TaxTMI 
TaxTMI 
2018 (4) TMI 689
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....e of Rs. 9,13,10,045/- after set off of brought forward house property losses of Rs. 20,98,59,295/- under the normal provisions of the Act and book profit of Rs. 26,99,62,710/- u/s.115JB of the Act. During the A.Y. 2009-10 and 2010-11 the assessee has incurred loss under the head income from house property which have been set off against the similar income under the head in A.Y.2011-12. The amount of losses and set off thereof are tabulated as under:- Asstt. Years Amount of Profit/(Loss) 2009-10 (32,36,89,528)/- 2010-11 (7,09,40,630)/- 2011-12 18,47,70,863/- Losses available to be carried forward for set-off against the income of assessment year 2012-13 and onwards (20,98,59,295)/- The admitted facts are that the shareholding pattern of the assessee company remained unchanged from inception till A.Y.2011-12. Further that RPL is a 100% subsidiary of WGH. Further the shareholding pattern of WGH was as under:- Shareholding pattern of WGH in A.Y.2009-10 Name No. of shares held As a % Vijay Wadhwa 7,00,000 40.00% Vinita Wadhwa 7,00,000 40.00% Other individual shareholders 3,50,000 20.00% Total 17,50,000 100....
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....res remain the same; hence, losses of Rs. 20,98,59,295/- has to be allowed. However, the Assessing Officer did not accept the contention of the assessee and held that more than 51% shareholding of the assessee company has changed during the year and thereby rejected the set off of brought forward house property losses of earlier years aggregating to Rs. 20,98,59,295/- u/s.71B r.w.s. 79 of the Act against the house property income for the year under consideration. 4. The matter carried to the CIT(A) and the CIT(A) has dismissed the appeal. 5. The learned AR submitted that assessee company is controlled by Wadhwa Group. It is also admitted fact that in A.Y.2009-10 assessee incurred loss of Rs. 13.89 crores under the head Income from House Property. The shareholders of the assessee company were RPL, WGH and SND, each of them holding 33.33%. Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa held together 90% shares in RPL. Similarly, Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa held 80% in WGH as on 31.03.2009. Similarly in A.Y. 2010-11, the assessee incurred loss of Rs. 7.09 crores and Shri Vijay Wadhwa and Mrs. Vinita Wadhwa were held 87% shares in RPL and similarly in 2012-13 Shri Vijay Wadh....
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.... the previous years, which may bear profits in the subsequent years after the new owner takes over the company. Where there is a change in shareholding of a company, no loss incurred in any year prior to the previous year shall be carried forward and set-off against the income of the previous year, unless on the last day of the previous year the shares of the company carrying not less than 51% of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than 51% of the voting power on the last day of the year or years in which the loss was incurred. The learned AR submitted that the present case is the case as explained during the course of argument that assessee is owner of the property. The learned AR submitted that Hon'ble Karnataka High Court has consider the various judgment and Hon'ble Karnataka High Court judgment is in favour of the assessee. The Hon'ble Karnataka High Court is the only judgment as on date today. There is no jurisdictional High Court judgment against the assessee. Therefore, the matter is squarely covered by the decision of the Hon'ble Karnataka High Court. The learned AR submitted that there is decisio....
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....ta Wadhwa held 80% in WGH as on 31.03.2009. Similarly, Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa held together 87% in RPL and Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa were held 100% owner of the property. The aforesaid shareholding pattern of the assessee company for the year ending 31.03.2009, 31.03.2010 and 31.03.2012 can be tabulated as under: Last Day of the Year of Loss Year of Set Off 31.03.2009 31.03.2010 31.03.2012 1. Amount of loss 13.89 cr. 7.09 cr. 20.99 2. Shareholding in assessee company Vijay and Vinita Nil Nil 100% 90% and 87% in RPL 33.33% 33.33% 80% and 72.5% in WGH 33.34% 33.34% 3. Voting power of Vijay and Vinita in the assessee company through RPL 90 x 33=30 87 x 33=29 4. Voting power of Vijay and Vinita in the assessee company through WGH 80 x33=26 72.5 x 33=24 56 53 100 8. The shareholding pattern of t....
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....be more than 51% for all years. The assessee has filed shareholding pattern of Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa in RPL and WGH before the AO during assessment proceeding vide Authorised Representative's letter dt.10.10.2014 and also before the CIT(A) which is reproduced at Pages 3 - 6 of CIT(A)'s order and CIT(A) has also verified the same by calling for Share Rcgisters(Copy of Letter dt. 10.10.2014 is enclosed)[Also filed at Page No.44-49 of Paper Book]. The Case of the assessee is that Mr. Vijay Wadhwa and Mrs Vinita Wadhwa through RPL and WGH are exercising voting rights exceeding 51% in the assessee company. 10. In A.Y. 2012-13, the assessee in its computation of income claimed set off of loss under the head "Income from House Property" for A.Y. 2009-10 (13.89 Cr.) and A.Y. 2010-11(7.09 cr.) aggregating to Rs. 20.98 Cr. against income under the head "Income from House Property" for A.Y. 2012-13 amounting to Rs. 30.11 Cr. 11. The Assessing Officer and the CIT(A) denied the aforesaid set off by invoking the provisions of section 79 of the Act and holding that since 51% shareholding as on 31st March 2009, 31st March 2010 and 31st March 2012 is not with the sam....
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....ining income of assessee. Deduction u/s.35AB, as claimed by assessee, was disallowed and lease rentals paid were also disallowed. Assessment order also did not allow setting off of losses of previous years by invoking S.79. Case of assessee was reopened u/s.147/148 and benefit granted in such year u/s.35AB was disallowed. CIT(A) partly allowed appeal of assessee and benefit of deduction claimed u/s.35AB was granted; but assessee was not found to be entitled to set-off of brought forward losses, considering change in beneficial holding of 51% or more, as provided u/s.79. Matter under consideration was if assessee would be entitled to carry forward and set off of business loss despite assessee not owing 51% powers in company as per section 79 by taking beneficial share holding. Held, where there was change in shareholding of company, no loss incurred in any year prior to previous year should be carried forward and set-off against income of previous year, unless on last day of previous year shares of company carrying not less than 51% of voting power were beneficially held by persons who beneficially held shares of company carrying not less than 51% of voting power on last day of year....
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....essee submitted a list of directors on the board of the two companies prior to merger as well as the directors on the board of merged company. It remained in the same hands. Thus, the CIT(A) is correct in holding that change in more than 51 per cent was due to merger of two companies. There was no change in control and management. Considerable cogency is found on the part of the CIT(A)'s adjudication wherein he has referred the Circular No.528, dt. 16th Dec., 1988 and considered the case of the present merger as akin to death of shareholders. He also held that in the case of death of a living person the shares held by him get transferred to his legal heirs. Similarly when existence of a company is legally finished, the benefit of assets held by it (including shares of other company) will pass on to its shareholders. Under the circumstances, there is no infirmity or illegality ion the order of the CIT(A) holding that S.79 was not applicable and therefore, the assessee company is eligible for set off brought forward losses against the current year income. Due to merger of IIPL holding 98 per cent shares of assessee company with the assessee company, the shareholders of the I....
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.... the legislature was to lay down the condition of shareholding then there was no need to specify "voting power". This clearly indicates and which is fortified by a plain reading of section 79(a) of the Act that shareholding is not the condition but exercise of "voting power" is important for the purpose of section 79(a). 17. Second proviso to section 79(a) provides that this section would not 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 51% shareholders of the amalgamating or demerged foreign company continued to be the shareholders of the amalgamated or the resulting foreign company. This proviso does not speak of "voting power" but lays down the condition of "shareholding". This is in sharp contrast to the main provision, i.e., section 79(a) of the Act. This clearly shows that the emphasis in the main section 79(a) is not on shareholding but on voting power. 18. Similarly section 79 substituted by the Finance Act, 2017 also supports the interpretation of section 79(a) as it stood for A.Y. 2012-13. The substituted section 79(b)....
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.... to Yum Singapore. Yum USA is not a shareholder on any of the 2 days as mandated by section 79 of the Act. In the instant case, the case of the assessee appellant is that the assessee appellant company belongs to Wadhwa group controlled by Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa through RPL and WGH as on 31st March 2009 and 31st March 2010 and directly on 31st March 2012. Furthermore, the Delhi High Court has refused to frame the question of law on this issue under section 260A of the Act and hence it cannot be said that the Delhi High Court has decided the issue on interpretation of section 79 of the Act. Therefore decision of Delhi High Court in Yum India is not applicable to the facts of the present case. It is important to note that Delhi High Court in the case of Select Holidays reported in [2013] 35 taxmann.com 368 (Delhi) have themselves held that set off under section 79 of the Act cannot be denied if the management due to change in shareholding is with the same set of people. 23. Assuming for argument sake, Yum India case can be said to have decided the issue in favour of the Revenue then there is a Karnataka High Court decision in the case of AMCO Power Systems Ltd rep....
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....nt case in appeal. 26. The decision of Barodawala reported in 4 ITD 186 (Mum) relied by the lower authority is also distinguishable on facts. In that case issue was whether shareholding of father, mother and minor son can be clubbed to calculate 20% of voting power for the purpose of section 2(22)(e) of the Act. The Tribunal held that a guardian's shareholding cannot be clubbed with father to decide whether father together in his individual capacity and in his capacity as guardian held 20% voting power. In the present appeal, Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa together hold more than 51% holding in the assessee appellant company through RPL & WGH which is the test to be satisfied for the purpose of section 79 of the Act. Furthermore, definition of "persons holding substantial interest" in section 2(22)(e) is different than wording used in section 79 of the Act and hence Barodawala's case is not applicable and distinguishable on facts and in law to the facts of present appeal. 27. Section 79 of the Act provides for carry forward and set off of losses. In the present appeal, the assessee is not seeking carry forward of losses to be set off but the assessee is seeki....