Benefit of set off of brought forward losses could not be denied to the amalgamated company if there is no change in control and management of amalgamated company pre and post merger

Delhi bench of the Income-tax Appellate Tribunal (the Tribunal), in the case of DCIT Vs. Select Holiday Resorts Pvt. Ltd. (ITA Nos. 1184 & 2460/Del/2008) (Judgment Date: 23 December 2010, Assessment Years: 2004-05 & 2005-06) held that where a parent company merged with its subsidiary, the benefit of brought forward and set off of losses under Section 79 of the Income-tax Act, 1961 (the Act) claimed by the amalgamated company, cannot be disallowed on the grounds that there was a change in the shareholding of more than 51 percent of the share capital of the subsidiary company since there was no change in control and management of amalgamated company pre and post merger.

Facts of the case

• M/s. Indrama Invetsment (P) Ltd. (IIPL) was an investment-holding company and held 98 percent of the share capital of the taxpayer. Further, four individuals of the promoter family (the promoters) held 100 percent of the shareholding in IIPL.
• IIPL merged with the taxpayer. Pursuant to the merger, the shareholding of IIPL in the taxpayer was cancelled and shares were issued to the promoters.

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