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Issues:
Interpretation of section 79 of the Income-tax Act regarding the set off of carried forward losses due to a change in shareholding exceeding 51% of the voting power. Analysis: The case involved a private limited company seeking to carry forward losses from earlier assessment years for the assessment year 1979-80. The Income-tax Officer disallowed the carry forward due to a change in shareholding by more than 51% of the voting power, citing section 79 of the Income-tax Act. The Commissioner of Income-tax (Appeals) found that the change in shareholding did not aim to avoid or reduce tax liability, following a decision by the Bombay High Court. The Tribunal upheld this decision, emphasizing the lack of evidence from the Revenue to establish tax avoidance. The Supreme Court affirmed the interpretation of section 79 in Italindia Cotton Co. P. Ltd. v. CIT, stating that the burden is on the assessee to prove that either clause (a) or (b) of section 79 is met to claim the benefit of carrying forward losses. The Court criticized the Tribunal for not considering this burden of proof and directed a fresh consideration of the case in line with the Supreme Court's decision, allowing the parties to present additional evidence. The Court declined to answer the question referred but instructed the Tribunal to reevaluate the matter. In conclusion, the judgment highlights the importance of meeting the conditions of section 79 of the Income-tax Act to claim the benefit of carrying forward losses, emphasizing the burden of proof on the assessee. The Court's decision underscores the need for a proper assessment based on the legal requirements outlined in section 79, ensuring a fair and accurate determination of tax liability in cases involving changes in shareholding exceeding 51% of the voting power.
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