Continuity of ownership test restricts loss aggregation for closely-held companies unless beneficial majority voting remains unchanged.

Aggregation of unabsorbed preceding-year losses by a closely-held company is permitted only if it satisfies a continuity of ownership test requiring that persons holding a majority of beneficial voting power at the end of the prior year remain the same at the end of the relevant year. For this purpose, changes due to a shareholder's death or gift to a relative are ignored, and shareholding changes in an Indian subsidiary caused by amalgamation or demerger of a foreign company are ignored where the principal shareholders of the foreign company continue in the resulting foreign entity.

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