Commissioner of Income Tax vs Acme Thread Co. P. Ltd.

S.K. Desai, J.—In this reference the following question has been referred to us :

"Whether, on the facts and in the circumstances of the case, s. 79 of the IT Act, 1961 applied in the case ?"

It would seem that the answer to be given to this question is concluded in favour of the assessee on a two fold consideration - one legal and the other factual and/or logical.

In the first place it would seem that the Tribunal was entirely right in coming to the conclusion that the change in the shareholding of the assessee company was not effected with a view to avoid or reducing any liability of tax. This is discussed by the Tribunal in paragraph 18 of its appellate order and the approach as well as the conclusion reached by the Tribunal would seem to be unexceptionable. This is the second aspect of the matter.

It is now settled as as far this court is concerned that s. 79 will apply only where the change in shareholding has taken place in the previous year relevant to assessment year under the IT Act. 1961. This position has been accepted by a Division Bench of this court in Commissioner of Income Tax Bombay City-II Vs. Hindustan Export and Import Corporation Pvt. Ltd., . In our opinion the question referred to us is required to be answered both by reason of the conclusion reached in the said paragraph 18 as well as by the rule of law enunciated in the aforesaid decision, in the negative and in favour of the assessee. We answer the question accordingly. Parties however to bear their own costs of the reference.