2023 (11) TMI 1042 - AT - Income Tax

Assessee wins right to set off brought forward losses despite shareholding changes under Section 79

Hiranandani Healthcare Pvt. Ltd. Versus Commissioner of Income Tax (Appeals) /National Faceless Appeal Centre, Delhi

The ITAT Mumbai allowed the assessee's claim for setting off brought forward losses against current income. The AO had disallowed the losses citing ... Disallowance of brought forward losses adjusted against the income - Change in shareholding of the company - AO relied upon the assessment order pertaining to the AY 2012-13, wherein addition u/s 79 of the Act was made and carry forward losses were disallowed - assessee filled appeal against that order for AY 2012-13 - HELD THAT:- As both the authorities below decided the issue qua brought forward losses, on the basis of assessment order passed for the AY 2012-13, which has been reversed by the Hon’ble Coordinate bench of the Tribunal [2023 (7) TMI 1325 - ITAT MUMBAI] for A.Y. 2012-13, 2014-15 allowed the brought forward losses and the Hon’ble Bench has allowed set off of brought forward losses by holding that change in individual shareholding of the shareholders would also not attract the provisions of section 79 of the Act and therefore will not be applicable in the facts of the present case. Hence respectfully following the said decision above we are inclined to allow the claim of the Assessee qua setting off of the brought forward losses, consequently the same is allowed. Issues Involved:1. Disallowance of brought forward losses adjusted against income.2. Applicability of Section 79 of the Income Tax Act, 1961.Summary:Disallowance of Brought Forward Losses:The Assessee declared its total income as 'NIL' for the assessment year, which was processed under section 143(3) of the Income Tax Act. The Assessing Officer (AO) disallowed the Assessee's claim of setting off brought forward losses against the income of Rs. 37,09,306/- due to a change in the shareholding pattern during the previous assessment year (AY 2012-13). The AO's decision was based on Section 79 of the Act, which bars carry forward of losses if there is a change in shareholding pattern. The Ld. Commissioner affirmed the AO's decision but directed the AO to verify the correct figures of carry forward business losses.Applicability of Section 79:The core issue was whether the change in shareholding pattern of the Assessee company was hit by Section 79 of the Act, thereby barring the set off of carry forward losses. The Assessee argued that the shareholding was between M/s. Fortis Healthcare Limited (FHL) and M/s. Fortis Healthcare Holdings Pvt. Limited (FHHPL), and the change in shareholding pattern was within the same group of shareholders. The Tribunal observed that the provisions of Section 79 would not be applicable if the 51% voting power was held by the same group of persons in both the years of incurring losses and the years of setting off losses. It was noted that FHHPL is the holding company of FHL, and thus, there was no change in the beneficial ownership.Tribunal's Decision:The Tribunal concluded that the change in individual shareholding between FHL and FHHPL did not attract the provisions of Section 79. Therefore, the Assessee was eligible to set off the brought forward losses. The decision of the lower authorities was reversed, and the appeal was allowed in favor of the Assessee.Final Order:The appeal filed by the Assessee was allowed, and the order was pronounced in the open court on 30-08-2023.