TaxTMI 
TaxTMI 
TaxTMI 
1977 (1) TMI 24
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....and that such income was liable to be included in the assessee's total income in full and not to the extent of 40% only ? " The facts of the case are as follows. The assessee is a private limited company owning tea gardens. The assessment years involved are 1966-67, 1967-68 and 1969-70. In the assessment year 1966-67, the assessee had taken a loan from the Allahabad Bank against hypothecation of tea crops. The amount of interest paid by the assessee during the assessment year 1966-67 amounted to Rs. 18,266. It had also advanced loans to three sister concerns, namely, (1) Bharat Wood Works (P.) Ltd., (2) Tarajan Tea Co. (P.) Ltd. and(3) Assam Forest Products (P.) Ltd. In respect of the loan advanced by the assessee to these companies it re....
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....ncome of the assessee. The income from interest on loans advanced to the sister companies was computed at Rs. 31,361 after deducting the sum of Rs. 9,000 from the total amount of interest of Rs. 40,361 received by the assessee. This amount was included in the income of the assessee in full as income from other sources. Here again, the claim of the assesee that this income also would be covered by rule 8 of the Income-tax Rules, 1962, and only 40% of the same could be included in its total income was rejected. In the assessment year 1969-70 a sum of Rs. 10,000 was disallowed out of the interest paid to the Allahabad Bank in respect of the loans advanced to sister concerns of the assessee while computing the income from tea business. 40% of....
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....ibunal against all the orders of the Appellate Assistant Commissioner for the aforesaid three assessment years. All these appeals were disposed of by the Tribunal by a consolidated order. It was claimed on behalf of the assessee that rule 8 of the Income-tax Rules would apply to the entire business income of the assessee. It was urged that the only business of the assessee was tea business and interest was received in the course of the business. The Tribunal held that the receipt of interest and the tea business was one integrated business. The Tribunal, therefore, held that the entire loan taken against the hypothecation of the tea crop from the Allahabad Bank was loan for the purpose of tea business and the entire interest paid on the l....
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....India, make rules for the whole or any part of India for carrying out the purposes of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters--.......... (b) the manner in which and the procedure by which the income shall be arrived at in the case of-- (i) income derived in part from agriculture and in part from business............" Rules 7 and 8 are rules framed under section 295(2)(b)(i) of the Act. In this case we are concerned with rule 8, which reads as follows : " 8. Income from the manufacture of tea.--(1) Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income....
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....e it is found that certain amounts were borrowed by the assessee from the Allahabad Bank by hypothecation of tea crop. The assessee had to pay interest to the bank on these amounts. The interest paid to the bank has been allowed as a deduction allowable under the provisions of the Act. No doubt, the money that was taken by the assessee by hypothecation of tea crop cannot but be held to be in the course of tea business. But the same thing cannot be said in respect of the interest received from the three sister concerns. Out of the sum that was taken on loan from the bank, a portion was advanced to these three sister concerns as loan and the assessee received interest thereon. This advancing of loan to the three sister concerns from the facts....
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.... the assessee. Mr. R. L. Jain, the learned counsel appearing for the assessee, has submitted that the Tribunal has observed that receipt of interest and tea business was one integrated business and if that is the finding of fact arrived at by the Tribunal, then it erred in law and logic in holding that this interest had no connection with the integrated business. There is, however, a fallacy in this submission. The assessee took loan from the Allahabad Bank by hypothecating the tea crop and some interest was paid to the bank for this loan. This interest was charged to tax in full by the Income-tax Officer, and this question was considered by the Tribunal. While considering this aspect of the matter the Tribunal found : " There is common....