Transfer of Indian company Shares by a holding Company to another holding Company results in disallowance of B/F losses

CA Suraj R. Agrawal

Brief of the Case:-

Delhi High Court held in case of Yum Restaurants (India) Pvt. Ltd vs. ITO upheld the order of Delhi ITAT and held that under Section 79 of the Act the set off and carry forward of loss, which is otherwise available under the provisions of Chapter VI, is denied if the extent of a change in shareholding taking place in a previous year is more than 51% of the voting power of shares beneficially held on the last day of the year in which the loss was incurred. In the present case, there was a change of 100% of the shareholding of Yum India and consequently there was a change of the beneficial ownership of shares since the predecessor company (Yum Asia) and the successor company (Yum Singapore) were distinct entities. The fact that they were subsidiaries of the ultimate holding company, Yum USA, did not mean that there was no change in the beneficial ownership. Unless the Assessee was able to show that notwithstanding shares having been registered in the name of Yum Asia or Yum Singapore, the beneficial owner was Yum USA, there could not be a presumption in that behalf.

Case Summary:-

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