CBDT issues final
notification u/s. 115JG(1) specifying the conditions to be fulfilled upon
conversion of Indian Branch of foreign bank into Indian subsidiary company and
also specifying modifications, exceptions, in applicability of certain
provisions of the Act to such conversion; Apart from the conditions specified
in draft notification for availing capital gains exemption that all assets /
liabilities of Indian Branch are taken over by subsidiary, foreign co. receives
consideration only by way of share allotment, foreign co./ its nominees hold
whole of the share capital of the subsidiary, conversion is in accordance with
RBI guidelines, the final notification additionally stipulates that all assets
and liabilities of Indian branch are transferred at book values and any change
in value of assets consequent to their revaluation shall be ignored; Likewise,
the final notification specifies two additional ‘exceptions, modifications and
adaptations’, viz. 1) Sec. 56(2)(x) shall not apply to the transaction of receipt
of shares in the Indian subsidiary company by the foreign company in
consequence of the conversion and 2) the provisions of 35DDA [relating
amortisation of expenditure incurred under VRS] shall be, as far as may be,
apply to the Indian subsidiary company, as they would have applied to the
Indian branch, if the conversion had not taken place; The conditions relating
to unabsorbed depreciation, losses set-off / carry forward, tax credit are
largely similar to those proposed under draft notification; CBDT also amends
Rule 8AA to provide for determination of the holding period for the capital
asset which became the property of the Indian subsidiary co. in consequence to
conversion u/s. 115JG(1), states that the period for which the asset was held
by the Indian branch and by the previous owner [who acquired the capital asset
by a mode referred to in Sec. 49(1) / Sec. 115JG(1)] shall be included
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