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Carry-forward of losses

Anitha (Articles) (121 Points)

13 March 2017

Hi All,

Kindly clarify my doubt.

Is carryforward of loss is possible in the below mentioned case:

Foreign Company purchases 100% shares of Indian Company, Both Companies have same director.

Thanks in advance

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13 Replies

Suresh Pai S (Tax Consultant) (1029 Points)
Replied 13 March 2017

Yes. Provided that the conditions in section 80 are satisfied.

Anitha (Articles) (121 Points)
Replied 25 March 2017

What about sec 79 which states who has 51% of voting power on end of FY for which return filed, should hold same during the end of FY in which you going to carryforward the ealier loss

Suresh Pai S (Tax Consultant) (1029 Points)
Replied 25 March 2017

I noticed something just now. How can one company acquire 100 percent shares of another company? For forming a company, atleast two persons are needed right?

Anitha (Articles) (121 Points)
Replied 27 March 2017

Indian Company has Mr. A and Mr. B as director holding 50% each.

Above directors are also the directors of foreign company.

Now Foreign Company acquires

Suresh Pai S (Tax Consultant) (1029 Points)
Replied 27 March 2017

Ok. But after it is acquired by foreign company there is only one subscriber for shares. It is not possible.

Aarvi Solutions (8 Points)
Replied 27 March 2017

The Delhi High Court (HC) held in a recent case that the taxpayer would not be entitled to carry
forward and set off unabsorbed losses on change in immediate shareholding by over 49% even
though the change in shareholding was within the group, and the ultimate holding company of both
the transferor and transferee was the same.

Anitha (Articles) (121 Points)
Replied 28 March 2017

Is any section states there should be two subscriber?

I thought indian company can be a wholly owned subsidary of Foreign company.

If not possible. What is the concept of wholly owned subsidary?

Anitha (Articles) (121 Points)
Replied 28 March 2017

Can u please state the case citation

sivabommakanti (CA - Tax Consultant) (267 Points)
Replied 28 March 2017

hi Anitha, sec3 of companies act requires min 2 members in pvt co & 7 in case on public co.

sivabommakanti (CA - Tax Consultant) (267 Points)
Replied 28 March 2017

an Indian co can definitely be a wholly owned subsidiary of any co. The holding co buys 100% shares but registers a few no of shares say 1 share in name of the company's nominee (a director can be a nominee)

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Anitha (Articles) (121 Points)
Replied 28 March 2017

yea, i tottaly foregt. then what is the concept of wholly owned subsidaries ?

Anitha (Articles) (121 Points)
Replied 28 March 2017

ok thank you. Then in such case, carryforward is not possible is the final solution?

sivabommakanti (CA - Tax Consultant) (267 Points)
Replied 28 March 2017

if its is pvt co then not possible. But you can still carry fwd any unabsorbed depreciation. since you mentioned it has unabsorbed losses, it should also be having unabsorbed depreciation.