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2019 (1) TMI 1477 - KERALA HIGH COURTApplicability of Section 79 - Carry forward and set off of losses in the case of certain companies - Tribunal have held that the assessee-Company as on the last date of the previous year relevant to the assessment year being a Company in which the public are substantially interested and the 51% shareholding of that Company having existed prior to the amalgamation on 01.01.2000, Section 79 of the Act is inapplicable to the Company Held that:- Not less than 51% of the share holding of FC Berg on the last day of the year or years in which the loss occurred, should have been beneficially held by not less than 51% of the shareholders of FC OEN. FC OEN acquired 60% of the shareholding of FC Berg only in July, 1999. Irrespective of that, the new company will be entitled to claim the business loss of the amalgamated company in the assessment year relevant to that previous year in which there was change in shareholding. This is because the prohibition is only in claiming the losses of any year prior to the previous year. But 51% of the shareholding, in FC Berg, in none of the years prior to the previous year (1999-2000), was ever held by FC OEN or even FCI. Section 79 squarely applies in the case of the assessee, FC OEN Limited in so far as the claim of carry forward of losses, incurred by FC Berg, in any of the years prior to the previous year. On amalgamation, FC OEN Limited cannot claim business loss of FC Berg for the years prior to the previous year, i.e, as on and prior to 31.3.1999. Section 79 does not prohibit the claim of business loss of that previous year in which there was a change in shareholding, i.e., 1999-2000. We see from the assessment order that business loss upto 31.12.1999 has been declined obviously for reason of the new company in which the public are substantially interested having been formed on 01.01.2000. As we earlier noticed, the amalgamation and the change in status of the company to one in which public are substantially interested, does not at all affect the applicability of Section 79 insofar as the earlier company was not one in which the public are substantially interested. Hence, the business loss of the earlier company from 01.04.1999 to 31.12.1999 has to be allowed to be carried forward by FC OEN Limited. We, hence, answer the question of law partly in favour of the assessee and partly in favour of the Revenue. We direct the AO to carry out the modification insofar as grant of carry forward of business loss or set off of business loss of the previous year relatable to FC Berg, i.e., of the financial year 1999-2000, in the assessment year 2000-2001.
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