Harsolia Finance Ltd.,, Himatnagar vs Department Of Income Tax

सुनवाई क तार ख/ Date of Hea ring : 07/05/2015 घोषणा क तार ख /Date of P ronouncement: 8/05/2015

आदेश /O R D E R

PER: S.S. GODARA, JUDICIAL MEMBER

This Revenue's appeal for A.Y.1996-97, arises from order of the CIT(A)-VIII, Ahmedabad dated 14.10.2011 passed in case no.CIT(A)-VIII/DCIT/S.K. Cir/201/10-11, in proceedings u/s.8(2) & 10(a) r.w.s. of the Interest Tax Act in short 'the Act'.

2. The Revenue's sole substantive ground reads as under:

"[1] The ld. CIT(A) has erred in law and on facts in recording a finding that receipt of hire purchase interest of Rs.19,18,060/- do not constitute interest chargeable to tax under Interest Tax Act."

The Revenue reiterates its abovestated pleadings and strongly argues in favour of the Assessing Officer's action treating the impugned receipts as interest under the Interest Tax Act. The Interest Tax Appeal No.1/Ahd/2012 Harsolia Finance Ltd.

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assessee has not come present despite service of notice. It is proceeded ex-parte.

3. The assessee-company is an NBFC engaged in the business of leasing, financing and giving assets on hire purchase basis. The Assessing Officer had completed a regular assessment in its case on 3.8.2010 treating the very interest chargeable on higher purchase as the one falling u/s. 2(7) of the Interest Tax Act. The assessee preferred an appeal. The CIT(A) in its order reversed the Assessing Officer's findings invoking the provisions of the Interest Tax Act. The department came in appeal. A co-ordinate bench of the tribunal in its order dated 28.8.2009 restored the issue back to the file of Assessing Officer to examine genuineness of the higher purchase transactions as to whether the same amounted to financing transactions or not attracting provisions of the Interest Tax Law.

4. The Assessing Officer took up consequential proceedings. The assessee relied on Board's Circular No.760 dated 13.1.1998. It would strongly opposed the Assessing Officer proposal for invoking provisions of the Act. The Assessing Officer seems to have been heavily swayed by his earlier findings. We find from his order dated 3.8.2010 passed in the second round that the assessee had given on lease/finance its capital assets to higher purchase basis to its customer along with transfer of possession thereof. It had treated income arising therefrom amounting to Rs.19,18,060/- as higher purchase interest in the balance sheet. The Assessing Officer Interest Tax Appeal No.1/Ahd/2012 Harsolia Finance Ltd.

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observed that the same were in the nature of finance charges attracting interest tax levy. He held that the assessee had failed to prove the nature of its transactions as higher purchase transactions and treat the impugned income as interest as per section 2(7) of the Act.

5. The assessee preferred an appeal. The CIT(A) has accepted its contention as under:

"6. I have carefully considered the submission made by the appellant and I have also gone through the ITAT's decision in the relevant case laws submitted by the appellant and the Board's circular No.760 dated 13/01/1998. While making the reassessment, in view of the ITAT's direction the A.O has again taken the hire purchase charges as chargeable interest. In the assessment order, no new facts have been brought by the A.O. He has simply reproduced the facts and the reason of addition of the original assessment passed on 25/03/2004 where the A.O in para No. 3.3 of the assessment order has discussed the reason for additions.

The A.O has merely mentioned that the transactions are in nature of Finance transactions without analyzing the terms of the hire purchase agreement. While deciding the issue, the CIT(A)-IX, Ahmedabad, vide appeal No. CIT(A)-IX/ACIT/20/HMT/04-05 dated 8/10/2004 he has held as under-

(a) Possession of goods is delivered on the condition that such person pays the agreed amount in periodical instalments.

(b) Property in the goods does not pass till all the instalments are paid and after that terminal value of Rs. 1000 is paid further.

(c ) Such person has a right to terminate the agreement at any time before the right to property passes to him.

(d) Even on the registration document of motor vehicles it is clearly mentioned that this is subject to hire purchase agreement with the appellant.

(e) Such person is under obligation to transfer the property in the name of the appellant if there is any breach of conditions of the agreement.

Interest Tax Appeal No.1/Ahd/2012 Harsolia Finance Ltd.

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(f) Hirer shall be at liberty to buy the vehicle or goods during the currency of hire purchase agreement by paying all the amounts.

(g) Hirer has to use goods alongwith the limitations placed by various clauses of the agreement.

(h) Appellant is also entitled to repossess the goods in case of any breach of conditions of the agreement. The facts and the conditions have not changed in the reassessment order of the A. O as has already been discussed that no new facts or evidences have been discussed in the assessment order to prove that this was chargeable interest and not hire purchase transactions. In view of the above discussion and the Board's circular and also the decision of the Hyderabad Bench of ITAT in the case of N .K. leasing and Construction Pvt. Ltd. vs. DCIT reported in 79 ITD 658, it is held that hire charges will not fall under the head chargeable interest. Therefore, the addition of Rs.19,18,060/- is deleted and the appellant gets the relief."

6. We have heard the Revenue and gone through the relevant findings. The present is second round of litigation between the parties about chargeability of higher purchase amount of Rs.19,18,060/- under the Interest Tax Act. It is made clear that the Revenue-appellant has not filed any evidence before us so as to controvert the CIT(A) findings treating the assessee's higher purchase transactions as genuine. He also quotes Board's Circular and decision of the ITAT Hyderabad Bench (supra) holding that Interest Tax law does not apply in case of higher purchase transactions. It has come on record that the assessee has delivered possession of its assets given on finance/lease. It is also engaged in the same very business. We take cue from the co-ordinate bench decision in these circumstances and hold that the assessee's higher purchase transactions are not in the nature of purely finance transactions so as to invoke provisions of the Interest Tax Act. The Interest Tax Appeal No.1/Ahd/2012 Harsolia Finance Ltd.

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CIT(A) findings under challenge are affirmed. The Revenue's ground fails.

7. The Revenue's appeal is dismissed.

Order pronounced in the Court on this day, the Friday 8th May, 2015 at Ahmedabad.

Sd/- Sd/- (N.S. SAINI) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 08/05/2015 Prabhat Kr. Kesarwani, Sr. P.S. आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आयु त / Concerned CIT

4. आयकर आयु त(अपील) / The CIT(A)-III, Ahmedabad

5. वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

आदेशानुस ार / BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad