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TMI Blog2019 (1) TMI 1477X X X X Extracts X X X X X X X X Extracts X X X X ..... malgamated to the other, for the assessment year 2000-01 arises on the applicability of Section 79 of the Income Tax Act, 1961 [for brevity "the Act"]. The question of law is re-framed as follows: "Ought not the Tribunal have held that the assessee-Company as on the last date of the previous year [1999-2000] relevant to the assessment year [2000-2001] 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?" 2. On facts, it has to be noticed that FC Berg Limited was a company which existed from 1996 onwards with 40% of its shareholding with Framatome Connectors India Limited [FCI] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the year or years in which the loss was incurred". 5. Section 79 is a measure devised by the legislature to prevent profit making companies, from claiming deduction of carried forward losses of companies taken over, which were carried on un-profitably. The provision applies only to companies in which the public are not substantially interested. The specific case put up by the assessee is that on the close of the year, the company, after amalgamation, is FC OEN Limited, which is a company in which the public are substantially interested. 6. Section 79, takes care o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the shares in the new company also. Hence, if FC OEN had held 51% of the shareholding of FC Berg on any years prior to the previous year, then the loss of such years could be claimed by FC OEN after amalgamation. 8. On the facts as evidenced from the particular case, we find that FC Berg was existing as on 01.04.1999, which was a company in which the public are not substantially interested. In July 1999, 60% of the shares in FC Berg was acquired by FC OEN. The change in shareholding, as contemplated in Section 79 hence was occasioned in the previous year relevant to the subject assessment year. It continued as a company in which the public are not substantially interested. The amalgamation took place with effect from 01.01.2000, upon whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany 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. 10. 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. However, Section 79 does not prohibit the claim of business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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