Change in Status of an Entity in Accordance with Foreign Law Does Not Impact the Availing of Benefits under the Indian Income Tax Act, 1961

The present article is of importance to international readers as it provides an analysis of a recent ruling of the Bombay High Court (the High Court), which held that the reorganization of an entity into another entity in accordance with foreign law’s would not impact the benefits that can be availed under the Indian Tax Laws. This case, Aberdeen Asia Pacific, deals with this in the context of the set-off and carry-forward of losses by “series” or funds following the change in structure of an entity from a trust to a limited liability company (LLC). The High Court has permitted the assessee to carry forward losses, despite the change in structure of the assessee, i.e. conversion of the trust to an LLC, and subsequently has annulled the assessment orders passed by the Deputy Commissioner of Income Tax disallowing the carry-forward of the losses.