Nihilent Technologies Private Limited V. DCIT & Anr. (Mumbai HC)
chandan bagaria
Dear Members,
The above judgement appears to be harsh on the assessee and distant from the provisions of the Act. The decision given by the Mumbai High Court against Nihilent Technologies Private Limited needs to be further explained as per the Income Tax Act. The provisions of section 79 gets attracted when there is a CHANGE in the shareholding pattern in the closely held company and owing to such change the Person holding more than 51% share in the previous year in which the loss is incurred gets reduced to below 51% in the previous year in which the assessee claims set of losses. Nihilent Technologies Private Limited had shares held by Hatch Investments (Mauritius) Ltd to the extent of 99.85% where other share holder holds share only to the extent of 0.15%. The reduction in the shareholding from 99.85% to 76.25% is not due to change in the shareholding but due to further issue of share.
on May 2000 and as per share holders agreement out of the authorized capital of Rs.20,00,00,000/-, the company has issued 15.1% shares to the promoters and stock management team as a sweat equity shares and 10% to EXOP trust for employees on approved stock plan. The balance 74.9% shares were brought by Nedcore group through Nedcore bank Ltd. South Africa through Hatch Investment (Mauritius) as and by 31-03-2002 the same was increased to 76.25%.
The share issued on May 2000 to the extent of 15.1% to promoter and 10% to EXOP trust and reduced share holding of 38.125% of Hatch Investments (Mauritius) Ltd together constitute more than 51% shareholding in the year of loss and in the year of assessment. Hence even if further issue of share is taken into consideration Nihilent Technologies Private Limited adequately satisfy the conditions of section 79 to enjoy the benefit of setoff of loss in the assessment year 2003-04 for the loss carried forward and incurred by the firm in the assessment year 2001-02. There appears to be no reason as to why losses pertaining to A.Y. 2001-02 amounting to Rs.5,25,42,452/- to arrive at NIL income and also allowed benefit of carry forward of Rs.4,25,18,048/- for the unabsorbed portion shall be denied to Nihilent Technologies Private Limited.
The points to be further considered is:
a) The case has been reopened by the revenue after 4 years.
b) The provisions of section 79 gets attracted when there is change in the shareholding pattern.
c) Nihilent Technologies Private Limited from the fact of the case appears to be a Indian company which is a subsidiary of foreign company. Hence as per proviso to section 79 the provisions of section 79(a) do not apply to Nihilent Technologies Private Limited.
In my opinion the decision given by the honourable High Court, Mumbai in Nihilent Technologies Private Limited V. DCIT & Anr. (Mumbai HC) is harsh on the assessee, and not in accordance with the provision of the law. The provisions of section 79 has been forcibly applied in the case and assessee has been denied the benefit of set off. The opinion of the members of the forum will enrich us in this regard.
Regards,
Ca Chandan Bagaria
Kalidas Ramaswami
To my mind no review is called for.
regards
kalidas
Date: Sun, 7 Aug 2011 15:44:25 +0530
From: chandan...@yahoo.co.in
Subject: [PDRUNGTA] Nihilent Technologies Private Limited V. DCIT & Anr. (Mumbai HC)
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