tax losses - the economic times
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10/29/2015 Supreme Court ruling gives clarity on carrying forward tax losses The Economic Times
http://economictimes.indiatimes.com/news/politicsandnation/supremecourtrulinggivesclarityoncarryingforwardtaxlosses/articleshow/49561126.cms?… 1/2
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By Sachin Dave, ET Bureau | 28 Oct, 2015, 06.13AM IST Post a Comment
A recent Supreme Court judgement has given clarity on whethertax losses could be allowed in the event of a change ofshareholding beyond 51%.
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Supreme Court ruling gives clarity on carrying forward taxlosses
MUMBAI: In what could benefit companies making acquisitions and internal restructuring, arecent Supreme Court judgement has given clarity on whether tax losses could be allowedin the event of a change of shareholding beyond 51%.
A problem that many Indian companies faced was the uncertainty on whether the buyer in atransaction — acquisition or restructuring of a group company — can add tax losses. Theincome tax department's view was that tax losses caused by the seller cannot be added ascost to the transaction. This was struck down by the SC.
In a case involving Amco Power Systems, the SC has allowed the company to accrue taxlosses. Industry trackers said the whole debate was around Section 79 of the Income TaxAct, where the dispute was whether tax losses could be carried forward.
"This decision will help provide clarity on carry forward of tax losses, especially, in case ofinternal business restructuring where there is really no transfer of tax losses for it to beutilised by a third party," said Hemal Zobalia, senior director at Deloitte India.
There are cases for and against on interpretation of beneficial owner versus registered shareholder for the purposes of carrying forwardtax losses under the section.
The recent judgement is the first by the apex court on Section 79 and can impact other similar cases as well, said industry trackers. Theysaid the judgement could also pave the way for clarity around funding in startups.
In the first week of October, industry body Assocham had sought a taxationfriendlyenvironment from the finance ministry, especially around the shareholding pattern assection 79 of the Income Tax Act is proving to be a hindrance.
"Restriction prescribed under Section 79 of the Income Tax Act should not apply to thestartup ecosystem where change in shareholding pattern is due to the infusion of fundsby investors without change in the management of the company run by originalfounders," the chamber had said in a presentation submitted to Revenue SecretaryHasmukh Adhia.
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10/29/2015 Supreme Court ruling gives clarity on carrying forward tax losses The Economic Times
http://economictimes.indiatimes.com/news/politicsandnation/supremecourtrulinggivesclarityoncarryingforwardtaxlosses/articleshow/49561126.cms?… 2/2
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