CBDT issues clarification regarding carry forward of losses in case of change in shareholding due to strategic disinvestment

Sep 15, 2021 | by Avantis RegTech Legal Research Team

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Finance & Taxation Compliance

The Central Board of Direct Taxes (CBDT) on September 10, 2021 has issued clarification regarding the losses which were cause by the amendments made in the income-tax Act, 1961 by the finance act, 2021 which is known as strategic disinvestment. All the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss, or as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected. 

In order to facilitate the strategic disinvestment, CBDT has decided that Section 79 of the Income-tax Act, 1961,which specifies Carry forward and set off of losses in the case of certain companies, shall not apply to an erstwhile public sector company which has become so as a result of strategic disinvestment. 

The loss incurred in any previous year prior to, and including, the previous year of strategic disinvestment shall be carried forward and set off by the erstwhile public sector company. The relaxation shall cease to apply from the previous year in which the company, that was the ultimate holding company of such erstwhile public sector company immediately after completion of the strategic disinvestment, ceases to hold, directly or through its subsidiary or subsidiaries, fifty-one per cent of the voting power of the erstwhile public sector company. 



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