DCIT, CIRCLE - 12(1), KOLKATA , KOLKATA vs. M/S. AVIS TIE-UP PVT. LTD., , KOLKATA

The assessee is a non-banking financial company and engaged in the business of granting loans and advances, investment in shares, securities, derivatives, mutual funds. The assessee company filed its return of income on 28.09.2013 declaring total income of Rs.3,43,82,994/- for the Assessment Year 2013-14. The Assessing Officer competed assessment u/s 143(3) determining the M/s. Avis Tie-up Pvt. Ltd Assessment Year: 2013-14 total income of the assessee at Rs.4,41,71,596/-, inter alia, disallowing set off of loss on future and options on the grounds that Explanation to Section 73 of the Act applies.

On appeal, the ld. CIT(A) deleted the addition on the ground that the gross total income of the assessee company assessed consisting of mainly income chargeable under the head ‘interest on securities’, ‘income from house property’, ‘capital gains’ and ‘income from other sources’ and that these are more than 50% of the gross total income. Hence he held that this falls under the exceptions curved out to Explanation 73 of the Act.

Aggrieved, the Revenue is in appeal before us. The assessee has filed a cross-objection on disallowance u/s 14A r.w.r. 8D of the Income Tax Rules, 1962. 4.1 After hearing rival submissions, we find no infirmity in the order of the ld. CIT(A). The gross total income of the assessee is Rs.3,43,82,994/-. This gross total income comprises as follows: (i) Income from house property Rs.6,22,706/- (ii) Income from business Rs.1,63,93,415/- (iii) Capital gains Rs.1,85,61,252/- (iv) Income from other sources Rs.63,416/- 4.2 A perusal of the same demonstrates that more than 50% of the gross total income of the assessee consists of ‘income from house property’ and ‘income from capital gains’ and ‘income from other sources’. Hence, the issue is covered by the exception curved out to Explanation to section 73 of the Act. Even otherwise, as noted by the Assessing Officer, the assessee is a NBFC and is engaged in the activity of granting loans and advances etc. The interest received M/s. Avis Tie-up Pvt. Ltd Assessment Year: 2013-14 on loans and advances of Rs.1,63,93,415/- which is 41.18% from the gross income. The company’s principal business is granting loans and advances and hence this case is covered by the exceptions curved out in Explanation to Section 73 of the Act. Thus, on this ground also, the order of the ld. CIT(A) has to be upheld. Hence, we dismiss the appeal of the Revenue.

We now take up C.O No.30/Kol/2019. The cross-objection of the disallowance made u/s 14A r.w.r. 8D of the I.T. Rules, 1962. The case of the assessee is that satisfaction as required in law, was not recorded by the Assessing Officer prior to invoking Rule 8D and hence the disallowance is bad in law. We find that the Assessing Officer requested the assessee for details of expenditure incurred in relation to tax exempt income earned by the assessee and the assessee had filed detailed written submissions in reply. After going through these detailed submissions, the Assessing Officer rejected the same. Hence, in our view, this rejection of submissions is substantial compliance of the requirement of recording satisfaction. There is no specific form prescribed to record satisfactions. Hence, we reject this ground of the assessee. Hence, this C.O of the assessee is dismissed.

In the result, this appeal of the Revenue and the C.O of the assessee are dismissed. Kolkata, the 15th March, 2019.