Section 79

Section 79 — the law in short

What the courts have decided on section 79, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Subhulaxmi Mills Ltd Supreme CourtHelps taxpayer
  The officer has invoked s.79 after a change in our shareholding and struck out everything brought forward, including unabsorbed depreciation. Does s.79 reach unabsorbed depreciation?
  No. The Supreme Court agreed with the Gujarat High Court that when s.79 speaks of loss, it does not include unabsorbed depreciation or unabsorbed development rebate. Only the brought forward business loss is at risk under s.79; unabsorbed depreciation continues to be governed by s.32(2).
• AMNS Gandhidham Ltd v ACIT High CourtHelps taxpayerValidity unconfirmed
  My client took over a company through an IBC resolution plan. The assessing officer has begun assessments for years before the takeover and says he will examine whether the brought forward losses survive the change in shareholding. Can he?
  On these facts, no. Where the resolution professional gave the jurisdictional Principal Commissioner the opportunity of being heard that s.79(2)(c) requires and the Principal Commissioner made no submissions before or at the approval of the resolution plan, the Bombay High Court held that the Revenue could not afterwards reopen the allowability of the carried forward losses, and quashed assessment proceedings relating to a period before the plan's implementation date.
• PCIT v Burda Druck India Pvt Ltd High CourtHelps taxpayerValidity unconfirmed
  The assessment order for the loss year ends with a line saying the brought forward losses will not be allowed to be carried forward because our shareholding changed. Am I stuck with that when I claim the set-off later?
  No. The assessing officer of the loss year has only to notify the amount of the loss he has computed; whether that loss can be carried forward and set off is for the officer who deals with the year in which the set-off is claimed. The Delhi High Court upheld the Tribunal's direction to expunge the remark, and added that unabsorbed depreciation and capital losses do not fall within s.79 at all.
• Yum Restaurants (India) P Ltd v ITO High CourtHelps departmentValidity unconfirmed
  Our shares moved from one group company to another. Do we lose our carried forward losses?
  Yes. A transfer of the entire shareholding from one holding company to another changes the beneficial ownership of the shares for s.79, even though the ultimate parent stays the same, so the earlier losses cannot be carried forward and set off.
• CIT v AMCO Power Systems Ltd High CourtHelps taxpayerHigh Courts differ
  Our holding company moved most of its shares in us to its own wholly-owned subsidiary. Do we lose our carried-forward losses under s.79?
  The Karnataka High Court said no on these facts. s.79 speaks of voting power, not merely of registered shareholding. Where the parent transferred shares to a company it wholly owned, the parent and that subsidiary together still controlled 51 per cent of the voting power, so the section was not attracted.
• ACIT v Lurgi India International Services Pvt Ltd ITATHelps taxpayerValidity unconfirmed
  Our Indian company's shares moved from one group company to another and the ultimate parent abroad did not change. The officer says 97 per cent of the shareholding changed and denies the brought forward losses. Which way does the Tribunal go?
  On these facts the Tribunal decided with the taxpayer, but it supplied almost no reasoning of its own. The Delhi Bench dismissed the Revenue's appeal in a single paragraph, finding merit in the assessee's submissions and no material from the Revenue contradicting the Commissioner (Appeals). What it left standing is the Commissioner (Appeals)'s reasoning that s.79 stresses beneficial ownership, that the ultimate holding company remained the same throughout the restructuring, and that CIT v AMCO Power Systems Ltd applied. The Revenue's ground founded on Yum Restaurants failed with the appeal, but the Tribunal did not address that decision.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.