PCIT Vs Canara Bank Securities Ltd (Supreme Court of India)
Factual Background
The respondent-assessee, Canara Bank Securities Ltd, is a private limited company. For assessment year 2008-09, the assessee filed its return of income, wherein the issue before the Assessing Officer (AO) pertained to income generated out of the assessee’s investment funds placed in fixed deposits. The assessee was previously engaged in the business of primary dealing of securities and was in the process of switching over to a new business of stock broking. The assessee had liquidated its investment from the past business and parked the surplus funds in fixed deposits awaiting the commencement of activities in the new business. The assessee claimed the interest income earned from these fixed deposits as income arising out of its business activity. On 08.10.2010, the AO passed an assessment order accepting the assessee’s stand that such interest income arose out of its business activity.
Read HC Judgment in this case: Bombay HC Dismisses Section 263 Revision on Plausible View of FD Interest Income
Proceedings Before the High Court
The Commissioner of Income Tax (CIT) took the assessment order dated 08.10.2010 into suo-moto revision under Section 263 of the Income Tax Act (“the Act”). The CIT expressed the opinion that the AO had not undertaken proper inquiries and had not examined whether the interest income was to be assessed under the head “Income from business” or “Income from other sources”. Holding the assessment order to be erroneous and prejudicial to the interest of the revenue, the CIT passed an order directing the AO to complete the assessment by examining the issue afresh.
