TMI Blog1994 (3) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... han 51% of the voting power on the last date of the year and secondly the Assessing Officer (AO) is satisfied that such change was not effected with a view to avoid or to reduce any tax liability. The assessee's representative further pointed out as to how the assessee has not effected the change in the shareholding but the AO could not find any substance in the statement of the assessee and the benefit of s. 79 of the Act was not extended to the assessee for claim of set off of losses and carry forward. The assessee went in appeal before the learned CIT(A)-II, Baroda, who also on the same ground rejected the claim of the assessee for set off of losses. 4. We have heard the learned counsel for the assessee and the learned Departmental Representative and also perused the record. 5. Before appreciating the rival submissions it may be pointed out that provisions of s. 79 may be quoted which reads as under: "79. Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in 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 yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 400 (New) 12. Shri Shantilal T. Vadgama 50 (New) 13. Miss Amita J. Shah Mr. Rajesh Valera 600 (New) 14. Miss Amita J. Shah Mrs. Hansaben Valera 150 (New) The learned counsel pointed out that out of the shareholders one Rajesh L. Valera appearing at Sl. No. 2 died and his family members appearing at sl. Nos. 11 to 14 also withdrew from the said company by relinquishing their shares and the position of shareholders as on 31st March, 1986 is appearing at page 18 of paper book which is as follows: Sl. No. Name of shareholder No. of share held 1. Shri Mukutlal Gupta 100 2. Shri Chandulal Chhaganlal Joshi 50 3. Shri Jamnadas S. Kewlani 550 4. Shri Ramesh Ch. S. Kewlani 100 5. Shri Pravinchandra N. Bhatt 500 6. Shri Hasmukh G. Kikani 100 7. Mrs. Rohini M. Sarvaiya 400 8. Devidas S. Kewlani 300 9. Mrs. Radhaben R. Kewlani 400 10. Mrs. Ramilal A. Parakh 200 11. Dr. Bharat V. Trivedi 300(new) 7. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge of shareholding need not fall within the prohibition of s. 79 of the Act. The change in case not effected for business or commercial reasons but in order that tax liability may be avoided or reduced, will attract the said prohibition. The citation of case of M.D. Traders Chit Fund Financiers (P) Ltd. vs. CIT (1989) 79 CTR (P H) 135 : (1989) 178 ITR 388 (P H) is also to the same effect and on the basis of this law the contention of the learned counsel for assessee is that in the cases referred to above, the crux of the matter is that even though there is any change of shareholding exceeding 50% still the Department is to show that it was effected to evade or reduce the liability to tax; otherwise prohibition of s. 79 will not be attracted; while in the case of assessee no such change is effected and voting power of more than 50% remained with those persons who are having shares on the last day of the previous year. The learned Departmental Representative simply placed reliance on the orders of the authorities below. 10. After going through the rival submissions and after perusal of the record, the contention of the assessee appears to be well founded. The reasoning of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten submission the assessee took the plea that the assessee has sufferred losses in the year under consideration that is why the reserve has not been credited. The AO accordingly disallowed the claim and in appeal, the learned CIT(A) on the same ground rejected the plea of the assessee keeping in view the decision of Hon'ble Supreme Court in the case of Shri Shubhlaxmi Mills Ltd. vs. Addl. CIT (1989) 77 CTR (SC) 33 : (1989) 177 ITR 193 (SC). 15. The learned counsel for the assessee has argued that no doubt the decision of the Hon'ble Supreme Court laid down in the case of Subhlaxmi Mills Ltd. was the latest one in which Hon'ble Supreme Court has laid down that in order to claim deduction on account of development rebate under s. 33(1) it is obligatory that the debit entries in the P L a/c and credit entries in the reserve a/c should be made in the relevant previous year. Existence of sufficient profits is not necessary and the mere book entries are sufficient. However, the learned counsel for the assessee pointed out that after the decision of the Hon'ble Supreme Court in the case of Shubhlaxmi Mills Ltd. vs. Addl. CIT, an amendment in s. 32A(4)(ii) was effected by the Finance A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank and the bank had debited credit guarantee of Rs. 4,437 and account advice was received during the year and crystallised during the year in question and it should have been allowed on this very ground. No doubt these expenses relate to previous year but as the liability was crystallised during the year in question and was not claimed in the previous year, the learned ITO should have allowed this and accordingly this ground is allowed and the ITO is directed to allow this amount as claimed by the assessee. 22. The last ground No. 5 relates to a disallowance of Rs. 8,211 by ITO being interest paid to the G.S.F.C. Term Loan. According to AO the assessee was fully knowing that the liability of this term loan should have been claimed in the year of accrual and once he has not claimed in the relevant year, it is not allowable during this year. This ground of the assessee is not tenable in view of the fact that assessee was maintaining a/c on mercantile basis and he must have been aware of his liability accruing on the term loan obtained from the G.S.F.C. and should have claimed in the year of accrual. Accordingly there is no force in this ground and reasonings of the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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