Hire purchase charges excluded from interest-tax where agreement was found to be a hire purchase arrangement on facts

A hire purchase agreement was found on the facts, and the High Court accepted the Appellate Tribunal's factual finding that the Revenue had not shown the hirer to be the purchaser or the assessee to be merely a financier. On that basis, the agreement was treated as hire purchase in substance, and no interference was warranted with the finding of fact. The hire purchase finance charges and service charges were not treated as chargeable interest under section 2(7) of the Interest-tax Act, so they were excluded from interest-tax assessment.

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Issues: Whether the agreement between the parties was a hire purchase agreement and, if so, whether the hire purchase finance charges and service charges constituted chargeable interest under section 2(7) of the Interest-tax Act.

Analysis: The agreement was examined in detail by the Appellate Tribunal, which recorded a factual finding that it was a hire purchase agreement. The Court accepted that the Revenue had not shown that the hirer was the purchaser and that the assessee was merely a financier. The finding was treated as one of fact and no interference was warranted.

Conclusion: The question was answered in the affirmative, against the Revenue and in favour of the assessee. The hire purchase finance charges and service charges were not held to be chargeable interest for the purpose of interest-tax assessment.

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