Carry forward of loss

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sanath (Querist)

02 December 2009 There're 4 shareholders - A,B,C and D each with a stake of 25%. The company makes a heavy loss in that year.
Shareholding pattern - A=B=C=D= 25%.
So, A and B transfer their stake to 'D', the very next year, while C transfers it to 'E'. The company makes a profit.
Shareholding pattern - D : 75%,E:25%(new guy)
Can the loss be carried forward? Nobody is related to anybody here. Are the provisions of Section 79 attracted. Would appreciate a lengthy reply, so that all my doubts could get cleared.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

02 December 2009 Section 79(a) attracts and company will loose the carried forward benefit.

sanath

sanath (Querist)

02 December 2009 Mr.Warrier,
I whole heartedly appreciate your reply,but can you please explain your stand sir.
'D' who was earlier a shareholder has more than 51% stake now.
Can you please give an explanation as to why you feel sec 79 gets attracted.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

02 December 2009 In the loss making year D's holding was 25%,so according to my understanding 79(a) attracts.

sanath

sanath (Querist)

02 December 2009 Thanks Mr.Warrier.
Anybody else whose got an opinion for my query?

Ankit Garg

Ankit Garg (Expert)

10 December 2009 I very much agree with Mr. Warrier,
Sec. 79(a) says that in the year of making set off of the loss (i.e. profitable year), the 51% voting power should remain same as that is in the year or years of making loss (loss making year or years).
In the loss making year the shareholding pattern is A=B=C=D=25%.
In the profit making year it is
D=75%
E=25%
So the conditions of Sec. 79(a)is not satisfied, as the 51% voting power is not remained same in the profit making year.
So we can concluded that the benefit of set off losses can not be obtained.

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