TaxTMI 
TaxTMI 
2018 (2) TMI 741
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 263 when the order passed by the AO u/s 143(3) wherein the interest income was not excluded for the purpose of rule 8 was not found to be erroneous nor any such finding is recorded and no reasons has been give for not accepting the submissions of the assessee. 3. For that the Ld. Pr CIT erred in exercising the jurisdiction u/s. 263 simply because the conclusion arrived at by the AO and the submissions made before him by the assessee were not acceptable to him when it was demonstrated that he AO has correctly assessed the income by applying rule 8. 4. For that the Ld. Pr CIT erred in setting aside the assessment order as a whole and further directing the AO to exclude interest income from the composite income for the purpose of applying Rule 8 of the Income Tax Rule when the fixed deposits on which the interest was earned was made from the cash credit account and deposited to the same account on maturity, the FDs were made for higher sanction of cash credit facility which fact has not been disputed and therefore interest income was to be excluded from the interest paid resulting that the same cannot be separately taken. 5. For that on the facts and circumstances of the ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ew of composite income for the purpose of applying Rule 8. The assessment order is therefore set side with the direction to exclude interest income for applying Rule 8. After conducting the inquiries & verification as directed above, the AO should pass a speaking order, providing adequate opportunity of being heard to the assessee. The impugned order u/s. 143(3) 31.12.2014 is accordingly, set aside and assessment should be done as per above directions." Aggrieve by this, the assessee has come up in appeal before us. 5. Ld. AR before us submitted that the interest income was earned on Fixed Deposit (FD) which was made out of cash credit account. On maturity of FD the amount was transferred to the cash credit account only. As such, FDs were made in order to get the higher cash credit limit from the banker. It was the requirement of the bank to maintain the FD in order to enjoy the benefit of cash credit facilities. Thus, interest income shown by the assessee was directly linked with the agricultural operation of the assessee. Thus, the impugned interest income should be treated as composite income as per the provision of Rule 8 of the IT Rules, 1962. Ld AR for the assessee also s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vation of Pr. CIT u/s. 263 of the Act. He vehemently relied on the order of Ld. Pr. CIT. In rejoinder Ld. AR submitted that all the details were duly filed by assessee before Ld. Pr. CIT vide letter dated 23.02.2017 but Ld. Pr.CIT without considering the same and pointing out any defect has held order of AO as erroneous in so far as prejudicial to the interest of revenue. 6. We have heard the rival submissions of both the parties. We have also examined the orders passed by the Authorities Below and the judgements / orders cited by the representatives of both the parties. In the instant case the assessee has shown interest income of Rs.3,09,81,406/- on which the tax was computed in the manner as provided under Rule 8 of the IT Rules, 1962. However the Ld. Pr CIT was of the view that this interest income is outside the purview of composite income as specified under Rule 8 of IT Rules. But AO has allowed the same. Thus, there was an error committed by the Assessing Officer in taxing the interest income in the manner as specified under Rule 8 of IT Rules, 1962 which is causing prejudice to the interest of revenue. 6.1 On perusal of order of Ld. Pr CIT we note that Ld. Pr. CIT has he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....u/s 263 of the Act has not pointed out any defect in the submission filed by assessee before him during proceedings. The assessee before Ld. Pr. CIT has made the submission that amount of interest income is directly linked with the agricultural operation of assessee. Therefore, the same has to be included in the composite income as specified under Rule 8 of IT Rules, 1962. We find force in the advanced argument placed by Ld. AR for the assessee as the impugned interest income is directly linked with the agricultural operation of assessee. In holding so, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of Eveready Industries India Ltd. v. CIT & Anr. reported (2010) 323 it 312 (Cal) wherein the Hon'ble court has held:- 39. As we have already narrated above that the assessee in this case procured loans from banks and other financial institutions for its tea growing and manufacturing business and part of such funds remain temporarily unutilized. The assessee, instead of keeping the amount idle, invested the surplus funds in short-term interest bearing fixed deposits and earned interest. The main activity of the assessee is growin....