Hire-purchase receipts from vehicle transactions were not treated as chargeable interest under the Interest-tax Act.

Hire-purchase receipts from vehicle transactions were held outside the Interest-tax Act because the assessee bought the vehicles in its own name, retained ownership, and hired them to customers under hire-purchase agreements. No loan or advance was made to the customers, and they were not parties to the purchase transaction. Applying sections 2(5), 2(7) and 5, the court treated the receipts as arising from a hire-purchase arrangement rather than a financing arrangement. The right of repossession on default reinforced that characterisation, so the receipts were not chargeable to interest-tax and the revenue's challenge failed.

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Issues: Whether amounts earned by the assessee under hire-purchase transactions of vehicles were liable to interest-tax as chargeable interest under the Interest-tax Act, 1974.

Analysis: The assessee purchased the vehicles in its own name and thereafter hired them out to customers under hire-purchase agreements. The customers were not parties to the purchase transaction and no loan or advance was made to them. The statutory scheme of section 5, read with the definitions of "chargeable interest" in section 2(5) and "interest" in section 2(7), applies to interest on loans and advances and other specified interest receipts. On the admitted facts, the transaction was found to be a hire-purchase arrangement and not a financing arrangement, particularly because the assessee retained ownership and had a right of repossession on default.

Conclusion: The hire-purchase receipts were not chargeable to interest-tax and the revenue's challenge failed.

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