Carry forward of loss

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

sanath

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

sanath

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

Ankit Garg

Ankit Garg (Expert)
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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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