The Central Board of Direct Taxes ( CBDT ) has notified the unabsorbed depreciation, set off/ carry forward of losses, tax credit under section 115JG of the Income Tax Act, 1961 for conversion of Indian Branch of Foreign Bank into Indian Subsidiary company.
The Finance Act, 2012 inserted a new Chapter XII-BB consisting of Section 115JG in the Income Tax Act, 1961 which contains “Special provisions relating to the conversion of Indian Branch of a Foreign Bank into a Subsidiary Company”.
Section 115JG of the Act, inter alia, provides that in case the conversion of Indian Branch of foreign bank fulfils the conditions notified by the Central Government, the capital gains arising from such conversion shall not be chargeable to tax and the provision relating to 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 case of foreign company and Indian subsidiary shall apply with such modification, exception etc. as may be specified in the notification.
The Reserve Bank of India (RBI) had recently released the “Scheme for setting-up of wholly owned subsidiaries (WOS) by the foreign bank in India” (the Scheme) on 6th November 2013. The Scheme, inter alia, provides the procedure for conversion of existing branches of Foreign Bank in WOS. A Foreign Bank is required to set-up a WOS in India and the Indian Branch shall amalgamate with WOS as per the Amalgamation Scheme approved by the shareholder of Foreign Bank and WOS which is sanctioned by the RBI.
In view of the above, it is proposed to issue Notification under Section 115JG(1) of the Act specifying the conditions to be fulfilled by the conversion and also specifying modifications, exceptions, in the applicability of certain provisions of the Act to such conversion.
Subscribe Taxscan Premium to view the Judgment
