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TMI BlogCondition for carry forward and set off of losses in cases of strategic restructuring : Clause 119 of the Income Tax Bill, 2025 and Comparison with Section 79 of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... s witnessing alterations in shareholding. The clause aims to regulate the conditions under which losses can be carried forward and set off against future income, thereby affecting tax liabilities. This commentary will also compare Clause 119 with the existing Section 79 of the Income Tax Act, 1961, which already provides a framework for the carry forward and set off of losses in certain companies. Objective and Purpose The legislative intent behind Clause 119 is to ensure that tax benefits related to the carry forward and set off of losses are not misused in cases of strategic restructuring or changes in ownership. By setting specific conditions, the clause aims to prevent tax avoidance while still allowing genuine business losses to be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision is crucial for preventing tax avoidance through strategic changes in company ownership. Clause 119(3)(b) provides an exception for eligible start-ups, allowing them to carry forward losses if all shareholders at the time the loss was incurred continue to hold their shares at the time of the shareholding change, and the loss was incurred within the first ten years of incorporation. This exception reflects a policy decision to support start-ups by providing them with greater flexibility in managing their tax liabilities. 4. Exceptions to the General Rule Clause 119(4) enumerates several exceptions where the restrictions on carrying forward and setting off losses do not apply. These include changes due to the death of a shareholder, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses in cases of changes in shareholding. They share a common goal of preventing tax avoidance through strategic ownership changes while allowing genuine business losses to be offset against future income. 2. Differences Clause 119 introduces a broader scope by including provisions related to the change in constitution of firms and succession of businesses, which are not explicitly covered by Section 79. Additionally, Clause 119 provides specific exceptions for start-ups and strategic disinvestment, reflecting a more nuanced approach to contemporary business practices. Section 79 focuses primarily on changes in shareholding and does not provide the same level of detail regarding exceptions and special cases as Clause 119. The introducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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