Set Off & Carried Forward Of Loss In Case Of Change Of Ownership

MCQ SELF CHALLENGE # 0092

Set Off And Carried Forward Of Loss In Case Of Change Of Ownership

Dear Professional Seniors & Friends,

Warm Greetings!

Welcome to the Next MCQ challenge of top chartered accountant firm in India on the concept-based practical professional knowledge on Set off and Carried Forward of Loss in case of change of ownership in a unique manner to be self-answered by participants. The detailed answers of these MCQs shall be posted the next day for the self-assessment of the participants.

MCQ 92.1: M/s Lux India Private Itd and M/s Pears India Private Ltd are subsidiaries of HUL Ltd an unlisted Company with no public Interest with HUL owning 30% ownership in both Lux India and Pears India. M/s Lux Ltd was having Loss or Business for Rs 180 Crore in FY 2015-16 However as a part of the Restructuring plan, the ownership of M/s Lux India shifted from HUL Itd to Pears India for its 80% share in PY 17-18. Can Fears India carry forward the loss of Lux India in PY 17-18.

A. Yes. Loss can be carried forward

B. No, Loss cannot be carried forward

C. Yes, the loss can be carried forward for a fresh period of 8 years

D. None of the Above

MCQ 92.2: If in the above case, M/s Lux India and M/s Pears India are Listed Entities with 80% of their share capital held by the public and shareholders approve their amalgamation in the Previous year 2015-16.

A. Yes. Loss can be carried forward

B. No, Loss cannot be carried forward

C. Yes, the loss can be carried forward for a fresh period of 8 years

D. None of the Above.

Answer MCQ Self Challenge #0092

This post of MCQ is on provisions relating to Set of and Carried Forward of Loss in case of a change of ownership.

Answer MCQ 92.1:

B) No. Loss cannot be carried forward

Answer MCQ 92.2:

C) Yes. loss can be carried forward for a fresh period of years

Practical Analysis for MCQ 92.1 & 92.2:

• Section 79 of the Income Tax Act provides for provisions relating to carrying forward and setting off losses in case of certain situations Le where ownership has been changed.
• The said section provides that the loss relating to the previous year shall be carried forward if at the closing of the previous year and at the opening of the current year, 51% or more shares have been held by the same persons
• The section applies to the closely held company and does not apply to companies in which the public are substantially interested
• Also as per Section 72A, in case of amalgamation, the loss can be carried forward for a fresh period of 5 years

Based on the above analysis, the correct answer to MCQ 92.1 B) No. Loss cannot be carried forward since 51% or more shares are not held by same shareholders and the correct answer to MCQ 92.2 C) Yes, the loss can be carried forward for a fresh period of 8 years as the section do not apply to widely held companies in which public are substantially interested) & also as per Section 72A, loss can be c/f for fresh period of 8 years.

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as a professional opinion you can definitely have your own opinion.)

Sincere Regards

CA Sanjay Kumar Agrawal

Mobile: 9810116321