Amendment of section 79.
18. In section 79 of the Income-tax Act,––
(i) in sub-section (2), after clause (e), the following clause shall be inserted, namely:––
“(f) to an erstwhile public sector company subject to the condition that the ultimate holding company of such company, immediately after the completion of strategic disinvestment, continues to hold, directly or through its subsidiary or subsidiaries, at least fifty-one per cent. of the voting power of such company in aggregate.”;
(ii) after sub-section (2), the following sub-section shall be inserted, namely:––
“(3) Notwithstanding anything contained in subsection (2), if the condition specified in clause (f) of the said sub-section is not complied with in any previous year after the completion of strategic disinvestment, the provisions of sub-section (1) shall apply for such previous year and subsequent previous years.”;
(iii) in the Explanation, after clause (i), the following clauses shall be inserted, namely:––
‘(ia) “erstwhile public sector company” shall have the same meaning as assigned to it in clause (ii) of the Explanation to clause (d) of sub-section (1) of section 72A;
(ib) “strategic disinvestment” shall have the same meaning as assigned to it in clause (iii) of the Explanation to clause (d) of sub-section (1) of section 72A;’.
Notes on Clauses:
Clause 18 seeks to amend section 79 of the Income-tax Act relating to carry forward and set off of losses in case of certain companies.
Sub-section (1) of the said section, inter alia, provides that where a change in shareholding has taken place during the previous year in the case of a company, not being a company in which the public are substantially interested, no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, unless on the last day of the previous year, the shares of the company carrying not less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of year or years in which the loss was incurred.
Sub-section (2) of the said section provides certain circumstances in which the provisions of sub-section (1) shall not apply.
It is proposed to amend the said sub-section (2) by inserting a new clause (f) to provide that nothing in sub-section (1) shall apply to an erstwhile public sector company subject to the condition that the ultimate holding company of such company, immediately after the completion of strategic disinvestment, continues to hold, directly or through its subsidiary or subsidiaries, at least fifty-one per cent. of the voting power of the erstwhile public sector company in aggregate.
It is further proposed to insert a new sub-section (3) in the said section to provide that notwithstanding anything contained in sub-section (2), if the condition specified in clause (f) of the said sub-section is not complied with in any previous year after the completion of strategic disinvestment, the provisions of sub-section (1) shall apply for such previous year and subsequent previous years.
It is also proposed to amend the Explanation, inter alia, to insert the definition of the expressions “erstwhile public sector company”, and “strategic disinvestment”.
These amendments will take effect from 1st April, 2022 and will, accordingly, apply in relation to the assessment year 2022-2023 and subsequent assessment years.
