TaxTMI 
TaxTMI 
1994 (3) TMI 123
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.... beneficially held by the persons, who held shares of the company carrying not less than 51% of the voting power on the last date of the year and secondly the Assessing Officer (AO) is satisfied that such change was not effected with a view to avoid or to reduce any tax liability. The assessee's representative further pointed out as to how the assessee has not effected the change in the shareholding but the AO could not find any substance in the statement of the assessee and the benefit of s. 79 of the Act was not extended to the assessee for claim of set off of losses and carry forward. The assessee went in appeal before the learned CIT(A)-II, Baroda, who also on the same ground rejected the claim of the assessee for set off of losses. 4. We have heard the learned counsel for the assessee and the learned Departmental Representative and also perused the record. 5. Before appreciating the rival submissions it may be pointed out that provisions of s. 79 may be quoted which reads as under: "79. Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in previous year in the case of a company, not being a company in which the public....
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....i Shantilal T. Vadgama 50 (New) 13. Miss Amita J. Shah & Mr. Rajesh Valera 600 (New) 14. Miss Amita J. Shah & Mrs. Hansaben Valera 150 (New) The learned counsel pointed out that out of the shareholders one Rajesh L. Valera appearing at Sl. No. 2 died and his family members appearing at sl. Nos. 11 to 14 also withdrew from the said company by relinquishing their shares and the position of shareholders as on 31st March, 1986 is appearing at page 18 of paper book which is as follows: Sl. No. Name of shareholder No. of share held 1. Shri Mukutlal Gupta 100 2. Shri Chandulal Chhaganlal Joshi 50 3. Shri Jamnadas S. Kewlani 550 4. Shri Ramesh Ch. S. Kewlani 100 5. Shri Pravinchandra N. Bhatt 500 6. Shri Hasmukh G. Kikani 100 7. Mrs. Rohini M. Sarvaiya 400 8. Devidas S. Kewlani 300 9. Mrs. Radhaben R. Kewlani 400 10. Mrs. Ramilal A. Parakh 200 11. Dr. Bharat V. Trivedi 300(new) 7. The learned counsel for assessee further pointed out that Jamnadas S. Kewlani was having 150 shares on 31st March, 1985, while Shri Pravinchandra N. Bhatt and Shri B.S. Kewlani we....
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.... may be avoided or reduced, will attract the said prohibition. The citation of case of M.D. Traders & Chit Fund Financiers (P) Ltd. vs. CIT (1989) 79 CTR (P&H) 135 : (1989) 178 ITR 388 (P&H) is also to the same effect and on the basis of this law the contention of the learned counsel for assessee is that in the cases referred to above, the crux of the matter is that even though there is any change of shareholding exceeding 50% still the Department is to show that it was effected to evade or reduce the liability to tax; otherwise prohibition of s. 79 will not be attracted; while in the case of assessee no such change is effected and voting power of more than 50% remained with those persons who are having shares on the last day of the previous year. The learned Departmental Representative simply placed reliance on the orders of the authorities below. 10. After going through the rival submissions and after perusal of the record, the contention of the assessee appears to be well founded. The reasoning of the Hon'ble Supreme Court in the case of CIT vs. Italindia Cotton Co. (P) Ltd. is fully applicable to the present case. First of all, the change is not effected to more than 51% ....
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....ly disallowed the claim and in appeal, the learned CIT(A) on the same ground rejected the plea of the assessee keeping in view the decision of Hon'ble Supreme Court in the case of Shri Shubhlaxmi Mills Ltd. vs. Addl. CIT (1989) 77 CTR (SC) 33 : (1989) 177 ITR 193 (SC). 15. The learned counsel for the assessee has argued that no doubt the decision of the Hon'ble Supreme Court laid down in the case of Subhlaxmi Mills Ltd. was the latest one in which Hon'ble Supreme Court has laid down that in order to claim deduction on account of development rebate under s. 33(1) it is obligatory that the debit entries in the P&L a/c and credit entries in the reserve a/c should be made in the relevant previous year. Existence of sufficient profits is not necessary and the mere book entries are sufficient. However, the learned counsel for the assessee pointed out that after the decision of the Hon'ble Supreme Court in the case of Shubhlaxmi Mills Ltd. vs. Addl. CIT, an amendment in s. 32A(4)(ii) was effected by the Finance Act, 1990, with retrospective effect from 1st April, 1976. The result of this amendment is that effect of the aforesaid Supreme Court's decision in the case of Shri Shubhlaxmi M....