Will Sec 79 be applicable in case there is a change in 51% voting power but no change in beneficial ownership?
Case:
1. Assessee claimed that shareholding of the Assessee-company is of M/s. FHL and M/s. FHHPL. Both the above said shareholders were holding 40% and 60% of shares respectively as on 1.4.2011.
2. During the year ending on 31.3.2012 relating to A.Y. 2012-13, the Assessee issued 30 Lakhs equity shares having face value at Rs.10/- each with a premium of Rs.90/- per share (totaling to Rs. 100/- per share) to FHL.
3. As a result, there was a change in share holding pattern between both the shareholders, i.e., the holding of FHL increased to 85%, while holding of FHHPL got reduced to 15%.
4. FHHPL is the holding company of FHL. FHHPL holds 81.34% shares in FHL.
5. Sec 79 of the Income Tax Act disallows the carry forward of past losses if, by the end of the previous year, the ownership of at least 51% of voting power has changed.
So in such a situation, will assessee be allowed to carry forward the past losses?
Reply:
1. This case is similar to case before Mumbai ITAT- Hiranandani Healthcare Pvt. Ltd. (I.T.A. No. 1142/Mum/2023), where it was held as below:
2. FHHPL is holding company of FHL. Hence, the increase in shareholding of FHL in the assessee company, in any case, would not result in the change in the voting power of the shareholders.
3. Since the beneficial ownership remained unchanged since FHHPL was the holding company of FHL, the assessee can be alllowed to carry forward past losses.
The copy of the order is as under:
