CBDT issues clarification on carry forward of losses in case of change in shareholding
The Finance Act of 2021 amended section 72A of the Income-tax Act of 1961 (the Act) to provide, among other things, that in the event of an amalgamation of a public sector company (PSU) that ceases to be a PSU (erstwhile public sector company), as part of strategic disinvestment, with one or more company or companies, then, subject to the conditions laid out therein, the accumulated loss and unabsorbed depreciation are deductible.
To facilitate strategic disinvestment, it has been decided that Section 79 of the Income-tax Act of 1961 will not apply to a previously public sector company that has become so as a result of strategic disinvestment. As a result, any loss incurred in any previous year prior to, and including, the year of strategic disinvestment shall be carried forward and set off by the former public sector company.
The above relaxation shall cease to apply from the previous year in which the company that was the ultimate holding company of such former public sector company immediately after completion of the strategic disinvestment ceases to hold, directly or through its subsidiary or subsidiaries, 51% of the voting power of the former public sector company.
The term “erstwhile public sector company” and “strategic disinvestment” shall have the meaning in Explanation to clause (d) of sub-section (1) of Section 72A of the Income-tax Act, 1961.
Necessary legislative amendments for the above decision shall be proposed in due course of time.