Bhagabati Prasad Banerjee, J. - (1.) The following questions of law have been referred by the Income-tax Appellate Tribunal, "D" Bench, Calcutta, under Section 256(1) of the Income-tax Act, 1961, for the opinion of this court : "(a) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the losses of the earlier years cannot be set off against the profits assessable for the assessment year 1978-79 in the case of the assessee because of the provisions of Section 79 of the Income-tax Act though there was no change in the shareholding during the previous year within the meaning of that section ? (b) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that set off of past losses can be denied to the assessee under Section 79 of the Income-tax Act because of the change in its shareholding even where such change was effected with a view to avoiding or reducing any liability to tax ? (c) Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal to hold that the change in the shareholding of the assessee-company was effected with a view to avoiding or reducing any liability to tax within the meaning of Section 79 of the Income-tax Act, 1961 ? (d) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in rejecting the assessee's claim for set off of the loss for the year 1976 against the profits of the year 1977 though there was no change in the shareholding within the meaning of Section 79 of the Income-tax Act after January 10, 1976 ?"
(2.) The facts relating to this case, shortly, are as follows : The assessment year in question is 1978-79 for which the relevant year of account is the year ending on December 31.
(3.) The assessee is a resident-company. It owns a tea garden and is engaged in the business of cultivation, manufacture and sale of tea. The assessee-company keeps accounts on mercantile basis. In the course of the assessment proceedings for the assessment year 1978-79, the Income-tax Officer noticed that there had been a change in the shareholding structure of the assessee-company. This change occurred on January 10, 1976, when more than 51 per cent, of the shares of the assessee-company, which were previously held by the Guha Roy Group stood transferred to the Mehra Group. The assessee-company had suffered substantial business losses when the company was held by the said Guha Roy Group. While making the assessment for the assessment year 1978-79, the Income-tax Officer intended to invoke the provisions of Section 79 of the Income-tax Act, 1961, and to deprive the assessee-company of the benefit of setting off in the current year, the business losses carried forward from the earlier years.;