1989 (9) TMI 35

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..... osses of earlier years having regard to the correct interpretation of section 79 of the Income-tax Act, 1961?" The respondent (assessee) is a private limited company. We are concerned with the assessment year 1979-80. The previous year ended on December 31, 1978. The assessee made a net profit of Rs. 11,994. The assessee put forward a plea to carry forward the loss of the earlier assessment years amounting to Rs. 39,097. The return was filed on June 23, 1979, declaring a net loss of Rs. 33,730. The Income-tax Officer found that there was a change of shareholding in the previous year by more than 51 per cent. of the voting power. He also held that section 79 of the Income-tax Act forbids carry forward of the loss incurred in the earlier as .....

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..... 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 was incurred ; or (b) the Income-tax Officer is satisfied that the change in the shareholding was not effected with a view to avoiding or reducing any liability to tax." The decision of the Bombay High. Court, relied on by the Commissioner of Income-tax (Appeals) and the Appellate Tribunal, reported in Itali .....

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..... view to avoid or reduce any liability to tax. At page 165 of the Reports (Italindia Cotton Co. P. Ltd.'s case [1988] 174 ITR 160) the Supreme Court held thus: "In our opinion, to avoid falling within the scope of section 79, it is sufficient for the assessee to show that the case attracts either clause (a) or clause (b). If the assessee succeeds in doing so, he will be entitled to the benefit of the provisions of the Income-tax Act, entitling him to claim carry forward and set-off of losses suffered by the company in an earlier year or years against the income of the previous year." The above decision of the Supreme Court clearly lays down that the burden is on the assessee to show that the claim attracts either clause (a) or clause (b .....

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