Buying a private limited company with 8 crore in losses

Hi,

Hope You are doing well!

Since you are buying the entire company it also includes assets as well as liabilities.

Pursuant to sec 79 of IT Act, 1961, if transfer of shareholding from existing shareholders exceeding 51% then in my opinion you would not able to carry forward or set off the losses of that company.

Merely appointing new directors will not change the position.

Thanks & Regards,

Payal Chhajed

Losses can be set off only by the assessee who has incurred loss. In other words brought forward losses can be set of only by the SAME ASSESSEE except in the following situations.

1) Inheritance

2) Amalgamation

3) Succession

4) Demerger

I don't think your case falls into any of the above categories, so not eligible.

Thanks

No, you will not be able to use the losses of previous company after buying the company.

As per section 79 of the income tax act, carry forward of loss is allowed only if the earlier shareholder carrying share more than 51% are still holding the shares more than 51% post restructuring.

Unfortunately, No.

Carry forward of losses is allowed only if the shareholder composition of at least 51%, is still the same post restructuring.

Regards,

Nikhil.

Hi,

The losses can be carried forward by you after takeover only if you acquire upto 49%. The balance 51% voting power shall remain same who actually incurred the losses during previous financial years.

Thanks

Damini

Hi

As per section 79 of income tax act you can't carry forward losses if shareholding changes more than 51%. Directorship is not a issue/concern in this matter only share holding to be check, as you are acquiring 100%holding hence you can't claim such losses.

Please be noted that depreciation will be allowed to set off in future as section 79 doesn't apply to depreciation.

Hope it will help you

In terms of Section 79 of the Income-tax Act, 1961, any change in shareholding beyond 49% has an impact on the carry forward of losses (as per income-tax and not book losses) incurred by an unlisted Indian company. Since you intend to acquire the entire shareholding of an existing company, the losses of such company would not be allowed to be carry forward and as such would lapse. However, the said provision is not applicable to unabsorbed depreciation. Thus, unabsorbed depreciation would continue to be carried forward and would be available for set-off in subsequent years.

Yes you will be able to claim the losses.

Further if you are already into same business & you intend to buy the company which is in same business, then you should opt for merger as it will give you option to set off losses of company you are acquiring with the profits of profit making company.

Hi

Since the company all together will be a new entry, the losses cannot be carried forward.

However, if only 49% of shareholding is transferred, the losses shall be carried forward.