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of <h1>Taxability of Hire Charges in Hire-Purchase Transactions Clarified Under Interest-tax Act, 1974; Distinguishing True vs. Financing Arrangements.</h1> The circular addresses the taxability of hire charges in hire-purchase transactions under the Interest-tax Act, 1974. It clarifies that hire charges should be treated as interest and subject to tax if the transaction is essentially a financing arrangement. The circular advises Assessing Officers to distinguish between true hire-purchase transactions and financing transactions disguised as hire-purchase. It provides criteria for this determination, including the terms of the agreement and the intention of the parties involved. The guidance references a Supreme Court decision to support the distinction and advises careful examination of each transaction's nature.
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