TaxTMI 
TaxTMI 
Comparison of Section 119 "Carry forward and set off of losses not permissible in certain cases." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....shareholding of companies. The provisions affect taxpayers (firms and companies), and the tax administration whenever continuity of ownership or control is questioned for loss carry-forwards. Effective dates or enactment/notification dates: Not stated in the document. Background & Scope Statutory hooks: the text sits under the chapter on "Set off, or carry forward and set off of losses" and cross-refers to section 140 (eligible start-ups), section 70(2) (relocation), section 116(3)(b)/(c) (definitions of "erstwhile public sector company" and "strategic disinvestment"), and Companies Act provisions (sections 241, 242) and the Insolvency and Bankruptcy Code, 2016. The section covers: (1) change in firm constitution (retirement/death of part....
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....nless specified continuity conditions are satisfied. The key continuity test is beneficial ownership of shares carrying at least 51% of voting power (variously expressed). There is a special carve-out for eligible start-ups (subject to shareholder continuity and a ten-year incidence period), and several exceptions where the restriction does not apply (death, gift to relative, certain amalgamations/demergers of foreign holding companies, resolution plans under IBC/Company Act intervention, relocation u/s 70(2), and strategic disinvestment where ultimate holding retains at least 51% voting power). Interpretation Legislative intent, as discernible from the text, is to prevent continuity of losses being exploited after a change in ownership/c....
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....ion referred to in section 70(2) (Act cites a specific Table reference in one version; Bill uses a general reference). * Erstwhile public sector companies after strategic disinvestment where the ultimate holding company immediately post-disinvestment continues to hold at least 51% voting power. Illustrations * Example 1 - Firm: A partner holding 25% retires in the tax year; the firm had a loss for the year. The portion of loss proportionate to the retired partner's share that exceeds any share of profits attributable to that partner for that tax year is not available for carry forward by the firm. (Numerical computation methodology: Not stated in the document.) * Example 2 - Private company change in shareholding: A company incur....
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....uld monitor changes in firm constitution and company shareholding within tax years; loss carry-forwards can be disallowed when continuity of beneficial 51% voting power is broken. For start-ups, maintain shareholder registers and evidence that original shareholders continued to hold voting shares and ensure losses are within the ten-year window. For firms, document profit shares and any payments to retired/deceased partners to substantiate allowable carry-forwards. For succession of business, document whether succession is by inheritance; otherwise, successors cannot claim pre-existing losses. * Record-keeping/evidence points: Beneficial ownership records, share transfer instruments, gift deeds (to demonstrate exceptions), death certifica....
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....e), the document is silent: Not stated in the document. Differences Between the Two Texts and Practical Impact Topic Clause 119 of the Income Tax Bill, 2025 (Old Version) Section 119 of the Income-tax Act, 2025 Firm clause wording States firm "shall not be entitled to carry forward and set off so much of the loss proportionate to the share of retired or deceased partner as reduced by his share of profit, if any, from the firm for that tax year." States "nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the tax year." Practical impact - firm Differ....
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....hin first ten years from incorporation. Similar, but cross-reference is to section 140 and the Act specifies "regardless of the change in percentage of shareholding, where the company is an eligible start up referred to in section 140," and uses similar conditions; wording close but Act emphasises "continue to hold those shares" and the ten-year period. Relocation reference Refers to section 70(2) generally. Refers to section 70(2)(Table: Sl. No. 5.C) - a more specific cross-reference in the Act. Strategic disinvestment definition Cross-refers to section 116(3)(c) (Bill). Cross-refers to section 116(3)(c)(i) (Act) - more specific sub-clause reference. Other drafting differences Minor variances in phrasing of exc....