TaxTMI 
TaxTMI 
1980 (3) TMI 107
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....e company who held shares as on 31st Dec., 1972 sold away their shares during the calendar year, 1973. The company had previous loss carried forward and also unabsorbed depreciation as well as adjusted development rebate which had to be set off in subsequent years. After noting the change in the share holding, the ITO held that s.79 came into operation and the assessee could not be allowed the set off loss carried forward from the earlier years as well as earlier unabsorbed depreciation and unadjusted development rebate. The ld. AAC allowed the assessee's appeal holding that the case of the assessee did not fall within the mischief of s. 79. No doubt on some points, as well shall see later, the ld. AAC rejected some of the contentions of th....
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.... for the first time when there were profits and the question of set off was considered. Their Lordship have held that s. 79 prevented set off of business loss only if that section was attracted, it did not come in the way of set off of unabsorbed depreciation or unabsorbed development rebate. Their Lordships have also held that before s. 79 could be brought into operation both the conditions under s. 79 (a) and 79(b) had to be fulfilled.; in other words if the assessee showed that one of the conditions was no fulfilled., s. 79 could not be brought into operation. Again what was required to be proved was the motive in acquiring the shares by the purchasers. Shri Mittal then pointed that their Lordships have held that whether conditions of s.....
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.... to the aspects of the onus, as according to him the onus is on the Revenue to show that s. 79 is attracted though it may ultimately turn out to be only a light burden. 7. Then Shri Kaji pointed out that the new line in which the company earned profits was started in the last two months of Calendar year, 1974 i.e., more than a year after the change of shareholders. Again it was not shown that the new share-holders saved their tax liability by taking over the company or the shares. The company had no tax liability because of the past losses and unabsorbed depreciation and development rebate. No tax was, therefore, avoided by the company, and that could not have been the motive. Again when the new share-holders acquired the shares their mo....
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....erials were not available; secondly the machinery required for this purpose has been retained by the company even till today. 9. Sec. 79 provides that where a change occurred in the share-holders of a closely held company, no loss incurred in any earlier years should be carried forward in this year and set off against the income after the change in share-holders unless (a) 51 per cent of the shares have not changed in hand; or (b) the change in share holders was not effected with a view to avoiding or reducing any liability of tax. We find that in the case of Subhlaxmi Mills. Their Lordships have explained this provision giving clear guide lines on this aspect. Firstly, it is explained that both the conditions viz., change in ownership o....