Law: Income Tax Act, 1961

Section: 79

Income-tax----Company in which public are not substantially interested---Loss---Carry forward and set-off---Shares carrying 51% of voting power ceasing to be held by same group---Change in shareholding effected not with a view to avoiding or reducing tax liability---Section 79, Indian Income-tax Act, 1961 not applicable---Company's right to carry, forward and set-off loss not lost---Change in shareholding is to be found on a comparison between position of voting power on last day of previous year for which assessment is sought to be made and corresponding position of earlier year in which loss was incurred which is claimed to be set-off---Indian Income-tax Act, 1961, S.79. Section 79 of the Indian Income-tax Act, 1961, provides that even if shares carrying 51% of the voting power ceased to be held by the same group, the section would not apply to the company, if the Income-tax Officer is satisfied that the change in the shareholding was not effected with a view to avoiding or reducing any liability to tax. Thus, it follows that if the change in the shareholding was effected not with that object but with some other object in view, the section would not apply and the company's right to carry forward and set-off the loss would not be lost even though the Milt of the change in tile shareholding maybe negation or reduction of tax liability. The change in the shareholding which is contemplated by section 79 is one which is to be found on a comparison between the position of voting power on the last day of the previous year for which the assessment is sought .to be made and the corresponding position of the earlier year in which the loss was incurred which is claimed to be set-off. JUDGMENT GOKAL CHAND MITAL, J.--The Income-tax Appellate Tribunal, Amritsar, has referred the following two common questions for the assessment years 1974-75 and 1976-77 for opinion of this Court: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of section 79(a) of the Income-tax Act, 1961, are attracted in the case? (2) Whether the Tribunal was correct in interpreting section 79(a) of the Income-tax Act to mean that…

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