9911796707
TMI Blog1983 (8) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... rry forward of losses. Since there was no positive income in the assessment year 1979-80 the question of set off of brought forward losses and applicability of section 79 of the Income-tax Act, 1961 ('the Act') did not come up for consideration. In the assessment year 1980-81 there was positive income. Hence, the question of set off and carry forward of losses and the issue of applicability of section 79 was considered. The ITO held that the provisions of section 79(a) are applicable and the assessee will not be entitled to carry forward of losses sustained in the earlier years. The assessee's case was that as the change was necessitated for rehabilitating the company which had become sick due to continued losses, the case would be covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge in the shareholding was effected with a view to avoid or reduce any liability to tax. The ratio laid down by the Bombay High Court in the case of Italindia Cotton Co. (P.) Ltd. v. CIT [1978] 113 ITR 58 would apply. Following the above decision he held that the assessee should be allowed the benefit of carry forward of losses of earlier years, and, accordingly, he directed the ITO. Against the same, the revenue has preferred this appeal. 3. The learned departmental representative strongly urged that the provisions of section 79(a) are applicable and the assessee will not be entitled for carry forward of losses sustained in earlier years. The conditions prescribed under section 79 are specific and are alternative, and either of the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rward and set off of losses in the case of certain companies. --- Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested, no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year unless --- (a) on the last day of the previous year the shares of the company carrying not less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns mentioned in section 79 are specific and they are alternative and either of the circumstances is enough to bring the case under the grip of section 79. In our view, the assessee has proved that the change of shareholding was brought about to rehabilitate the company which became sick due to continued large losses and the change was effected not with a view to avoid or reduce any liability to tax. Thus, section 79(b) would apply to the assessee. Since the change in shareholding was not effected with a view to avoiding or reducing any liability to tax, it satisfies clause (b) of section 79 and thus the assessee is entitled for carry forward and set off of losses of the earlier years. The ITO's view that once section 79(a) is not satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otwithstanding a change of more than 51 per cent of the voting power between the two relevant dates if a claim for set off has to be made by the assessee, then it is for the assessee to satisfy the taxing authorities and the Tribunal that such change in the shareholding has not taken place with a view to avoiding any liability to tax and if the taxing authorities and the Tribunal are so satisfied, then, notwithstanding a change of more than 51 per cent of the voting power between the two relevant dates, a claim for set off will be permissible under clause (b) of section 79." Thus, it was held that clause (b) will apply in a case where the benefit under clause (a) of section 79 is not available to the assessee and where the change in the v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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