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Issues involved: Disallowance of set off of carried forward business loss u/s. 79 of the I.T. Act.
Summary: The appeal was filed against the order of the CIT(A) upholding the disallowance of set off of carried forward business loss of A.Y. 2006-07 and A.Y. 2007-08 u/s. 79 of the I.T. Act. The Assessing Officer observed a change in the shareholding pattern of the assessee company and disallowed the set off of losses based on section 79. The CIT(A) also upheld this decision, stating that the conditions of section 79 were not met due to the change in shareholding. The assessee argued that despite the change, the group still controlled the shares and should be entitled to the set off. However, the Tribunal found that the change in shareholding pattern did not meet the requirements of section 79, as the beneficial holding had indeed changed. The Tribunal dismissed the appeal, affirming the decision of the CIT(A). The Tribunal analyzed the shareholding pattern and relevant provisions of section 79. It was noted that Priority One Marketing Pvt. Ltd., which previously held 80% shares, now held only 3.2%, while Mrs. Manisha Sanghani, who previously held no shares, now held 48.8%. The Tribunal rejected the argument that the shareholding remained within the group, emphasizing that a company is a distinct legal entity separate from its shareholders. The Tribunal agreed with the CIT(A) that section 79 applied to the case, as the shareholding pattern had indeed changed. The appeal was dismissed, confirming the decision of the CIT(A). The assessee's reliance on a Tribunal decision from Delhi Bench was deemed irrelevant, as the facts of that case involving a merger were different from the present case. The Tribunal in the present case found the decision cited by the assessee to be inapplicable due to the distinguishable circumstances. The appeal was dismissed, and the order was pronounced on 23rd October 2013.
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