WADHWA & ASSOCIATES REALTORS P.LTD, MUMBAI V. ASST CIT 9(3), MUMBAI

ITA 967/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0259 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR
• Assessee Lawyers: MAHESH O RAJORA
• Keywords: Carry forward of business losses; Question of law; Wholly owned subsidiary
• Section: 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI N. K. PRADHAN, ACCOUNTANT MEMBER ITA NO.967/M/2016 ASSESSMENT YEAR: 2012-13 M/S. WADHWA & ASSOCIATES REALTORS PRIVATE LIMITED 301, 3 RD FLOOR, PLATINA, PLOT C-59, G BLOCK, BANDRA KURLA COMPLEX, BANDRA EAST, MUMBAI - 400051 PAN:AAACW5273G VS. ASST. COMMISSIONER OF INCOME TAX 9(3) MUMBAI. (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI JITENDRA JAIN, ADVOCATE & SHRI MAHESH O. RAJORA, CA REVENUE BY : SHRI ABHIJIT PATANKAR DATE OF HEARING : 29.01.2018 DATE OF PRONOUNCEMENT : 14.02.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEAL HAS BEEN PREFERRED BY THE A SSESSEE AGAINST THE ORDER DATED 23.12.2015 OF THE COMMISSIONER OF INCOME TAX (APPEALS) 21, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE IS A PRIVATE LIMITED DOMESTIC COMPA NY ENGAGED IN THE BUSINESS OF LEASING OF COMMERCIAL PROPERTIES TO EAR N LEASE RENTAL AND FOR CAPITAL APPRECIATION. THE BOOKS OF ACCOUNTS OF THE ASSESSE ES ARE REGULARLY AUDITED UNDER THE COMPANIES ACT 1956 AND U/S.44AB OF THE CO MPANIES ACT, 1961 [HEREINAFTER REFERRED AS THE ACT]. THE ASSESSEE IS REGULARLY ASSESSED THE TAX. ASSESSEE HAS FILED ITS RETURN OF INCOME ON 29.09.20 12 DECLARING TOTAL INCOME OF RS.9,13,10,045/- AFTER SET OFF OF BROUGHT FORWARD H OUSE PROPERTY LOSSES OF RS.20,98,59,295/- UNDER THE NORMAL PROVISIONS OF TH E ACT AND BOOK PROFIT OF RS.26,99,62,710/- U/S.115JB OF THE ACT. DURING THE A.Y. 2009-10 AND 2010-11 ITA NO967/M/16 A.Y.2012-13 2 THE ASSESSEE HAS INCURRED LOSS UNDER THE HEAD INCOM E FROM HOUSE PROPERTY WHICH HAVE BEEN SET OFF AGAINST THE SIMILAR INCOME UNDER THE HEAD IN A.Y.2011-12. THE AMOUNT OF LOSSES AND SET OFF THER EOF ARE TABULATED AS UNDER:- ASSTT. YEARS AMOUNT OF PROFIT / (LOSS) 2009-10 (32,36,89,528)/- 2010-11 (7,09,40,630)/- 2011-12 18,47,70,863/- LOSSES AVAILABLE TO BE CARRIED FORWARD FOR SET-OFF AGAINST THE INCOME OF ASSESSMENT YEAR 2012-13 AND ONWARDS (20,98,59,295)/- THE ADMITTED FACTS ARE THAT THE SHAREHOLDING PATTER N OF THE ASSESSEE COMPANY REMAINED UNCHANGED FROM INCEPTION TILL A.Y.2011-12. FURTHER THAT RPL IS A 100% SUBSIDIARY OF WGH. FURTHER THE SHAREHOLDING P ATTERN OF WGH WAS AS UNDER:- SHAREHOLDING PATTERN OF WGH IN A.Y.2009-10 NAME NO. OF SHARES HELD AS A % VIJAY WADHWA 7,00,000 40.00% VINITA WADHWA 7,00,000 40.00% OTHER INDIVIDUAL SHAREHOLDERS 3,50,000 20.00% TOTAL 17,50,000 100.00% SHAREHOLDING PATTERN OF WGH IN A.Y.2010-11 NAME NO. OF SHARES HELD AS A % VIJAY WADHWA 6,34,375 36.25% VINITA WADHWA 6,34,375 36.25% OTHER INDIVIDUAL SHAREHOLDERS 4,81,250 27.50% TOTAL 17,50,000 100.00% SHAREHOLDING PATTERN OF RPL IN A.Y.2009-10 NAME NO. OF SHARES HELD AS A % VIJAY WADHWA 450 45.00% VINITA WADHWA 450 45.00% OTHER INDIVIDUAL SHAREHOLDERS 100 10.00% TOTAL 1000 100.00% ITA NO967/M/16 A.Y.2012-13 3 SHAREHOLDING PATTERN OF RPL IN A.Y.2010-11 NAME NO. OF SHARES HELD AS A % VIJAY WADHWA 435 43.50% VINITA WADHWA 435 43.50% OTHER INDIVIDUAL SHAREHOLDERS 130 13.00% TOTAL 1000 100.00% IN A.Y.2012-13 THE SHARE HELD BY RPL, SND AND WGH I N THE ASSESSEE COMPANY WERE TRANSFERRED TO SHRI VIJAY WADHWA AND S MT. VINITA WADHWA FOR CONSOLIDATION AND RE-ORGANISATION OF BUSINESS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDING ASSES SING OFFICER ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SET OFF OF BRO UGHT FORWARD HOUSE PROPERTY LOSSES OF RS.20,98,59,295/- AGAINST THE CURRENT YEA RS HOUSE PROPERTY INCOME SHALL NOT BE DENIED IN VIEW OF SECTION 79 OF THE AC T TO THE ASSESSEE AS DURING THE YEAR MORE THAN 51% OF THE SHAREHOLDING PATTERN OF THE ASSESSEE HAS CHANGED. IN RESPONSE THE ASSESSEE FILED LETTER DAT ED 10.10.2014 AND ASSESSEE SUBMITTED THE PROVISION OF SECTION 79 OF THE ACT ST ATES THAT IN CASE OF A CLOSELY HELD COMPANY, NO LOSS SHALL BE CARRIED FORWARD AND SET OFF, IF THERE IS A CHANGE IN THE BENEFICIAL SHAREHOLDING TO THE EXTENT OF 51% IN THE YEAR IN WHICH LOSS HAS BEEN INCURRED AND IN THE YEAR IN WHICH LOSS SOUGHT TO BE SET OFF. THE REFERENCE IN SECTION IS TO THE BENEFICIAL OWNERSHIP OF THE SH ARES AND NOT TO THE REGISTERED SHAREHOLDERS OF THE SHARES. THE ASSESSEE SUBMITTED THAT THE TWO INDIVIDUALS, I.E. MR.VIJAY WADHWA AND MRS. VINITA WADHWA, WERE T HE BENEFICIAL OWNER OF THE SHARES OF THE ASSESSEE COMPANY IN THE YEAR IN W HICH LOSSES WERE INCURRED AND ALSO IN THE YEAR IN WHICH LOSSES HAVE BEEN SET OFF. THE ASSESSEE ALSO SUBMITTED THAT MR. VIJAY WADHWA AND MRS. VINITA WAD HWA WERE THE BENEFICIAL OWNER OF SHARES OF THE ASSESSEE AND ALSO THEY ARE DIRECTORS OF THE ALL COMPANIES. IN VIEW OF THE ABOVE FACTS AND CIRCUMST ANCES OF THE CASE, SECTION 79 HAS NO APPLICATION IN THE CASE OF THE ASSESSEE A S BENEFICIAL OWNER OF THE SHARES REMAIN THE SAME; HENCE, LOSSES OF RS.20,98,5 9,295/- HAS TO BE ALLOWED. ITA NO967/M/16 A.Y.2012-13 4 HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE C ONTENTION OF THE ASSESSEE AND HELD THAT MORE THAN 51% SHAREHOLDING OF THE ASS ESSEE COMPANY HAS CHANGED DURING THE YEAR AND THEREBY REJECTED THE SE T OFF OF BROUGHT FORWARD HOUSE PROPERTY LOSSES OF EARLIER YEARS AGGREGATING TO RS.20,98,59,295/- U/S.71B R.W.S. 79 OF THE ACT AGAINST THE HOUSE PROPERTY INC OME FOR THE YEAR UNDER CONSIDERATION. 4. THE MATTER CARRIED TO THE CIT(A) AND THE CIT(A) HAS DISMISSED THE APPEAL. 5. THE LEARNED AR SUBMITTED THAT ASSESSEE COMPANY I S CONTROLLED BY WADHWA GROUP. IT IS ALSO ADMITTED FACT THAT IN A.Y .2009-10 ASSESSEE INCURRED LOSS OF RS.13.89 CRORES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE SHAREHOLDERS OF THE ASSESSEE COMPANY WERE RPL, WGH AND SND, EACH OF THEM HOLDING 33.33%. MR. VIJAY WADHWA AND MRS. VIN ITA WADHWA HELD TOGETHER 90% SHARES IN RPL. SIMILARLY, MR. VIJAY W ADHWA AND MRS. VINITA WADHWA HELD 80% IN WGH AS ON 31.03.2009. SIMILARLY IN A.Y. 2010-11, THE ASSESSEE INCURRED LOSS OF RS.7.09 CRORES AND SHRI V IJAY WADHWA AND MRS. VINITA WADHWA WERE HELD 87% SHARES IN RPL AND SIMI LARLY IN 2012-13 SHRI VIJAY WADHWA AND MRS. VINITA WADHWA HELD 100% SHARE S IN ASSESSEE COMPANY. THE ASSESSEE HAS FILED THE SHAREHOLDING P ATTERN AND WHICH WAS VERIFIED FROM THE SHARE REGISTERS AND COPY OF WHICH IS ENCLOSED AT PAGE NO.44- 49 OF THE PAPER BOOK. THE ASSESSEES CASE IS THAT ON 31.03.2009, 31.03.2010 AND 31.03.2012 51% VOTING POWER IN THE ASSESSEE COM PANY IS HELD BY SAME PERSONS AND THEREFORE THE ASSESSEE IS ENTITLED TO S ET OFF THE SAID LOSS. THE LEARNED AR SUBMITTED THAT THE OBJECT OF SECTION 79 HAS EXPLAINED IN APEX COURT IN THE CASE OF CIT VS. ITALINDIA COTTON CO. P. LTD . REPORTED IN 147 ITR 160 IS TO DISCOURAGE PERSONS CLAIMING A REDUCTION OF THEIR TAX LIABILITY ON THE PROFITS EARNED IN COMPANIES WHICH HAS SUSTAINED LOSSES IN E ARLIER YEARS. IT WAS NOT UNUSUAL FOR A GROUP OF PERSONS TO ACQUIRE A COMPANY , WHICH HAD SUFFERED LOSSES IN THE EARLIER YEARS, IN THE EXPECTATION THA T THE COMPANY WOULD EARN ITA NO967/M/16 A.Y.2012-13 5 SUBSTANTIAL PROFITS AFTER SUCH ACQUISITION, AND THE Y WOULD BENEFIT BY A REDUCTION OF THE TAX LIABILITY OF THOSE PROFITS ON A SET OFF OF LOSSES CARRIED FORWARD FROM EARLIER YEARS BEFORE THE ACQUISITION. THE LEARNED AR SUBMITTED THAT SECTION 79(A) EMPHASIS ON THE VOTING POWER BENEFICIALLY HEL D BY THE SAME PERSON AS ON THE LAST DAY OF THE PREVIOUS YEAR WHEN THE LOSS IS INCURRED AND ON THE LAST DAY OF THE PREVIOUS YEAR WHEN THE SET OFF IS CLAIMED. THE CONDITION UNDER SECTION 79(A) IS EXERCISE OF VOTING POWER IS IMPORTANT FOR THE PURPOSE OF SECTION 79(A). THE BENEFICIARY HELD IN SECTION 79(A) GOES WITH THE VOTING POWER AND NOT WITH THE SHAREHOLDING. HOWEVER, CLAUSE (B) OF SECTION 7 9 AS SUBSTITUTED BY THE FINANCE ACT, 2017 THE PHRASE VOTING POWER GOES WITH SHAREHOLDING. THEREFORE, 51% SHARE SHOULD BE HELD BY SAME PERSON ON THE LAST DAY OF THE PREVIOUS YEAR IN WHICH LOSS IS INCURRED AND THE LAST DAY OF THE P REVIOUS YEAR IN WHICH THE LOSS SO INCURRED IS TO BE SET OFF. THE LEARNED AR SUBMIT TED THAT ISSUE AND CONTROVERSY IS DIRECTLY COVERED BY THE HONBLE KARN ATAKA HIGH COURT IN CASE OF AMCO POWER SYSTEMS LTD. [2015] 379 ITR 375 WHERE IN THE SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE KARNATAKA HIGH COUR T AND HAS HELD THAT THE PURPOSE OF SECTION 79 OF THE ACT WOULD BE THAT BENE FIT OF CARRY FORWARD AND SET OFF OF BUSINESS LOSS OF PREVIOUS YEARS OF COMPANY S HOULD NOT BE MISUSED BY ANY NEW OWNER WHO MAY PURCHASE THE SHARES OF THE CO MPANY, ONLY TO GET THE BENEFIT OF SET-OFF OF BUSINESS LOSSES OF THE PREVIO US YEARS, WHICH MAY BEAR PROFITS IN THE SUBSEQUENT YEARS AFTER THE NEW OWNER TAKES OVER THE COMPANY. WHERE THERE IS A CHANGE IN SHAREHOLDING OF A COMPAN Y, NO LOSS INCURRED IN ANY YEAR PRIOR TO THE PREVIOUS YEAR SHALL BE CARRIED FO RWARD AND SET-OFF AGAINST THE INCOME OF THE PREVIOUS YEAR, UNLESS ON THE LAST DAY OF THE PREVIOUS YEAR THE SHARES OF THE COMPANY CARRYING NOT LESS THAN 51% OF THE VOTING POWER WERE BENEFICIALLY HELD BY PERSONS WHO BENEFICIALLY HELD SHARES OF THE COMPANY CARRYING NOT LESS THAN 51% OF THE VOTING POWER ON T HE LAST DAY OF THE YEAR OR YEARS IN WHICH THE LOSS WAS INCURRED. THE LEARNED AR SUBMITTED THAT THE PRESENT CASE IS THE CASE AS EXPLAINED DURING THE CO URSE OF ARGUMENT THAT ITA NO967/M/16 A.Y.2012-13 6 ASSESSEE IS OWNER OF THE PROPERTY. THE LEARNED AR SUBMITTED THAT HONBLE KARNATAKA HIGH COURT HAS CONSIDER THE VARIOUS JUDGM ENT AND HONBLE KARNATAKA HIGH COURT JUDGMENT IS IN FAVOUR OF THE A SSESSEE. THE HONBLE KARNATAKA HIGH COURT IS THE ONLY JUDGMENT AS ON DAT E TODAY. THERE IS NO JURISDICTIONAL HIGH COURT JUDGMENT AGAINST THE ASSE SSEE. THEREFORE, THE MATTER IS SQUARELY COVERED BY THE DECISION OF THE HONBLE KARNATAKA HIGH COURT. THE LEARNED AR SUBMITTED THAT THERE IS DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SELECT HOLIDAY RESORTS (P.) LTD. [20 13] 35 TAXMANN.COM 368 WHEREIN THE FACTS ARE DIFFERENT BUT IN THAT CASE TH E HONBLE DELHI HIGH COURT HAS HELD THAT CARRYING FORWARD AND SET OFF OF, IN C ASE OF CERTAIN COMPANIES, MERGER TAKE PLACE IN THAT CASE 98% SHARES OF ASSESS EE COMPANY WERE HELD BY IIPL AND 100% SHARES OF IIPL WERE HELD BY FOUR PERS ONS OF A FAMILY WHO HAD THE CONTROL AND MANAGEMENT OF IIPL AS WELL AS ASSES SEE COMPANY. THE ASSESSING OFFICER DISALLOWED THE CARRY FORWARD OF L OSSES U/S.79 AND TRIBUNAL HAS ALLOWED THE CLAIM AND MATTER WENT TO HONBLE DE LHI HIGH COURT HAS DISMISSED THE APPEAL OF THE REVENUE. THE LEARNED A R SUBMITTED THAT HONBLE DELHI HIGH COURT IN CASE OF YUM RESTAURANTS (INDIA) P. LTD. REPORTED IN 380 ITR 637. THE FACTS ARE DIFFERENT, THEREFORE IT IS NOT APPLICABLE. THE LEARNED AR SUBMITTED THAT THERE ARE JUDGMENT IN FAVOUR OF T HE ASSESSEE, MOREOVER, THERE IS TRIBUNAL JUDGMENT WHICH ARE DECIDED BY THE TRIBUNAL AND THERE IS A DIRECT DECISION OF HONBLE KARNATAKA HIGH COURT, AS SESSEES APPEAL SHOULD BE ALLOWED. 6. THE LEARNED DR SUBMITTED THAT THERE IS NO EVIDEN CE THAT SHARES OF THE ASSESSEE COMPANY WERE BENEFICIAL HELD BY SHRI VIJAY WADHWA AND MRS. VINITA WADHWA FOR A.Y.2009-10 AND 2010-11 WHEN THE LOSS WE RE INCURRED BY THE ASSESSEE COMPANY. THE DECISION IN CASE OF TAINWALA TRADING AND INVESTMENTS CO. LTD. DECIDED BY BOMBAY TRIBUNAL AND APEX COURT IN CASE OF VODAFONE WHICH CLEARLY STATES THAT SECTION 79 REFERS SHARES BEING BENEFICIARY HELD AND NOT BY CONTROL OF MANAGEMENT AND VOTING POWER, THEREFOR E, SECTION 79 IS APPLICABLE ITA NO967/M/16 A.Y.2012-13 7 WHEN THE SHARE HOLDING PATTERN OF THE ASSESSEE SHOW S THAT THEY WERE BENEFICIALLY OWNER AND THERE SHOULD NOT BE ANY CHAN GE OF SHARE HOLDING OF THE COMPANY AS PER PROVISION OF SECTION 79 OF THE ACT. THE REGISTER OR BENEFICIAL HELD OF THE SHARES IS VERY IMPORTANT, THEREFORE, TH E CIT(A) IS JUSTIFIED IN NOT ALLOWING THE CLAIM. 7. WE HAVE HEARD CONTENTION OF BOTH THE PARTIES. T HE ASSESSEE IS A COMPANY CONTROLLED BY WADHWA GROUP. IN A.Y.2009-10 AND 2010-11 ASSESSEE HAS INCURRED THE LOSS OF RS.13.89 CRORES UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ON 31.03.2009 AND 31.03.2010 SHAREHOLDER OF THE ASSESSEE COMPANY WERE RPL, WGH AND SND, EACH OF THEM HOLDING 33.33%. MR. VIJAY WADHWA AND MRS. VINITA WADHWA HELD TOGETHER 90% SHARES IN RPL. SIMILARLY, MR. VIJAY WADHWA AND MRS. VINITA WADHWA HELD 80% IN WGH AS ON 31.03.2009. SIMILARLY, MR. VIJAY WADHWA AND MRS. VINITA WADHWA HELD TOGETHER 87% IN RPL AND MR. VIJAY WADHWA AND MRS. VINITA WADHWA WER E HELD 100% OWNER OF THE PROPERTY. THE AFORESAID SHAREHOLDING PATTERN OF THE ASSESSEE COMPANY FOR THE YEAR ENDING 31.03.2009, 31.03.2010 AND 31.03.2012 CAN BE TABULA TED AS UNDER: LAST DAY OF THE YEAR OF LOSS YEAR OF SET OFF 31.03.2009 31.03.2010 31.03.2012 1. AMOUNT OF LOSS 13.89 CR. 7.09 CR. 20.99 2. SHAREHOLDING IN ASSESSEE COMPANY VIJAY AND VINITA NIL NIL 100% 90% AND 87% IN RPL 33.33% 33.33% 80% AND 72.5% IN WGH 33.34% 33.34% 3. VOTING POWER OF VIJAY AND VINITA IN THE ASSESSEE COMPANY THROUGH RPL 90 X 33=30 87 X 33=29 4. VOTING POWER OF VIJAY AND VINITA IN THE 80 X 33=26 72.5 X 33=24 ITA NO967/M/16 A.Y.2012-13 8 ASSESSEE COMPANY THROUGH WGH 56 53 100 8. THE SHAREHOLDING PATTERN OF THE ASSESSEE COMPANY SINCE ITS INCORPORATION TILL THE A.Y.2011-12 WAS AS UNDER: CHART I: NAME NUMBER OF SHARES % OF HOLDING RAJDHANI PROPERTIES PVT. LTD. [RPPL] 3,333/- 33.33 SHREE NAMAN DEVELOPERS LIMITED [SNDL] 3,333/- 33.33 WADHWA GROUP HOLDING PRIVATE LIMITED [WGHPL] 3,334/- 33.33 TOTAL 10,000/- 100.00 AS SHOWN IN ABOVE TABLE, THE ENTIRE SHARE CAPITAL O F ASSESSEE COMPANY WAS HELD BY THE THREE COMPANIES IN 1/3 RD SHARE EACH. THE RPPL IS 100% SUBSIDIARY OF WGHPL AND THE SHAREH OLDING PATTERN OF WGHPL IS AS UNDER: CHART II: NAME NUMBER OF SHARES % OF HOLDING MR. VIJAY WADHWA 7,00,000 40.00% MRS. VINITA WADHWA 7,00,000 40.00% OTHER INDIVIDUAL SHAREHOLDERS 3,50,000 20.00% TOTAL 17,50,000 100.00 IT IS APPARENT FROM THE CHART I & II ABOVE THAT MOR E THAN 51% OF THE ASSESSEE COMPANYS SHARES AND VOTING POWER ARE HELD BY THE W ADHWA GROUP COMPANIES WHICH IN TURN ARE BENEFICIALLY HELD BY MR . VIJAY WADHWA AND MRS. VINITA WADHWA. THESE TWO INDIVIDUALS WERE ALSO THE DIRECTORS IN ALL ABOVE MENTIONED COMPANIES I.E. ASSESSEE, RPPL AND WGHPL. THEY CONTINUE TO BE DIRECTORS IN THE ABOVE COMPANIES NOW ALSO. ITA NO967/M/16 A.Y.2012-13 9 9. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E COMPANY HAS EARNED TAXABLE INCOME OF RS.30,11,61,838/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND AFTER SETTING OFF THE BROUGHT FORWARD LOSSES OF RS.20,98,59,295/- AS SHOWN IN ABOVE TABLE, REMAINING INCOME OF RS.9,1 3,02,543/- (I.E. RS.30,11,61,838 RS.20,98,59,295) HAS BEEN OFFERED AS INCOME AND TAXES HAVE BEEN TRANSFERRED BY THEM TO MR. VIJAY WADHWA AND MR S.VINITA WADHWA FOR CONSOLIDATION AND RE-ORGANISATION OF THE BUSINESS S TRUCTURE. THUS, INSTEAD OF HAVING THE BENEFICIAL OWNERSHIP IN THE ASSESSEE COM PANY THROUGH INTERMEDIATE COMPANIES, THESE TWO INDIVIDUALS (I.E. MR. VIJAY WA DHWA AND MRS. VINITA WADHWA) ARE NOW DIRECT BENEFICIAL SHAREHOLDERS OF A SSESSEE COMPANY. THE CURRENT SHAREHOLDING OF THE ASSESSEE IS AS UNDER: NAME NO. OF SHARES % OF HOLDING VIJAY WADHWA 4,900 49.00% VINITA WADHWA 5,100 51.00% TOTAL 10,000/- 100.00% IT CAN BE SEEN FROM THE ABOVE TABLE THAT EARLIER MR .VIJAY WADHWA AND MRS.VINITA WADHWA WERE BENEFICIAL HOLDER TO THE EXT ENT OF 67% ONLY (THROUGH INTERMEDIARY WHICH HAS BEEN INCREASED TO 100% NOW; THUS, BENEFICIAL OWNERSHIP OF THESE INDIVIDUALS CONTINUES TO BE MORE THAN 51% FOR ALL YEARS. THE ASSESSEE HAS FILED SHAREHOLDING PATTERN OF MR. VIJAY WADHWA AND MRS. VINITA WADHWA IN RPL AND WGH BEFORE THE AO DURING A SSESSMENT PROCEEDING VIDE AUTHORISED REPRESENTATIVE'S LETTER DT.10.10.2014 AND ALSO BEFORE THE CIT(A) WHICH IS REPRODUCED AT PAGES 3 - 6 OF CIT(A)'S ORDER AND CIT(A) HAS ALSO VERIFIED THE SAME BY CALLING FOR SH ARE RCGISTERS(COPY OF LETTER DT. 10.10.2014 IS ENCLOSED)[ALSO FILED AT PA GE NO.44-49 OF PAPER BOOK]. THE CASE OF THE ASSESSEE IS THAT MR. VIJAY WADHWA A ND MRS VINITA WADHWA THROUGH RPL AND WGH ARE EXERCISING VOTING RIGHTS EX CEEDING 51% IN THE ASSESSEE COMPANY. ITA NO967/M/16 A.Y.2012-13 10 10. IN A.Y. 2012-13, THE ASSESSEE IN ITS COMPUTATIO N OF INCOME CLAIMED SET OFF OF LOSS UNDER THE HEAD 'INCOME FROM HOUSE PROPE RTY' FOR A.Y. 2009-10 (13.89 CR.) AND A.Y. 2010-11(7.09 CR.) AGGREGATING TO RS. 20.98 CR. AGAINST INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' FOR A.Y. 2012-13 AMOUNTING TO RS. 30.11 CR. 11. THE ASSESSING OFFICER AND THE CIT(A) DENIED THE AFORESAID SET OFF BY INVOKING THE PROVISIONS OF SECTION 79 OF THE ACT AN D HOLDING THAT SINCE 51% SHAREHOLDING AS ON 31ST MARCH 2009, 31 ST MARCH 2010 AND 31 ST MARCH 2012 IS NOT WITH THE SAME PERSONS, THE LOSS CANNOT BE SET O FF. 11. THE CASE OF THE ASSESSEE IS THAT AS ON 31 ST MARCH 2009, 3 ST MARCH 2010 AND 31 ST MARCH 2012, 51% OF THE VOTING POWER IN THE ASSESSE E COMPANY IS HELD BY SAME PERSONS AND THEREFORE THE ASSESSEE IS ENTIT LED TO SET OFF THE AFORESAID LOSS. THE CASE OF THE ASSESSEE IS BASED ON EXERCISE OF VOTING POWER THROUGH RPL AND WGH BY MR. VIJAY WADHWA AND MRS. VINITA WAD HWA AS ON 31ST MARCH 2009 AND 31ST MARCH 2010. INSOFAR AS 31 ST MARCH 2012 IS CONCERNED, ADMITTEDLY MR. VIJAY WADHWA AND MRS. VINITA WADHWA WERE HOLDING DIRECTLY 100% SHARES IN THE ASSESSEE COMPANY. 12. BASED ON THE AFORESAID UNDISPUTED FACTS, THE IS SUE WHICH REQUIRES CONSIDERATION IS WHETHER AS ON 31 ST MARCH 2009 AND 31 ST MARCH 2010, IT CAN BE SAID THAT 51% OF THE VOTING POWER WERE BENEFICIALLY HELD BY MR. VIJAY WADHWA AND MRS. VINITA WADHWA. SIMILAR ISSUE HAD C OME UP BEFORE HONBLE KARNATAKA HIGH COURT IN CASE OF COMMISSIONER OF INC OME TAX VS. AMCO POWER SYSTEMS LTD. 379 ITR 375 WHEREIN IT IS HELD T HAT SECTION 79 OF THE ACT WOULD BE BENEFIT OF CARRY FORWARD AND SET OFF OF BU SINESS LOSSES OF PREVIOUS COMPANY SHOULD NOT BE EXERCISE BY ANY OWNER, WHO MA Y PURCHASE THE SHARES OF COMPANY ONLY TO GET BENEFIT OF SET-OFF OF BUSINE SS LOSSES FOR PREVIOUS YEARS OF COMPANY WHICH MAY BEAR PROFITS IN SUBSEQUENT YEA RS AFTER NEW OWNER TAKES OVER THE COMPANY. FOR SUCH PURPOSE IT IS PROVIDED UNDER SUCH SECTION THAT 51% OF VOTING POWER THAT WAS BENEFICIALLY HELD BY P ERSON OR PERSONS SHOULD ITA NO967/M/16 A.Y.2012-13 11 CONTINUE TO BE HELD, THEN ONLY SUCH BENEFIT COULD B E GIVEN TO THAT COMPANY. SECTION 79 SPEAKS OF 51% VOTING POWER, WHICH ABL CO NTINUED TO HAVE EVEN AFTER TRANSFER OF 49% SHARES TO TAFE, AS IT CONTROL LED VOTING POWER OF APIL, AND TOGETHER, ABL HAD 51% VOTING POWER. WE FIND TH AT THE HONBLE HIGH COURT HAS OBSERVED AS UNDER:- BUSINESS LOSS CARRY FORWARD AND SET-OFF ASSESSEE C OMPANY WAS ENGAGED IN MANUFACTURE AND SALE OF STORAGE BATTERIES. BY AGRE EMENT BETWEEN ABL AND ASSESSEE APSL, FORMER AGREED TO TRANSFER TECHNICAL KNOW-HOW AND GRANT OF NON-EXCLUSIVE LICENSE TO MANUFACTURE AND SELL POCKET PLATE NICAD BATTERIES ON PAYMENT OF LUMPSUM CONSIDERATION FOR LICENCE AND RIGHT TO USE TECHNOLO GY, TO LATER ASSESSEE FILED ITS RETURN WHEREIN NIL INCOME WAS SHOWN AFTER SETTING O FF LOSSES BROUGHT FORWARD FROM EARLIER YEARS. CASE OF ASSESSEE WAS TAKEN UP FOR S CRUTINY AND ASSESSMENT WAS COMPLETED DETERMINING INCOME OF ASSESSEE. DEDUCTIO N U/S.35AB, AS CLAIMED BY ASSESSEE, WAS DISALLOWED AND LEASE RENTALS PAID WER E ALSO DISALLOWED. ASSESSMENT ORDER ALSO DID NOT ALLOW SETTING OFF OF LOSSES OF P REVIOUS YEARS BY INVOKING S.79. CASE OF ASSESSEE WAS REOPENED U/S.147/148 AND BENEF IT GRANTED IN SUCH YEAR U/S.35AB WAS DISALLOWED. CIT(A) PARTLY ALLOWED APP EAL OF ASSESSEE AND BENEFIT OF DEDUCTION CLAIMED U/S.35AB WAS GRANTED; BUT ASSESSE E WAS NOT FOUND TO BE ENTITLED TO SET-OFF OF BROUGHT FORWARD LOSSES, CONSIDERING C HANGE IN BENEFICIAL HOLDING OF 51% OR MORE, AS PROVIDED U/S.79. MATTER UNDER CONSIDER ATION WAS IF ASSESSEE WOULD BE ENTITLED TO CARRY FORWARD AND SET OFF OF BUSINESS L OSS DESPITE ASSESSEE NOT OWING 51% POWERS IN COMPANY AS PER SECTION 79 BY TAKING BENEF ICIAL SHARE HOLDING. HELD, WHERE THERE WAS CHANGE IN SHAREHOLDING OF COMPANY, NO LOSS INCURRED IN ANY YEAR PRIOR TO PREVIOUS YEAR SHOULD BE CARRIED FORWARD AN D SET-OFF AGAINST INCOME OF PREVIOUS YEAR, UNLESS ON LAST DAY OF PREVIOUS YEAR SHARES OF COMPANY CARRYING NOT LESS THAN 51% OF VOTING POWER WERE BENEFICIALLY HEL D BY PERSONS WHO BENEFICIALLY HELD SHARES OF COMPANY CARRYING NOT LESS THAN 51% O F VOTING POWER ON LAST DAY OF YEAR OR YEARS IN WHICH LOSS WAS INCURRED. ABL WAS HOLDING COMPANY OF APIL, THAT WAS WHOLLY OWNED SUBSIDIARY OF ABL AND THAT BOARD O F DIRECTORS OF APIL WERE CONTROLLED BY ABL, WAS NOT DISPUTED. AS ABL WAS HA VING COMPLETE CONTROL OVER APIL, THAT WAS WHOLLY OWNED SUBSIDIARY OF ABL, EVEN THOUGH SHAREHOLDING OF ABL MAY HAVE REDUCED TO 6% IN YEAR IN QUESTION, YET BY VIRTUE OF BEING HOLDING COMPANY, OWING 100% SHARES OF APIL, VOTING POWER OF ABL COUL D NOT BE SAID TO HAVE BEEN REDUCED TO LESS THAN 51%M BECAUSE TOGETHER, BOTH CO MPANIES HAD VOTING POWER OF 51% WHICH WAS CONTROLLED BY ABL. PURPOSE OF S.79 W OULD BE THAT BENEFIT OF CARRY FORWARD AND SET-OFF OF BUSINESS LOSSES FOR PREVIOUS YEARS OF COMPANY SHOULD NOT BE MISUSED BY ANY NEW OWNER, WHO MIGHT PURCHASE SHARES OF COMPANY, ONLY TO GET BENEFIT OF SET-OFF OF BUSINESS LOSSES OF PREVIOUS Y EARS, WHICH MAY BEAR PROFITS IN SUBSEQUENT YEARS AFTER NEW OWNER TAKES OVER COMPANY . IT WAS PROVIDED THAT 51% OF VOTING POWER THAT WAS BENEFICIALLY HELD BY PERSON O R PERSONS SHOULD CONTINUE TO BE HELD, THEN ONLY SUCH BENEFIT COULD BE GIVEN TO COMP ANY. THOUGH ABL MIGHT NOT HAVE CONTINUED TO HOLD 51% SHARES, BUT S.79 SPEAKS OF 51 % VOTING POWER, WHICH ABL CONTINUED TO HAVE EVEN AFTER TRANSFER OF 49% SHARES TO TAFE, AS IT CONTROLLED VOTING POWER OF APIL, AND TOGETHER, ABL HAD 51% VOTING POW ER. CONTROL OF COMPANY REMAINED WITH ABL AS CHANGE IN SHAREHOLDING DID NOT RESULT IN REDUCTION OF ITS VOTING POWER TO LESS THAN 51%. CONTROL OVER COMPAN Y, WITH 51% VOTING POWER, ITA NO967/M/16 A.Y.2012-13 12 REMAINED WITH ABL AND, PROVISIONS OF S.79 WOULD NOT BE ATTRACTED. APPEAL DISMISSED. 13. SIMILARLY, WE FIND THE SIMILAR FACTS IN ITAT, G BENCH REPORTED IN 52 DTR 0014 IN THE CASE OF DEPUTY COMMISSIONER OF INCO ME TAX VS. SELECT HOLIDAY RESORTS (P.) LTD. WHEREIN IT WAS HELD AS UN DER:- IIPL WAS HOLDING 98 PER CENT OF SHARES OF THE ASSE SSEE COMPANY. ON THE OTHER HAND 100 PER CENT SHARES OF IIPL WERE HELD BY FOUR PERSONS OF THE FAMILY WHO WERE HAVING THE CONTROL AND MANAGEMENT OF THE IIPL AS WE LL AS OF THE ASSESSEE COMPANY. BECAUSE OF THE MERGER OF IIPL INTO THE ASSESSEE COM PANY, THE FORMER CAME TO AN END AS A RESULT OF WHICH THE SHARES OF AMALGAMATED COMP ANY WERE ALLOTTED TO THE SHAREHOLDERS OF IIPL. THUS, IT IS CLEAR THAT THERE IS NO CHANGE IN THE MANAGEMENT OF THE COMPANY WHICH REMAINED WITH THE SAME FAMILY (SE T OF PERSONS) WHO WAS EARLIER EXERCISING CONTROL. THE ASSESSEE SUBMITTED A LIST OF DIRECTORS ON THE BOARD OF THE TWO COMPANIES PRIOR TO MERGER AS WELL AS THE DIRECTORS ON THE BOARD OF MERGED COMPANY. IT REMAINED IN THE SAME HANDS. THUS, THE CIT(A) IS CORRECT IN HOLDING THAT CHANGE IN MORE THAN 51 PER CENT WAS DUE TO MERGER OF TWO COMP ANIES. THERE WAS NO CHANGE IN CONTROL AND MANAGEMENT. CONSIDERABLE COGENCY IS FO UND ON THE PART OF THE CIT(A)S ADJUDICATION WHEREIN HE HAS REFERRED THE CIRCULAR N O.528, DT. 16 TH DEC., 1988 AND CONSIDERED THE CASE OF THE PRESENT MERGER AS AKIN T O DEATH OF SHAREHOLDERS. HE ALSO HELD THAT IN THE CASE OF DEATH OF A LIVING PERSON T HE SHARES HELD BY HIM GET TRANSFERRED TO HIS LEGAL HEIRS. SIMILARLY WHEN EXI STENCE OF A COMPANY IS LEGALLY FINISHED, THE BENEFIT OF ASSETS HELD BY IT (INCLUDI NG SHARES OF OTHER COMPANY) WILL PASS ON TO ITS SHAREHOLDERS. UNDER THE CIRCUMSTANCES, T HERE IS NO INFIRMITY OR ILLEGALITY ION THE ORDER OF THE CIT(A) HOLDING THAT S.79 WAS N OT APPLICABLE AND THEREFORE, THE ASSESSEE COMPANY IS ELIGIBLE FOR SET OFF BROUGHT FO RWARD LOSSES AGAINST THE CURRENT YEAR INCOME. DUE TO MERGER OF IIPL HOLDING 98 PER CENT SHARES OF ASSESSEE COMPANY WITH THE ASSESSEE COMPANY, THE SHAREHOLDERS OF THE IIPL WERE ALLOTTED SHARES BUT THERE WAS NO CHANGE IN THE MANAGEMENT WHICH CONTINUED TO BE W ITH PERSONS OF THE FAMILY WHO WERE HAVING THE CONTROL AND MANAGEMENT OF THE IIPL AS WELL AS OF THE ASSES SEE COMPANY AND THEREFORE PROVISIONS OF S.79 WERE NOT V IOLATED AND THE ASSESSEE WAS ENTITLED TO CARRY FORWARD OF LOSS. 14. THE SAME MATTER TRAVELLED TO HONBLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. SELECT HOLIDAY RESOR TS (P.) LTD. 35 TAXMANN.COM 368 (DELHI) WHEREIN THE DEPARTMENTAL AP PEAL WAS DISMISSED BY OBSERVING AS UNDER:- SECTION 79 OF THE INCOME TAX ACT, 1961 LOSSES CARR Y FORWARD AND SET OFF OF, IN CASE OF CERTAIN COMPANIES [MERGER, EFFECT OF] ASSESSMENT YEAR 2004-05 98 PER CENT SHARES OF ASSESSEE COMPANY, WERE HELD BY IIPL AND B OTH WERE MANAGED BY SAME SET OF PEOPLE. ON MERGER OF IIPL INTO ASSESSEE COMPANY , ASSESSING OFFICER DISALLOWED CARRY FORWARD OF LOSSES, UNDER SECTION 79 WHETHER , WHERE THERE WAS NO CHANGE IN MANAGEMENT OF COMPANY WHICH CONTINUED TO REMAIN WIT H SAME SET OF PEOPLE, AND CHANGE IN SHAREHOLDING WAS ONLY DUE TO MERGER, CARR Y FORWARD OF LOSSES OF COMPANY COULD NOT BE DENIED. ITA NO967/M/16 A.Y.2012-13 13 15. THE OBJECT OF SECTION 79 AS EXPLAINED BY THE A PEX COURT IN THE CASE OF CIT VS ITALINDIA COTTON CO. P. LTD. REPORTED IN 147 ITR 160 IS TO DISCOURAGE PERSONS CLAIMING A REDUCTION OF THEIR TAX LIABILITY ON THE PROFITS EARNED IN COMPANIES WHICH HAS SUSTAINED LOSSES IN EARLIER YEA RS. IT WAS NOT UNUSUAL FOR A GROUP OF PERSONS TO ACQUIRE A COMPANY, WHICH HAD SU FFERED LOSSES IN THE EARLIER YEARS, IN THE EXPECTATION THAT THE COMPANY WOULD EA RN SUBSTANTIAL PROFITS AFTER SUCH ACQUISITION, AND THEY WOULD BENEFIT BY A REDUC TION OF THE TAX LIABILITY ON THOSE PROFITS ON A SET OFF OF LOSSES CARRIED FORWAR D FROM EARLIER YEARS BEFORE THE ACQUISITION. THE ACQUISITION OF A COMPANY IN SUCH A CASE WOULD BE EFFECTED BY A CHANGE IN ITS SHAREHOLDING AND THE CONTROL OVER T HE COMPANY COULD BE ENSURED BY SECURING THE BENEFICIAL OWNERSHIP OF SHA RES CARRYING 51 PER CENT OR MORE OF THE VOTING POWER. 16. IT IS IMPORTANT TO NOTE THAT SECTION 79(A) LAYS EMPHASIS ON THE 'VOTING POWER' BENEFICIALLY HELD BY SAME PERSONS AS ON THE LAST DAY OF THE PREVIOUS YEAR WHEN THE LOSS IS INCURRED AND ON THE LAST DAY OF THE PREVIOUS YEAR WHEN THE SET OFF IS CLAIMED. THE CONDITION UNDER SECTION 79( A) IS NOT HOLDING OF THE SHARES BUT EXERCISING VOTING POWER. IF THE INTENTIO N OF THE LEGISLATURE WAS TO LAY DOWN THE CONDITION OF SHAREHOLDING THEN THERE WAS N O NEED TO SPECIFY 'VOTING POWER'. THIS CLEARLY INDICATES AND WHICH IS FORTIFI ED BY A PLAIN READING OF SECTION 79(A) OF THE ACT THAT SHAREHOLDING IS NOT T HE CONDITION BUT EXERCISE OF 'VOTING POWER' IS IMPORTANT FOR THE PURPOSE OF SECT ION 79(A). 17. SECOND PROVISO TO SECTION 79(A) PROVIDES THAT T HIS SECTION WOULD NOT APPLY TO ANY CHANGE IN THE SHAREHOLDING OF AN INDIA N COMPANY WHICH IS A SUBSIDIARY OF A FOREIGN COMPANY AS A RESULT OF AMAL GAMATION OR DEMERGER OF A FOREIGN COMPANY SUBJECT TO THE CONDITION THAT 51% S HAREHOLDERS OF THE AMALGAMATING OR DEMERGED FOREIGN COMPANY CONTINUED TO BE THE SHAREHOLDERS OF THE AMALGAMATED OR THE RESULTING FOREIGN COMPANY . THIS PROVISO DOES NOT SPEAK OF 'VOTING POWER' BUT LAYS DOWN THE CONDITION OF 'SHAREHOLDING'. THIS IS ITA NO967/M/16 A.Y.2012-13 14 IN SHARP CONTRAST TO THE MAIN PROVISION, I.E., SECT ION 79(A) OF THE ACT. THIS CLEARLY SHOWS THAT THE EMPHASIS IN THE MAIN SECTION 79(A) IS NOT ON SHAREHOLDING BUT ON VOTING POWER. 18. SIMILARLY SECTION 79 SUBSTITUTED BY THE FINANCE ACT, 2017 ALSO SUPPORTS THE INTERPRETATION OF SECTION 79(A) AS IT STOOD FOR A.Y. 2012-13. THE SUBSTITUTED SECTION 79(B) PROVIDES FOR CARRY FORWARD AND SET OF F OF LOSSES IN CASE OF START UP COMPANIES AND THERE ALSO THE EMPHASIS IS ON HOLDING OF THE SHARES CARRYING VOTING POWER AND NOT VOTING POWER BEING BENEFICIALL Y HELD AS USED IN SECTION 79(A). 19. THE PHRASE 'BENEFICIALLY HELD' IN SECTION 79(A) GOES WITH THE VOTING POWER AND NOT WITH THE SHAREHOLDING. HOWEVER, CLAUS E (B) OF SECTION 79 AS SUBSTITUTED BY THE FINANCE ACT, 2017 THE PHRASE 'VO TING POWER' GOES WITH SHAREHOLDING. 20. IN OUR VIEW, THE TEST TO BE SATISFIED IS NOT WH ETHER 51% SHARES SHOULD BE HELD BY SAME PERSONS ON THE LAST DAY OF THE PREVIOU S YEAR IN WHICH LOSS IS INCURRED AND ON THE LAST DAY OF THE PREVIOUS YEAR I N WHICH THE LOSS SO INCURRED IS TO BE SET OFF. THE TEST IS WHETHER 51% OF THE VO TING POWER WAS BENEFICIALLY HELD BY SAME PERSONS ON THE AFORESAID 2 DAYS. 21. THE WORD USED IN SECTION 79 OF THE ACT IS ...'H ELD'... AND NOT 'OWNED'. THIS INDICATES THAT OWNERSHIP OF THE SHARES WITH TH E SAME PERSON IS NOT CONTEMPLATED FOR DENYING THE SET OFF OF THE LOSS. F URTHERMORE THE WORD PRECEDING 'HELD' IS 'BENEFICIALLY' WHICH IS AN ADJE CTIVE/ADVERB OF THE WORD 'BENEFIT'. THEREFORE, WHAT IS TO BE SEEN IS WHETHER THE BENEFIT OF VOTING RIGHTS IS HELD BY THE SAME PERSONS. THE PHRASE 'BENEFICIAL LY HELD' WOULD CONTEMPLATE WIDER MEANING TO COVER A SITUATION WHEREIN IF A PER SON IS ABLE TO INFLUENCE VOTING RIGHTS TO THE EXTENT OF 51% IN THE COMPANY S EEKING SET OFF THROUGH CHAIN OF HOLDING THEN SAME WOULD BE SUFFICIENT NOT TO DIS ENTITLE THE SET OFF OF THE LOSS. THE PHRASE USED IN SECTION 79(A) '.....BENEFICIALLY HELD BY PERSONS WHO BENEFICIALLY HELD' WOULD INDICATE INDIRECT CONTROL OF VOTING RIGHTS THROUGH ITA NO967/M/16 A.Y.2012-13 15 CHAIN OF HOLDING BY THE SAME GROUP. IN THE INSTANT CASE AS EVIDENT FROM CHART ABOVE, MR. VIJAY WADHWA AND MRS. VINITA WADHWA THRO UGH THEIR SHAREHOLDING IN RPL AND WGH CAN BE SAID TO BE HOLDI NG 51% VOTING POWER IN THE ASSESSEE COMPANY AS ON 31 ST MARCH 2009 AND 31 ST MARCH 2010 AND DIRECTLY AS ON 31 ST MARCH 2012. THEREFORE, THE ASSESSEE IS ENTITLED TO SET OFF THE LOSS UNDER CONSIDERATION IN THE ASSESSMENT YEAR 2012-13. 22. THE DECISION OF THE DELHI HIGH COURT IN THE CAS E OF YUM INDIA REPORTED IN [2016] 380 ITR 637 (DELHI) IS DISTINGUISHABLE ON FACTS. THE ASSESSEE IN THAT CASE DID NOT LEAD ANY EVIDENCE TO SHOW THAT YUM USA IS THE BENEFICIAL OWNER OF SHARES HELD BY YUM ASIA IN YUM INDIA WHICH WAS S UBSEQUENTLY TRANSFERRED TO YUM SINGAPORE. YUM USA IS NOT A SHAREHOLDER ON A NY OF THE 2 DAYS AS MANDATED BY SECTION 79 OF THE ACT. IN THE INSTANT C ASE, THE CASE OF THE ASSESSEE APPELLANT IS THAT THE ASSESSEE APPELLANT COMPANY BE LONGS TO WADHWA GROUP CONTROLLED BY MR. VIJAY WADHWA AND MRS. VINITA WADH WA THROUGH RPL AND WGH AS ON 31 ST MARCH 2009 AND 31ST MARCH 2010 AND DIRECTLY ON 31S T MARCH 2012. FURTHERMORE, THE DELHI HIGH COURT HAS REFUSED TO FRAME THE QUESTION OF LAW ON THIS ISSUE UNDER SECTION 260A OF THE ACT AND HENCE IT CANNOT BE SAID THAT THE DELHI HIGH COURT HAS DECIDED THE ISSUE ON INTER PRETATION OF SECTION 79 OF THE ACT. THEREFORE DECISION OF DELHI HIGH COURT IN YUM INDIA IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IT IS IMPORTANT T O NOTE THAT DELHI HIGH COURT IN THE CASE OF SELECT HOLIDAYS REPORTED IN [2013] 35 T AXMANN.COM 368 (DELHI) HAVE THEMSELVES HELD THAT SET OFF UNDER SECTION 79 OF THE ACT CANNOT BE DENIED IF THE MANAGEMENT DUE TO CHANGE IN SHAREHOLDING IS WITH THE SAME SET OF PEOPLE. 23. ASSUMING FOR ARGUMENT SAKE, YUM INDIA CASE CAN BE SAID TO HAVE DECIDED THE ISSUE IN FAVOUR OF THE REVENUE THEN THE RE IS A KARNATAKA HIGH COURT DECISION IN THE CASE OF AMCO POWER SYSTEMS LT D REPORTED IN [201513 79 ITR 375 (KARNATAKA) WHICH IS DIRECTLY ON THE ISS UE IN FAVOUR OF THE ASSESSEE. IN SUCH A SITUATION WHEN THERE IS A CONFLICT IN VIE W OF NON- JURISDICTIONAL HIGH ITA NO967/M/16 A.Y.2012-13 16 COURT AND THERE IS NO JURISDICTIONAL HIGH COURT CAS E, THE DECISION IN THE FAVOUR OF THE ASSESSEE NEEDS TO BE FOLLOWED AS HELD BY THE APEX COURT IN THE CASE OF VEGETABLE PRODUCTS REPORTED IN [1973] 88 ITR 192 (S C). 24. THE RELIANCE PLACED BY THE LOWER AUTHORITIES ON VODAFONE CASE REPORTED IN (2012) 341 ITR 0001 (SC) IS NOT APPLICABLE TO TH E ISSUE RAISED IN THIS APPEAL. THE ISSUE FOR CONSIDERATION IN THE PRESENT APPEAL R EVOLVES AROUND INTERPRETATION OF SECTION 79 OF THE ACT WHEREIN THE PHRASE USED IS 'BENEFICIALLY HELD'. THE ISSUE IN VODAFONE'S CASE WAS NOT RELATING TO SECTIO N 79 OF THE ACT BUT ON CAPITAL GAINS DUE TO INDIRECT TRANSFER WHEREBY THE CONTROL OF INDIAN COMPANY GOT CHANGED BECAUSE OF CHANGE IN SHAREHOLDING OF FOREIG N ENTITIES. IT WAS IN THIS CONTEXT THAT SEPARATE LEGAL ENTITY CONCEPT OF EACH COMPANY WAS EXPLAINED. ON THE CONTRARY DUE TO THE USE OF PHRASE 'BENEFICIALLY HELD' IN SECTION 79 OF THE ACT, THE LEGISLATURE SEEMS TO HAVE ACCEPTED THE CON CEPT OF GROUP CONTROL DUE TO CHAIN HOLDINGS WITH ONE/MORE PERSONS ULTIMATELY. 25. THE RELIANCE PLACED BY THE LOWER AUTHORITY ON M UMBAI TRIBUNAL CASE IN THE CASE OF TAINWALA TRADING AND INVESTMENTS CO. LT D. REPORTED IN F2012J 22 TAXINANN.COM 68 (MUM.) IS DISTINGUISHABLE ON FACTS. IN THAT CASE MR. TAINWALA WAS A DIRECTOR IN A COMPANY WHO HELD SHARES IN THE COMPANY INCURRING LOSS. MR. TAINWALA BECAME SHAREHOLDER OF THE COMPANY INCU RRING LOSS IN THE YEAR WHEN THE COMPANY INCURRING LOSS WANTED SET OFF. FRO M THE SAID DECISION, IT IS NOT CLEAR WHETHER MR. TAINWALA WAS A SHAREHOLDER IN THE COMPANY IN WHICH HE WAS A DIRECTOR AND IT WAS ON THESE FACTS THAT THE T RIBUNAL NEGATIVED THE ARGUMENT OF THE ASSESSEE FOR SET OFF UNDER SECTION 79 OF THE ACT. ALSO THE ARGUMENT OF CHANGE IN SHAREHOLDING DUE TO CROSS GIF T WAS ALSO NEGATIVE BECAUSE OF NO EVIDENCE TO THAT EFFECT. IN THE INSTANT CASE IN APPEAL, MR. VIJAY WADHWA AND MRS. VINITA WADHWA WERE SHAREHOLDERS IN RPL AND WGH WHO IN TURN WERE SHAREHOLDERS IN ASSESSEE APPELLANT IN THE YEAR OF INCURRING LOSS AND THEY WERE DIRECTLY SHAREHOLDERS IN THE YEAR WHEN THE ASS ESSEE WANTED TO SET OFF THE ITA NO967/M/16 A.Y.2012-13 17 LOSS. THEREFORE, THE DECISION OF TAINWALA IS DISTIN GUISHABLE ON FACTS AND NOT APPLICABLE TO THE PRESENT CASE IN APPEAL. 26. THE DECISION OF BARODAWALA REPORTED IN 4 ITD 18 6 (MUM) RELIED BY THE LOWER AUTHORITY IS ALSO DISTINGUISHABLE ON FACTS. I N THAT CASE ISSUE WAS WHETHER SHAREHOLDING OF FATHER, MOTHER AND MINOR SON CAN BE CLUBBED TO CALCULATE 20% OF VOTING POWER FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT. THE TRIBUNAL HELD THAT A GUARDIAN'S SHAREHOLDING CANNOT BE CLUBB ED WITH FATHER TO DECIDE WHETHER FATHER TOGETHER IN HIS INDIVIDUAL CAPACITY AND IN HIS CAPACITY AS GUARDIAN HELD 20% VOTING POWER. IN THE PRESENT APPE AL, MR. VIJAY WADHWA AND MRS. VINITA WADHWA TOGETHER HOLD MORE THAN 51% HOLDING IN THE ASSESSEE APPELLANT COMPANY THROUGH RPL & WGH WHICH IS THE TE ST TO BE SATISFIED FOR THE PURPOSE OF SECTION 79 OF THE ACT. FURTHERMORE, DEFINITION OF 'PERSONS HOLDING SUBSTANTIAL INTEREST' IN SECTION 2(22)(E) I S DIFFERENT THAN WORDING USED IN SECTION 79 OF THE ACT AND HENCE BARODAWALA'S CAS E IS NOT APPLICABLE AND DISTINGUISHABLE ON FACTS AND IN LAW TO THE FACTS OF PRESENT APPEAL. 27. SECTION 79 OF THE ACT PROVIDES FOR CARRY FORWAR D AND SET OFF OF LOSSES. IN THE PRESENT APPEAL, THE ASSESSEE IS NOT SEEKING CAR RY FORWARD OF LOSSES TO BE SET OFF BUT THE ASSESSEE IS SEEKING TO SET OFF THE BROU GHT FORWARD LOSSES OF THE EARLIER YEARS TO BE SET OFF IN THE CURRENT ASSESSME NT YEAR AND THEREFORE PROVISIONS OF SECTION 79 MAY NOT BE APPLICABLE. THE SAID SECTION WOULD APPLY IF THERE IS A CHANGE IN VOTING POWER IN THE ASSESSMENT YEAR WHEN THE LOSS IS SOUGHT TO BE CARRIED FORWARD AND SET OFF AGAINST TH E SUBSEQUENT YEAR LOSSES. 28. THE ASSESSEE IN THE PRESENT APPEAL FOR A.Y. 201 2-13 IS SEEKING TO SET OFF LOSS INCURRED IN A.Y. 2009-10 AND 2010-11. THE ISSU E BEFORE US RELATES TO LOSS OF A.Y.2009-10 AND 2010-11 TO BE SET OFF AGAINST IN COME OF A.Y.2012-13. 29. MR. VIJAY WADHWA AND MRS. VINITA WADHWA THROUGH THEIR SHAREHOLDING IN RPL AND WGH AS ON 31 ST MARCH 2009 AND 31 ST MARCH 2010, I.E., THE LAST DAY OF THE PREVIOUS YEAR IN WHICH THE LOSS WAS INCURRED , HELD VOTING RIGHTS TO THE EXTENT OF 56% AND 53% RESPECTIVELY AND AS ON 31 ST MARCH 2012 HELD 100% OF ITA NO967/M/16 A.Y.2012-13 18 SHARES CARRYING VOTING RIGHTS DIRECTLY AND THEREFOR E THE ASSESSEE APPELLANT IS ENTITLED TO CARRY FORWARD AND SET OFF OF LOSS OF A. Y. 2009-10 AND 2010-11 AGAINST INCOME OF A.Y. 2012-13. 30. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2018. SD/- SD/- (N. K. PRADHAN) (D. T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 14.02.2018. * MP . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / ( THE CIT(A) ) 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI