IT dept rejects PB fintech subsidiary’s Rs 86 Cr expense claim, issues Rs 9 Cr demand notice
The Income Tax Department issued a demand notice, seeking Rs 9.32 crore. However, PB Fintech contends that this demand contradicts the assessment order, which specifies no outstanding tax liability.
The Income Tax Department has disallowed Rs 85.6 crore in expenses claimed by PB Fintech’s subsidiary, Paisabazaar Marketing and Consulting Pvt. Ltd., for fiscal 2023-24.
The Assistant Commissioner of Income Tax issued the order on March 31 stating that the company failed to substantiate the expenses.
“During the assessment proceedings, the Company had duly provided all the necessary documents/information against these expenses, however AO has taken a contrary view and disallowed the same,” PB Fintech disclosed in an exchange filing.
The Income Tax Department also issued a demand notice, seeking Rs 9.32 crore. However, PB Fintech contends that this demand contradicts the assessment order, which specifies no outstanding tax liability. “The company shall file the necessary rectification application in this regard under Section 154 of the Act,” it said.
Despite the disallowance, the company emphasised that the decision does not create additional tax liabilities, as it can set off the amount against carried-forward losses. “Disallowance of Rs 85.60 crore will not result in any tax payable for the company since the amount of disallowance is allowed to be set off against the brought forward losses available with the company,” the filing stated.
In the context of income tax, "brought forward" or "carried-forward" losses refer to business losses that a company has incurred in previous financial years and has not yet offset against its income. Tax laws often allow businesses to carry these losses forward to future years, enabling them to reduce taxable income in profitable periods by offsetting past losses.
For example, If a company purchases machinery and, due to insufficient profits, cannot fully absorb the depreciation expense in the current year, the unabsorbed depreciation can be carried forward indefinitely and adjusted against future income.
In India, business losses can typically be carried forward for up to eight assessment years.