scheme of amalgamation, of a capital asset being a share(s)
held in an Indian company, by the amalgamating foreign company to the amalgamated foreign
company, if. At least 25% of shareholders of amalgamating company foreign company
Continue to remain shareholders of the amalgamated foreign company.
Such transfer does not attract tax on capital gain in the country in which the amalgamating
company is incorporated. In such case capital gain as not chargeable to tax.

 Section 35(5): Where, in a scheme of amalgamation, the amalgamating company sells or

otherwise transfers to the amalgamated company (being an Indian company) any asset
 representing expenditure of a capital nature on scientific research, the provisions of this section
shall, as far as may be, apply to the amalgamated company as they would have applied to the
amalgamating company if the latter had not so sold or otherwise transferred the asset.

 Section 35ABB: The amalgamated Indian company can claim full deduction in respect of
remaining installments of expenditure to obtain license to operate telecommunication services.

 Section 35D(5): The amalgamated Indian company can claim remaining installments of
preliminary expenses.

 Section 35DD: The amalgamated Indian company can claim amalgamation expenses in 5
equal installments from the year beginning with the previous year in which amalgamation take
place.

 Section 35DDA(2): The amalgamated Indian company can claim remaining deduction on
account of expenses incurred in respect of voluntary retirement scheme which is incurred by
amalgamating company.

 Section 35E(7): The amalgamated Indian company can claim remaining deduction on account
of expenses incurred in respect of prospecting for, or extraction or production of certain
minerals and also unabsorbed amount of such a instalments.

 Section 36(I)(ix): The amalgamated Indian company can claim remaining deduction on
account of expenses incurred in respect of capital expenditure incurred for the purpose of
promoting family planning among its employees.

 Section 42: The amalgamated Indian company can claim remaining deduction on account of
expenses incurred in respect of prospecting for, or extraction or production of petroleum and
natural gas.

 Section 43(1) Explanation 7: Actual cost of the asset to the amalgamated company shall be the
same as would have been to the amalgamating company, if it continued to hold it.
 Section 43(6) Explanation 2B: Actual cost of the asset to the amalgamated company = WDV
of the Block of assets to the amalgamating company immediately
preceding PY less depreciation actually allowed for such preceding PY.

 Section 115VY: Where there is an amalgamation of a qualifying company with another

company, the provisions relating to the tonnage tax scheme shall apply to the amalgamated
company if it is a qualifying company.Where the amalgamated company is not a qualifying
company, it can exercise an option within 3 months from the date of the approval of the
scheme of amalgamation.

 Section 2(42A)(C): The period of holding of shares shall be from the period the shares were
held in amalgamating company.

 Section 47(vii)There shall be no capital gain arising to the shareholders of amalgamating

company, where shareholders transfer shares of amalgamating company in lieu of allotment of
shares in Indian amalgamated company.

 Section- 72: specifies that loss shall be carried forward only by the person who has incurred
the loss. But Section 72A specifies an exception to this. Where certain conditions are satisfied
accumulated losses and unabsorbed depreciation can be carried forward by amalgamated
company also.
Benefit of amalgamation of company under Income tax act, 1961:

1. Investment allowance reduction

2. Development repute
3. Development allowance
4. Expenses incurred in scientific research
5. Expenditure incurred on acquisition of patent or copy right
6. Amalgamation of certain preliminary expenses
7. Amortization of expenses in case of amalgamation or demerger
8. Carry forward or set off accumulated loss and unabsorbed depreciation allowance in
amalgamation
Conclusion:

The rebuilding normally happens when a business is battling and losing cash. An outsider will be
acquired to evaluate how the business is being run, and afterward make proposals dependent on
what they found that will help make the business run all the more effectively. A solid corporate
rebuilding firm will have specialists in a wide assortment of regions that can analyze all parts of a
business to help discover arrangements. A decent corporate rebuilding firm won't simply recognize
issues of where cash is being lost, yet additionally offer arrangements that an organization can
actualize to explain those issues. They will likewise help an organization through the way toward
rebuilding by creating figures of what's in store furthermore, ensuring the organization can make
sure about the capital accessible to roll out those improvements. Corporate rebuilding can help
reestablish, safeguard and upgrade the estimation of an association.