INCOME TAX ACT, 1961

Section 28(i)

Business income - Chargeability - Assessee engaged in business of providing housing finance - Loss incurred on pre-termination of securitization agreement with bank, whether to be allowed as revenue loss

Assessee was engaged in business of providing housing finances. AO disallowed loss of Rs. 8,61,13,095 arising due to payments made by assessee towards premature termination of securitization agreement with bank. Tribunal also recorded in its order that no evidences were brought on record by assessee to substantiate that income in respect of securitization of loan was offered to tax by assessee in relevant years in which securitization agreement was entered into by assessee. The Tribunal also recorded that no agreement entered into by assessee with Axis Bank for pre-closure of securitization has been brought on record by assessee. Held: Assessee prima facie demonstrated that it included income on securitization of housing loans in its operating income in year when securitization agreement was entered. However, since complete documents were not filed by assessee as it did not file profit & loss account nor balance sheets, it could not be said conclusively that entire income arising from securitization of housing loan suffered taxation in year of securitization of housing loan. Transactions for entering into securitization agreement and its foreclosure are undoubtedly transactions in revenue field and by no stretch of imagination can be taken to be transactions on capital field. Matter was remanded to AO and if entire income on securitization of housing loan was suffered taxation in year in which securitization of loan portfolio took place, then in that eventuality payments made by assessee to bank at the time of pre-termination of securitization agreement so far as interest for unexpired period of securitization owing to pre-termination was to be allowed as loss/deduction on revenue account.

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2011-12

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