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66. Aggregation of losses in the case of certain companies
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66. Aggregation of losses in the case of certain companies.—(1) Notwithstanding anything in this Chapter a closely-held company shall not be allowed to aggregate any unabsorbed preceding year loss from ordinary sources or unabsorbed preceding year loss from the special source with the income of the financial year unless it satisfies the test of continuity of ownership.
(2) The closely-held company shall satisfy the test of continuity of ownership referred to in sub-section (1), if the shares of the company beneficially held by persons, carrying not less than fifty-one per cent. of the voting power on the last day of the financial year immediately preceding the relevant financial year, are held by the same persons on the last day of the relevant financial year.
(3) For the purposes of calculating the percentage of voting power under sub-section (2),—
(a) any change in the voting power in the relevant financial year due to the death of a shareholder or on account of transfer of shares by way of gift to any relative of the donor shareholder shall be ignored ;
(b) any change in the shareholding of an Indian company, which is a subsidiary of a foreign company, as a result of amalgamation or demerger of a foreign company, shall be ignored, if fifty-one per cent. shareholders of the amalgamating or demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company.
Clause 66 seeks to provide that a closely held company shall not be allowed to aggregate the unabsorbed preceding year loss from ordinary or special sources with the income of the current financial year unless it satisfies the test of continuity of ownership.
The said clause further provides that the closely-held company shall satisfy the test of continuity of ownership if the shares of the company beneficially held by persons, carrying not less than fifty-one per cent. of the voting power on the last day of the financial year immediately preceding the relevant financial year, are held by the same persons on the last day of the relevant financial year.
The said clause also provides that while calculating the percentage of voting power—
(a) any change in the voting power in the relevant financial year due to the death of a shareholder or on account of transfer of shares by way of gift to any relative of the donor shareholder shall be ignored ;
(b) any change in the shareholding of an Indian company, which is a subsidiary of a foreign company, as a result of amalgamation or demerger of a foreign company, shall be ignored, if fifty-one per cent shareholders of the amalgamating or demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company.
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