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TMI Blog2012 (11) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... d - In the result, appeal of the assessee is dismissed. - IT Appeal No. 41 (Agra) of 2011 - - - Dated:- 27-7-2012 - BHAVNESH SAINI AND A.L. GEHLOT, JJ. A.K. Sharma for the Respondent. ORDER A.L. Gehlot, Accountant Member - This is an appeal filed by the assessee against the order dated 20.10.2010 passed by the ld. CIT(A)-II, Agra for the Assessment Year 2007-08 on the following grounds :- "1. That with regards to the facts and circumstances of the case, the ld. A.O. and ld. CIT (Appeals)-II, Agra have erred in fact and law in denying the set off carry forward business loss to the tune of Rs. 29,94,643/- 2. That with regards to the facts and circumstances of the case, the ld. A.O. and ld. CIT(Appeals)-II, Agra has wrongly interpreted the provisions of section 79 of th3 Income Tax Act while disallowing the set off carries forward business loss. 3. That the assessment is bad in law and bad on facts. 4. That the assessee may be allowed to add, alter or amend any ground of appeal at the time of hearing of appeal." 2. The brief facts of the case are that the assessee company is running Hospital under the name and style of M/s. Peoples Heritage H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the carry forward loss of Rs.29,94,643/-. 5. The CIT(A) confirmed the order of the A.O. as under :- (paragraph no.2.2) "2.2 I have gone through the submissions made by the Ld. AR, it is undisputed fact that during the year share holding of the company has changed by more than 51 % and management and control of the appellant company has been passed on to Pippal family. As per the provisions of sec. 79 where a change in share holding has taken place in the previous year, in the case of company not being a company in which public are substantially interested then no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of previous year unless on the last day of that previous year and on the last day of the previous year in which the loss was incurred, the shares of the company I carrying not less than 51% of the voting power were beneficially held by the same persons. The assessee is not covered by exceptions as provided by the two proviso in section 79 of the Act. The plea of the Ld. AR that 72.8% of total paid share capital was introduced by family of Shri Hari Kishan Pippal during FY 2004-05 and not during the year under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illness and untimely death of the legal advisor Shri Devendra Garg and his office was closed and documents were in his office. It is submitted that the factual position should be considered on account of the assessee's case and change in the share holding pattern should be considered from F.Y. 2004-05 relevant to A.Y. 2005-06 only and not from F.Y. 2006-07 relevant to A.Y. 2007-08. It is further submitted that no amount in form of fresh capital was brought during the F.Y. 2006-07 relevant to A.Y. 2007-08. The assessee submitted that practically there is no change in the shareholding pattern. There is only an academic change on account of late allotment of shares. Therefore, this situation should be viewed as an exception to section 79 of the Act and, therefore, set off of loss may be allowed. 8. As stated above that the issue under consideration is pertaining to section 79 of the Act. Section 79 of the Act reads as under:- "Carry forward and set off of losses in the case of certain companies. 79. 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 publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions in Chapter VI relating to the carry forward and set off of losses. The benefit is available notwithstanding the change in the shareholding in the previous year, if shares representing not less than 51 per cent of the voting power remain beneficially held by the same persons on the relevant dates. The object sought to be served by enacting s. 79 appears to be to discourage persons claiming a reduction of their tax liability on the profits earned in companies which had sustained losses in earlier years. It was not unusual for a group of persons to acquire a company, which had suffered losses in the earlier years, in the expectation that the company would earn substantial profits after such acquisition, and they would benefit by a reduction of the tax liability on those profits on a set off of losses carried forward from earlier years before the acquisition. The acquisition of a company in such a case would be effected by a change in its shareholding and the control over the company could be ensured by securing the beneficial ownership of shares carrying 51 per cent or more of the voting power. If the change in the shareholding did not result in holding voting power of 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as set out in section 72 of the Act, it is obvious that in each A.Y. the A.O. concerned has to ascertain as to what is the amount of business loss which has been carried forward from the immediately previous A.Y. That being the case, if the condition of section 79 of the Act are otherwise satisfied and section 79 can be invoked, the question that has to be asked is - whether in the eye of the law so far as the A.Y. 1965-66 is concerned, there was any business loss validly carried forward from the immediate preceding A.Y. It is obvious that if the conditions of section 79 of the Act are otherwise satisfied, there could not have been any carrying forward and set off of the business losses incurred by the assessee-company prior to 1960-63 so far as the A.Ys. 1963-64 or 1964-65 was concerned and similarly each subsequent assessment year was concerned. The Court held that section 79 of the Act could be invoked in respect of AY 65-66 and 66-67 though these provisions were not invoked by the department in AY 62-63 where there was change in share holding of the Assessee Company and section 79 became applicable. 11. In the light of the above discussions, the admitted facts of the case un ..... 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