TaxTMI 
TaxTMI 
2018 (4) TMI 689
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....ught 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 17,50,000 100.00% Shareholding pattern of WGH in A.Y.2010-11 Name No. of shares held As a % Vijay....
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....olding 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 Wadhwa and Mrs. Vinita Wadhwa held 100% shares in assessee company. The assessee has filed the shareholding pattern and which was verified from the Share Registers and copy of which is enclosed a....
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....ear 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 decision of Hon'ble Delhi High Court in the case of Select Holiday Resorts (P.) Ltd. [2013] 35 taxmann.com 368 wherein the facts are different but in that case the Hon'ble Delhi High Court has held ....
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....perty. 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 the assessee company since its incorporation till the A.Y.2011-12 was as under: Name Number of shares % of holding Rajdhani Properties Pvt. Ltd. [RPPL] 3,333/- 33.33 Shree Naman Developers Limited [SNDL] 3,333/- 33.33 Wadhwa Group Holding Private Limited [WGHPL] 3,334/- 33.33 Total 10,000/- 100.00 ....
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.....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 same persons, the loss cannot be set off. 11. The case of the assessee is that as on 31st March 2009, 3 St March 2010 and 31st March 2012, 51% of the voting power in the assessee company is held by same persons and therefore the assessee is entitled to set off the aforesaid loss. The case of the assessee is based on exercise of voting power through RPL and WGH by Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa as on 31s....
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....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 or years in which loss was incurred. ABL was holding company of APIL, that was wholly owned subsidiary of ABL and that Board of Directors of APIL were controlled by ABL, was not disputed. As ABL was having complete control over APIL, that was wholly owned subsidiary of ABL, even though shareholding of ABL may have reduced to 6% in year in question, yet by virtue of being holding company, owing 100% shares of APIL, votin....
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....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 IIPL were allotted shares but there was no change in the management which continued to be with persons of the family who were having the control and management of the IIPL as well as of the asses see company and therefore provisions of S.79 were not violated and the assessee was entitled to carry forward of loss." 14. The same matter travelled to Hon'ble Delhi High Court in case of Commissioner of Income Tax Vs. Select Holiday Resort....
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.... 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) provides for carry forward and set off of losses in case of start up companies and there also the emphasis is on holding of the shares carrying voting power and not voting power being beneficially held as used in section 79(a). 19. The phrase "beneficially held" in section 79(a) goes with the voting power and not with the shareholding. However, clause (b) of section 79 as substituted by the Finance Act, 2017 the phrase "voting power" goes with sha....
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....ue 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 reported in [201513 79 ITR 375 (Karnataka) which is directly on the issue in favour of the assessee. In such a situation when there is a conflict in view of non- jurisdictional High Court and there is no jurisdictional High Court case, the decision in the favour of the assessee needs to be followed as held by the Apex Court in the case of Vegetable Products reported in [1973] 88 ITR 192 (SC). 24. The reliance placed by the lower authorities on Vodafone case rep....