TaxTMI 
TaxTMI 
2011 (5) TMI 589
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....of convenience. 2. Briefly stated the facts of the case are that on examination of the records of the assessee for the assessment years 2004-05 and 2005-06, it was noticed by the CIT that the order passed by the A.O. under section 154 for the assessment year 2004-05 and that under section 143(3) for the assessment year 2005-06 were erroneous and prejudicial to the interests of Revenue. The reason for such decision by the ld. CIT was that the losses pertaining to assessment year prior to 1998-99 were allowed to be set off by the AO, which could not have been done as per section 79 of the Income-tax Act, 1961 (hereinafter called 'the Act'). A show-cause notice was issued in this regard. The assessee furnished reply in support of its claim, w....
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....itled to set off the losses of earlier years against the income of the years under consideration. It was so held because substantial change took place in the shareholding pattern of the assessee company in the period relevant to assessment year 1998-99. Finally, the ld. CIT held that the contention of the assessee, that section 79 did not apply to it, was devoid of any merit. The assessee's argument that it was a deemed public limited company was found by the ld. CIT to be correct only for the purposes of Indian Companies Act, 1956, but the same was held to be not acceptable while applying the provisions of the Income-tax Act, 1961. He, therefore, set aside the above referred orders passed by the A.O. for both the years by holding them as e....
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....unt of transfer of shares by way of gift to any relative of the shareholder making such gift : Provided further that nothing contained in this section shall apply to any change in the shareholding of an Indian company which is a subsidiary of a foreign company as a result of amalgamation or demerger of a foreign company subject to the condition that fifty-one per cent shareholders of the amalgamating or demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company." 4. A bare perusal of section 79 divulges that if a change in the shareholding of the company takes place in a previous year, no loss incurred in any year prior to the previous year shall be carried forward and set off against the ....
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....of such subsidiary company has been held by the parent company or by its nominees throughout the previous year". 5. As per clause (b) of section 2(18), a company is said to be a company in which the public are substantially interested if it is a company which is not a private company as defined in the Companies Act, 1956, and the conditions either in item (A) or in item (B) are satisfied. 'Public company' has been defined in section 3(iv) of the Indian Companies Act, 1956, to mean a company which - (a) is not a private company; (b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed; (c) is a private company which is a subsidiary of a company which i....
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....sting the facts of the instant case on the touchstone of the above discussed provisions of the Income-tax Act as well as the Companies Act, it is evident that the hitherto character of the assessee company was changed to that of a public company in the preceding year by reason of M/s. Gagan Trading Co. Ltd.(a public company in itself) acquiring more than fifty per cent of the shares of the assessee company. Although the assessee company was originally registered as a private company, but became public company by virtue of the provisions of section 3(iv)(c) of the Companies Act. In order to be categorized as a company in which the public are substantially interested within the meaning of section 2(18) of the I.T. Act, 1961, it is sine qua no....
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....w of the matter, once it is held that the assessee is a company in which the public are substantially interested, application of section 79 is automatically ruled out because this section applies only "in the case of company, not being a company in which the public are substantially interested". 10. The ld. CIT has albeit held that the assessee is a deemed public company as per the Companies Act, but he held that the same could not be true while applying the provisions of the Act. There is a basic fallacy in this point of view for the reason that section 79 of the Act is not applicable to the companies in which public are substantially interested. The definition of the company in which public are substantially interested has been given in ....