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MCQ Self Challenge # 0092 on Set off and Carried Forward of Loss in case of change of ownership

 

Set off and Carried Forward of Loss in case of change of ownership

 

Dear Professional Seniors & Friends,
Warm Greeting!

Here is the Next post of #MCQ on 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 answer of these MCQs shall be posted next day for the self assessment of the participants.

MCQ 92.1: M/s Lux India Private ltd and M/s Pears India Private Ltd are subsidiaries of HUL Ltd an unlisted Company with no public Interest with HUL owning 80 % ownership in both Lux India and Pears India. M/s Lux Ltd was having Loss u/h Business for Rs 180 Crore in PY 2015-16. However as a part of Restructuring plan, the ownership of M/s Lux India shifts from HUL ltd to Pears India for its 80% share in PY 17-18. Can Pears 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 , 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 Previous year 2015-16.

A. Yes, Loss can be carried forward
B. No, Loss cannot be carried forward
C. Yes, loss can be carried forward for a fresh period of 8 years
D. None of the Above.

Sincere Regards!

CA Sanjay Kumar Agrawal
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Answer MCQ Self Challenge #0092

 

Dear Professional Seniors & Friends,

Warm Greetings!

 

This post of MCQ is on provisions relating to Set of and Carried Forward of Loss in case of 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 8 years

 

 

Practical Analysis for MCQ 92.1 & 92.2:

 

  • Section 79 of the Income Tax Act provides for provisions relating to carry forward and set off of losses in case of certain situations i.e. where ownership has been changed.
  • The said section provides that the loss relating to previous year shall be carry 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 same persons.
  • The section applies to closely held company and does not apply to companies in which public are substantially interested.
  • Also as per Section 72A, in case of amalgamation, loss can be carry forward for fresh period of 8 years.

 

Based on the above analysis, 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

 

correct answer to MCQ 92.2 C) Yes, 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 professional opinion; you can definitely have your own opinion.)

 

Sincere Regards!

 

CA Sanjay Kumar Agrawal

Mobile: 9810116321

 

To access MCQ posts regularly, please Join Telegram Channel:
https://t.me/caSanjayKumarAgrawal

 

For All MCQ post please click on:

Webpage: http://www.casanjay.me/

Facebook: https://www.facebook.com/CA.Sanjay.K.Agrawal/

Linkedin: https://www.linkedin.com/in/ca-sanjay-kumar-agrawal/

 

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