TMI Blog2011 (5) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee. - 3435 & 3436 (MUM.) OF 2010 - - - Dated:- 27-5-2011 - R.S. SYAL, SMT. ASHA VIJAYARAGHAVAN, JJ. Arvind Sonde for the Appellant. Devi Singh for the Respondent. ORDER R.S. Syal, Accountant Member ‑ These two appeals by the assessee are directed against the order passed by the CIT under section 263 on 24-3-2010 in relation to the assessment years 2004-05 and 2005-06. Since both the appeals are based on identical facts and common grounds of appeal and further the ld. CIT(A) has also passed a common order, we are proceeding to dispose them by this consolidated order for the sake of convenience. 2. Briefly stated the facts of the case are that on examination of the records of the assessee for the assessment years 2004-05 and 2005-06, it was noticed by the CIT that the order passed by the A.O. under section 154 for the assessment year 2004-05 and that under section 143(3) for the assessment year 2005-06 were erroneous and prejudicial to the interests of Revenue. The reason for such decision by the ld. CIT was that the losses pertaining to assessment year prior to 1998-99 were allowed to be set off by the AO, which could not have been done as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e years by holding them as erroneous and prejudicial to the interests of the Revenue and directed the assessing authority to redo the assessment as per law after giving the assessee a sufficient opportunity. 3. We have heard the rival submissions and perused the relevant material on record. The ld. CIT has opined that the brought forward losses of an earlier year did not qualify to be set off against the income of the years in question because of the operation of section 79. At this juncture, it would be apt to reproduce section 79 as under : "79. Carry forward and set off of losses in the case of certain companies. Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a 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 (a) 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 carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central, State or Provincial Act, or (c) any company to which this clause applies or any subsidiary company of such company if the whole of such share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year". 5. As per clause (b) of section 2(18), a company is said to be a company in which the public are substantially interested if it is a company which is not a private company as defined in the Companies Act, 1956, and the conditions either in item (A) or in item (B) are satisfied. 'Public company' has been defined in section 3(iv) of the Indian Companies Act, 1956, to mean a company which - (a) is not a private company; (b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed; (c) is a private company which is a subsidiary of a company which is not a private company. 6. Here, it is pertinent to note that the above extracted clause (iv) of section 3 of the Companies Act defining 'public company' has been substituted by the Companies (Amendment) Act, 2000, with effect from 13-12-2000. Section 43A defining "deemed public company" was amended with eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a company in which the public are substantially interested is adorned. We can notice from item (B) of section 2(18)(b) that the shares in such a company which is not a private company carrying not less than 50% of the voting power should have been allotted unconditionally to, or acquired unconditionally by, and be beneficially held by any company to which this clause applies throughout the relevant previous year. The assessee is satisfying this condition as well inasmuch as M/s. Gagan Trading Co. Ltd. held 12,01,001 shares of the assessee company as on 31-03-2003, which continued to be held during the whole of the previous year in question. It shows that more than 50% of the shares of the assessee company were held by M/s. Gagan Trading Co. Ltd., as a result of which that company became the holding company of the assessee company. Therefore, it is explicit that the assessee company, by fulfilling the requisite conditions, became a company in which the public are substantially interested as per the Companies Act. In that view of the matter, once it is held that the assessee is a company in which the public are substantially interested, application of section 79 is automatically r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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