Amendment of section 79.
35. In section 79 of the Income-tax Act, in sub-section (1), in the proviso, for the word “seven”, the word “ten” shall be substituted.
Notes on Clauses:
Clause 35 of the Bill 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 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.
Proviso to sub-section (1) provides that even if the said condition is not satisfied in case of an eligible start-up as referred to in section 80-IAC, the loss incurred in any year prior to the previous year shall be allowed to be carried forward and set off against the income of the previous year if all the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred, continue to hold those shares on the last day of such previous year and such loss has been incurred during the period of seven years beginning from the year in which such company is incorporated.
It is proposed to amend the said proviso so as to increase the period from seven years to ten years.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
