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TMI Blog2022 (2) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... in shareholding takes place pursuant to Resolution Plan was with purpose and object. Thus, claim of carry forward of losses is not impermissible but can only be granted giving opportunity to the appropriate Income Tax Authority. The benefit of carry forward of losses can be availed by the Appellant subject of opportunity to be given to Income Tax Authority to pass appropriate orders in accordance with Section 79 - the observations made in paragraph 238 and 244 of the order of the Adjudicating Authority need to be deleted and are hereby deleted and the benefit of carry forward losses can be claimed by the Appellant subject to decision by appropriate Income Tax Authority as per Section 79 of the Income Tax Act. It is open for the Appellant to claim benefit of carry forward losses as per Section 79 of the Income Tax Act before appropriate competent Income Tax Authority which shall decide the claim in accordance with law. Appeal disposed off. - Company Appeal (AT) (Insolvency) No. 992 of 2020 - - - Dated:- 14-2-2022 - [ Justice Ashok Bhushan ] Chairperson And [ Dr. Alok Srivastava ] Member ( Technical ) For the Appellant : Mr. Gopal Jain, Sr. Advocate with Mr. Shashank A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lan. 3. We have heard Shri Gopal Jain, learned senior counsel appearing of the Appellant as well as learned counsel appearing for the Respondent No. 1 Resolution Professional. Ms. Vibhooti Malhotra has appeared for Department of Income Tax. We have by order dated 02.02.2022 has accepted Reply filed by the Income Tax Department on the record. 4. Shri Gopal Jain, learned senior counsel for the Appellant submits that observations of the learned Adjudicating Authority that Appellant cannot avail the benefit of carrying forward of losses as per Section 79 of Income Tax Act, 1961 are erroneous. It is submitted that present is a case which is covered by Third Proviso to Section 79 sub-clause (b). Learned senior counsel has submitted that the present issue is fully covered by judgment of this Tribunal dated 04.12.2019 in Company Appeal (AT) (Insolvency) No. 467 of 2019, JSW Steel Ltd. vs. Ashok Kumar Gulla Ors. , where it was also case of approval of Resolution Plan and this Tribunal held that the Successful Resolution Applicant can claim such benefit. With regard to observations in paragraph 244, it is submitted that the Resolution Plan having been approved after recording the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Plan is submitted to the NCLT for its approval, and the Company should be permitted to carry forward its unabsorbed business losses notwithstanding a change in the shareholding of the company pursuant to this Resolution Plan. 238. With regard to this point, when all past liabilities are waived off, nothing has been left as liability, we do not believe this approval could be accorded to the company, therefore carrying forward of losses is not permitted. 8. Section 79 of the Income Tax Act, 1961 which deals with carry forward and set off of losses in case of certain companies is to the following effect: 79. Carry forward and set off of losses in case of certain companies.─ Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a previous year,─ (a) in the case of a company not being a company in which the public are substantially interested and other than a company referred to in clause (b), 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 on the last day of the previous year, the shares of the company carrying no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner or Commissioner. 10. As noted above, Resolution Professional has during pendency of approval of the plan issued notice to the Income Tax Authorities but no objection was filed. We may notice the reply of the Resolution Professional where rationale behind Section 79 of the Income Tax Act, 1961 has been highlighted. In paragraphs 4 and 5 of the Reply following has been stated: 4. That the rationale behind section 79 of the Income Tax Act, 1961 was to ensure that taxpayers do not purposely, and with mala fide intent, acquire loss making companies and thereafter enjoy tax benefits of such losses while conducting profitable businesses. Therefore, Section 79 provides that carry forward of losses will not be allowed where there is a change in shareholding of the company, unless 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. 5. Upon enactment of the Code, as a measure of incentive to resolution applicants that were acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Adjudicating Authority is concerned, are set aside and deleted and substituted with clarification as made above. The rest part of the impugned order dated 19th December, 2018 as clarified vide order dated 16th April, 2019 approving the Resolution Plan in favour of the Appellant is confirmed. The appeal is allowed with aforesaid observations. No costs. 12. We, thus, are of the view that benefit of carry forward of losses can be availed by the Appellant subject of opportunity to be given to Income Tax Authority to pass appropriate orders in accordance with Section 79. We, thus, are of the view that observations in para 238 deserves to be deleted and are hereby deleted. 13. Now coming to observations of the Adjudicating Authority made in paragraph 244, suffice it to say, Resolution Plan having been approved after recording the finding that the plan is in compliance with provisions of the Code and Regulations, there was no necessity to refer to Section 238 of the Code. Observations in paragraph 244 were uncalled for. We, thus, are of the view that observations made in paragraph 238 and 244 of the order of the Adjudicating Authority need to be deleted and are hereb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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