Loss in case of change in share holding pattern

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RAJU

LEARNER

1089 Points Joined November 2008

Dear Members,

There is a private limited company which has incurred substantial losses till 31.03.2008. During 2008-09 it has earned substantial income to set off the loss of earlier years. However during the year 2008-09, 50% of the shares held by a person is transferred to another person.

Section 79 of the IT Act states that loss of earlier year cannot be set off if the share holding pattern has changed. In the present case, the pattern has not changed in case of persons having less than 51% (as referred in Section 79).

Please guide as to whether the loss of earlier years can be adjusted in case of scenario explained above by the company.

Regards/Dharmaraju

Replies (3)

Juzer Sadikot

CA - innovative solutions for Imports an

1309 Points Joined November 2008

Dear Dharamraju,

In your case brought forward losses shall not be availabe for setoff against the income earned in previous years i.e. 2008-09 as 51% or more of voting rights are not beneficialy held by the same person, as on last day of the year, who was benificial share holder at the time of incurrence of these loss.

Also you may check whether you are qualifiying under 1st and 2nd provisio of section 79.

Thanks

RAJU

LEARNER

1089 Points Joined November 2008

Dear Juzer, Thank you very much for your prompt reply. The company is not eligible under I & II proviso. So the company may have forego the loss. Thanks again, G. Dharmaraju