The Shareholding Change Restriction
Section 79 restricts the carry-forward of business losses if the beneficial ownership of shares carrying at least fifty-one per cent of the voting power has changed in the relevant year. The restriction applies to a company in which the public is not substantially interested. The rationale is to prevent the trafficking of loss-making companies.
The Scheme Exemption
Section 79(2)(c) exempts a change in shareholding that results from an NCLT-sanctioned scheme of amalgamation or demerger. The exemption is available where the scheme is sanctioned by the NCLT and the change in shareholding is a consequence of the scheme, not a separate transaction. The scheme should record the reliance on Section 79(2)(c) and the NCLT order should reflect the shareholding change.
The IBC Overlay
The IBC resolution plan route has its own exemption under Section 79(2)(c), and the NCLAT has upheld the availability of the carry-forward benefit for an IBC resolution plan. A scheme that is not an IBC resolution plan cannot rely on the IBC-specific exemption; it must rely on the NCLT scheme exemption.
The Documentation
The file should contain: the Section 79(2)(c) analysis; the shareholding change computation; the NCLT order; and the tax opinion. A scheme that carries forward losses without the Section 79 analysis is exposed to a disallowance.
Call to Action: For Section 79 carry-forward analysis, NCLT scheme tax structuring, or loss-transfer documentation, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.