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TMI Blog2021 (9) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of incurring loss and controlling directly after merger. It is effectively, the whole companies engaged in the same type of business and part of same group. The whole group managed by the same set of Directors and shareholders. The fact on record shows that TRIL is a holding company of assessee-company as well as THPL. Therefore, the position does not change before and after merger of THPL with TRIL. Effectively, TRIL was controlling and having beneficial ownership of 76% (directly 24% and indirectly 41%) before merger and 76% after merger. - Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.03.2013 and 100% as on 31.03.2014. Therefore, there is no change in the control and management of the assessee during either of the years. The Assessing Officer rejected the contentions of the assessee by strictly interpreting provisions of section 79 of the Act and observed that the contentions of the assessee that more than 51% of the shares were held by the TRIL in both the years and therefore, the restrictions in section 79 would not apply is devoid of merits and cannot be accepted. Accordingly, the claim of set off of brought forward losses were rejected by the AO. 3. Aggrieved with the order of the AO, the assessee preferred appeal before Ld. CIT(A) and filed detailed submissions. After considering the detailed submissions of the assessee, the Ld. CIT(A) allowed the appeal filed by the assessee with the following observations : "7. I have carefully considered the facts of the case, contentions of the AO and the submissions of the appellant. The entire issue turns on an interpretation of Section 79 of the Act. Therefore, the said Section, as it then stood, bears reproduction: 79. Notwithstanding anything contained in this Chapter, where a change in shareholding has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is to prevent misuse by a new owner purchasing shares of a loss making company, only to avail of the benefit of the said losses. In my opinion, if you consider the words "voting power" and "beneficially held" as they appears in Section 79 of the Act, in that event Tata Realty & Infrastructure Ltd did beneficially hold more than 50% of the shares the appellant in the two years in which losses were incurred i.e. Assessment Years 2012-13 and 2013- 14. Despite the merger between Tata Realty Infrastructure Ltd. TRIL Highway Prefects Ltd, Tata Realty & Infrastructure Ltd. did beneficially hold more than 51% of the of the "voting power" earlier it held 65% through 24% directly and 41% indirectly, and in the current year of set off it holds 100% of the "voting power". The three Directors of TRIL Highway Projects Ltd are also on the board of Tata Realty & Infrastructure Ltd. It is necessary to consider the decisions relied upon by the appellant. In the case of CIT vs. Select Holiday Resorts (P) Ltd, the facts were that the assessee was a 98% subsidiary of a company called IIPL The shares of IIPL were fully held by four persons of the same family, who on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 79 is concerned, it is evident that during the earlier period 98% of the assessee's shares were held by IIPL. The holding company was amalgamated with the assessee company However, the shareholders of that holding company i.e. IIPL continued to be shareholders of the assessee company itself. The shareholders beneficially entitled to 98% of the shares continued to be the same. In these circumstances, the prohibition from carrying forward the losses, placed by Section 79 does not operate the other hand section 79(a) makes the provision consequently inapplicable. The conclusions of the Tribunal in this regard are unexceptionable. For the above reasons no substantial question of law can be determined by the Court". I find that the that the Appellant's case is also of change in shareholding on account of merger, the Income-tax Appellate Tribunal Delhi Bench in the case of which has been held to be akin to the death of a shareholder by the Delhi Tribunal and has been approved by the Delhi High Court. I agree with the view that transfer on account of merger is akin to transfer on account of death of Shareholder. Therefore, I am of the view that provisions of of section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Ld. CIT(A). He submitted that the beneficial owner and voting power used in section 79 indicates, in order to invoke provisions of section 79 only voting power is relevant and not shareholding pattern. He submitted that after merger proceedings, the assessee has 100% voting power compared to 24% directly and 41% indirectly. The same directors continue to be directors after the merger. Therefore, there is no change in the voting power as existed prior to merger. In this regard, he relied in the case of Commissioner of Income Tax, Bangalore v. AMCO Power System Ltd. (62 taxmann.com 350), Mumbai Tribunal judgement BancTec TPS India Private Limited v. CIT (ITA No. 2336/Mum/2019) dated 04th September 2019) and Mumbai Tribunal judgment in case of Wadhwa & Associates Realtors (P.) Ltd. v. Assistant Commissioner of Income Tax, 9(3) Mumbai. 7. Considered the rival submissions and material placed on record. We notice that the shareholding pattern of the assessee company is comprised of Tata Realty and Infrastructure Ltd. (TRIL) 24%, Actis Infrastructure Roads Ltd. (Actis) 24% and TRIL Highway Projects Ltd. (THPL) 52%. We further noticed that as on 31.03.2013 TRIL was holding 78.85% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A, there is nothing on the record to show that there was any agreement or arrangement that the beneficial owner of such shares would be with the holding company, Yum USA. 8.1 In the above case, there was no arrangement or agreement between the holding company and subsidiary companies, and these companies existed in the different international jurisdictions. The new company Yum India was formed as distinct and independent company. But the case under consideration belongs to same group of companies and the shares were invested by the shareholders within the group companies. The holding company is one of the shareholders controlling the other sister's concern. The share pattern clearly indicates that the holding company controls the whole business. Therefore, the case relied by the revenue is distinguishable. Moreover, the Yum USA, Yum India and Yum Singapore were formed in different jurisdiction and they are independent entities through series of intermediaries whereas in the case of assessee, shareholders/investor are part of same management in one single jurisdiction. 9. The fact on record shows that TRIL is a holding company of assessee-company as well as THPL. Therefore, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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