Page 45 - Union Budget_2019

Union Budget 2019

However, when there is a write off of loan by the company already applied for insolvency, such write

off shall still be deemed to be the income in the year of write-off. This issue hasn’t been addressed yet
and still proves be cumbersome for such companies.

Illustration

Case-1

The shareholding pattern of A Pvt Ltd as on 31.03.2020 before transfer of shares by Mr. A and after transfer

of shares by Mr. A is as follows.
Before Transfer After Transfer

Voting Voting
Shareholders power (%) Shareholders power (%)

A 75% D 25%
B 13% E 25%
C 12% F 25%

B 13%
C 12%

The total brought forward losses are Rs. 2,00,000 and income earned during the year is Rs.3,00,000.

It is clear from the above facts that there is a change in voting power more than 51%, where Mr. A has

transferred 75% of the voting power to Mr. D, Mr. E and Mr. F respectively.

Therefore, brought forward loss of Rs.2,00,000 cannot be set off against the income earned during the year

of Rs.3,00,000. Hence the total taxable income during the year is Rs.3,00,000.
Case-2

Assuming the facts of the case remains the same, if the Central Government had issued petition to NCLT

under section 241 of Companies act, 2013 and subsequently removed the board of directors of A Pvt Ltd
and has appointed new board of directors as nominated by Central Government.

Thus, as pursuant to the resolution plan by NCLT, Mr. A transfers his share to Mr. D, Mr. E and Mr. F as
mentioned in above table.

In such case, as per the proposed amendment, the loss incurred during the previous years of Rs.2,00,000

shall be set off against income of the current year of Rs.3,00,000 and provisions of Section 79 shall not apply.
Hence the total taxable income in the hands of A Pvt Ltd for the previous year shall be Rs.1,00,000.

Further, the relief under the proposed amendment shall be available to any subsidiary of A Ltd or a
subsidiary of such subsidiary.

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