TMI Blog1992 (8) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... been given in this case that the change in the shareholdings was effected with a view to avoiding or reducing any liability to tax ? " The assessee-company is a private limited company in which the public are not substantially interested. Its accounting period for the assessment year 1975-76 under consideration is the calendar year 1974. It claimed during the accounting period under consideration that unabsorbed depreciation and the trading loss of the assessment year 1973-74, the accounting period for which was the calendar year 1972, be brought forward and set off against its income of the assessment year 1975-76. The Income-tax Officer rejected such claim of, the assessee on the ground that on account of the change in the shareholdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew to avoiding or reducing any liability to tax." The Tribunal further recorded a finding of facts towards the end of paragraph 2 of its order as follows : " On the face of it, the change appears to be in a bona fide manner in the normal course and section 79 is not intended to hit such cases. " The answer to the question whether or not the assessee is disqualified to claim set off of the loss of the assessment year 1973-74 against the income of the assessment year 1975-76, revolves round the true interpretation of section 79, The Supreme Court in CIT v. Italindia Cotton Co. P. Ltd. [1988] 174 ITR 160 referring to clauses (a) and (b) of section 79 held that the conditions are intended to operate as alternative to one another and if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, tell it will not be disqualified from taking advantage of the provisions of Chapter VI in the Act. The assessing authority and the Appellate Assistant Commissioner both misread or misinterpreted section 79 and erroneously held that since the assessee-company failed to retain 51% or more shares on the last day of the previous year under consideration, it was disqualified under section 79 to claim set off of the losses of the assessment year 1973-74. Their approach was that when the assessee-company failed to satisfy the conditions of clause (a) of section 79, there was no need for them to look into the conditions of clause (b) of section 79. The true legal position is that clause (a) and clause (b) of section 79 carve out two distinct exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative to the first exception provided in clause (a) of section 79, it will still be entitled to claim carry forward and set off according to the factual finding of the Appellate Tribunal that the change in the shareholding of the assessee-company was bona fide. The Appellate Tribunal having found that the change in the shareholding was bona fide, ought to have worded the question referred to this court more appropriately. The question arising from the order of the Tribunal is whether on the facts as found by the Tribunal and on the true interpretation of section 79, the Tribunal was justified in holding that the provisions of section 79 are not applicable to the case of the assessee. There was a slip on the part of the Tribunal in formula ..... X X X X Extracts X X X X X X X X Extracts X X X X
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