The document discusses rules around setting off carried forward losses after a change in control of an entity according to Section 57(2)(b) and Section 20. It notes that an entity's control is deemed changed if 50% or more of its underlying ownership changes over three years. For a company that was solely owned by Mr. Shyam but he sold 60% of shares to Mr. Mohan, this qualified as a change in control since the ownership changed by more than 50%. Therefore, losses from before the change cannot be set off against income earned after the change in control.
The document discusses rules around setting off carried forward losses after a change in control of an entity according to Section 57(2)(b) and Section 20. It notes that an entity's control is deemed changed if 50% or more of its underlying ownership changes over three years. For a company that was solely owned by Mr. Shyam but he sold 60% of shares to Mr. Mohan, this qualified as a change in control since the ownership changed by more than 50%. Therefore, losses from before the change cannot be set off against income earned after the change in control.
The document discusses rules around setting off carried forward losses after a change in control of an entity according to Section 57(2)(b) and Section 20. It notes that an entity's control is deemed changed if 50% or more of its underlying ownership changes over three years. For a company that was solely owned by Mr. Shyam but he sold 60% of shares to Mr. Mohan, this qualified as a change in control since the ownership changed by more than 50%. Therefore, losses from before the change cannot be set off against income earned after the change in control.
As per Sec. 57 (2) (b), an entity cannot set off carried forward loss pertaining to Period before change in Control from business/investment income of the same entity generated after the period of Change in Control as per Sec. 20 An entitys control is deemed to be changed when 50% or more of its underlying ownership is changed in comparison to its ownership structure three years previously. While determining the change in control, only such changes as attributable to the beneficiaries holding 1% or more interest in the entity or the associated person of the beneficiaries holding 1% or more interest in the entity shall only be considered. In the given case, M/s Ganapati Industries P. Ltd. is being operated since last many years as the question provides information of the loss of last four years with Mr. Shyam as sole shareholder of the company, and Mr. Shyam sold 60% of the companys stake to Mr. Mohan on Ashad 31, 2069. As Mr. Shyam is the only shareholder (with 100% ownership), all change in control, i.e. 60%, shall be considered; which means there is change in control on Ashad 31, 2069. This means, as aforesaid in the first paragraph, the loss cannot be carried forward for set off after the change in control. As such, the tax officers contention is correct.