9911796707
TMI Blog1980 (3) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... e calendar year, 1973. The company had previous loss carried forward and also unabsorbed depreciation as well as adjusted development rebate which had to be set off in subsequent years. After noting the change in the share holding, the ITO held that s.79 came into operation and the assessee could not be allowed the set off loss carried forward from the earlier years as well as earlier unabsorbed depreciation and unadjusted development rebate. The ld. AAC allowed the assessee's appeal holding that the case of the assessee did not fall within the mischief of s. 79. No doubt on some points, as well shall see later, the ld. AAC rejected some of the contentions of the assessee though in the end he held that s. 79 was not attracted. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered. Their Lordship have held that s. 79 prevented set off of business loss only if that section was attracted, it did not come in the way of set off of unabsorbed depreciation or unabsorbed development rebate. Their Lordships have also held that before s. 79 could be brought into operation both the conditions under s. 79 (a) and 79(b) had to be fulfilled.; in other words if the assessee showed that one of the conditions was no fulfilled., s. 79 could not be brought into operation. Again what was required to be proved was the motive in acquiring the shares by the purchasers. Shri Mittal then pointed that their Lordships have held that whether conditions of s. 79 (1) were fulfilled or not was to be in a negative form and so the burden was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how that s. 79 is attracted though it may ultimately turn out to be only a light burden. 7. Then Shri Kaji pointed out that the new line in which the company earned profits was started in the last two months of Calendar year, 1974 i.e., more than a year after the change of shareholders. Again it was not shown that the new share-holders saved their tax liability by taking over the company or the shares. The company had no tax liability because of the past losses and unabsorbed depreciation and development rebate. No tax was, therefore, avoided by the company, and that could not have been the motive. Again when the new share-holders acquired the shares their motive could not have been reduction of their tax liability; they do not save any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been retained by the company even till today. 9. Sec. 79 provides that where a change occurred in the share-holders of a closely held company, no loss incurred in any earlier years should be carried forward in this year and set off against the income after the change in share-holders unless (a) 51 per cent of the shares have not changed in hand; or (b) the change in share holders was not effected with a view to avoiding or reducing any liability of tax. We find that in the case of Subhlaxmi Mills. Their Lordships have explained this provision giving clear guide lines on this aspect. Firstly, it is explained that both the conditions viz., change in ownership of shares and secondly the motive of avoiding or reduction of tax liability shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, unless it can be shown that the motive itself was reduction of tax liability. No doubt, the onus was on the assessee to establish that the motive was not avoidance or reduction of any tax liability. Here, however, we find that the facts lead to a conclusion that when the shares were acquired the motive was not to avoid or reduce any tax liability. We also agree with Shri Kaji that s. 79 withdraws a benefit that is normally available and hence it should be applied only when it is clearly attracted. 10. In this view of the matter we agree with the ld. AAC that condition (b) is not being fulfilled; s. 79 is not attracted. We, therefore, dismiss the appeals filed by the Revenue. 11. The cross objections are about the aspect whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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