Taxability of hire-charges: treat receipts as interest only when transactions are in substance financing, not genuine hire-purchase. Hire-purchase receipts are not automatically interest under the Interest-tax Act, 1974; Assessing Officers must distinguish genuine hire-purchase arrangements from transactions that are in substance financing. Where the arrangement functions as security for repayment of a loan-e.g., the hirer is the real purchaser but does not pay the full price and the hire-purchase company advances purchase money-the hire-charges should be treated as interest and subject to interest-tax. Examinations should consider agreement terms, relationship among parties, and manifested intention, applying the Sundaram Finance tests.
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Provisions expressly mentioned in the judgment/order text.
Taxability of hire-charges: treat receipts as interest only when transactions are in substance financing, not genuine hire-purchase.
Hire-purchase receipts are not automatically interest under the Interest-tax Act, 1974; Assessing Officers must distinguish genuine hire-purchase arrangements from transactions that are in substance financing. Where the arrangement functions as security for repayment of a loan-e.g., the hirer is the real purchaser but does not pay the full price and the hire-purchase company advances purchase money-the hire-charges should be treated as interest and subject to interest-tax. Examinations should consider agreement terms, relationship among parties, and manifested intention, applying the Sundaram Finance tests.
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