TaxTMI 
TaxTMI 
2015 (8) TMI 849
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....actions is inthe nature of loan and hence chargeable to interest tax ignoring the CBDT Circular No. 760 dated 13.1.1998 as well as the test laid down by the Supreme Court extracted thereon for determining whether a transaction is a loan transaction or not ? and 2. Whether the Appellate Tribunal was right in law in holding that the real intention of parties in all cases of purchase and hire back transactions is only to obtain finance and not to hire the asset?" 2. The assessee's contention that the sale on Hire Back transaction should be treated on par with regular Hire Purchase transaction and therefore, the interest on loans and advances are not chargeable to tax under the Interest Tax Act was rejected by the assessing officer an....
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....purchase and hire back transactions involving second hand assets come within the meaning of term 'interest' defined under Sec. 2 (7) of the Interest Tax Act." 4. The findings rendered by the Commissioner (Appeals) at paragraph 8 of his order dated 5.12.2002 is as follows : "8. I have carefully considered the submissions of the learned counsel for the appellant and perused the requisite material available on record. Admittedly, the hire purchase / lease transactions in question involved old/second hand assets, inasmuch as these transactions were entered with the parties who were already in possession of the asseets which were the subject matter of the contracts. The assets were pre-existing with the customers and therefore the ....
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....under the purview of interest-tax. He submitted that no evidence has been produced before the Tribunal or even before the lower authorities to prove that such transactions involved bonafide sales and ultimately amount to hire purchase transactions only." 8. The Tribunal, taking note of the decision of the Supreme Court as well as the CBDT Circular came to hold that, in the light of the decision of the Supreme Court, more particularly paragraph 5 of the CBDT Circular, the transaction in each case should be examined for the purpose of charging interest tax and such of those transactions which are not in the nature of hire purchase should be subject to levy of interest under the Interest Tax Act. 9. We find that the reason given by the T....
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....ods, as evidenced by documents. But no agreements or documents have been produced before us for such verifications. This issue was earlier decided by the 'A' Bench of the Chennai Tribunal in the case of the assessee in Int. TA Nos. 57, 58, 134 to 136/Mds/1999 and 57/Mds/2003 vide order dated 25.7.2005, whereby vide para 8 it was held as under :- "8. We have considered the rival submissions carefully and have gone through the relevant material on record as well as the decisions cited by the parties. We agree with the contention of the ld. DR. As observed by the Special Bench of the Tribunal in the case of Mideast Portfolio Management Ltd. v. DCIT (supra), normally court must proceed on the basis of the declared intention of the pa....
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....n the Interest-tax Act. In case of old assets what the recipient is looking for is finance and agreement for obtaining such finance may be framed in any manner, but the real intention is only to obtain finance and not to hire the asset. Keeping in view all these circumstances, we set aside the order of the ld. CIT (Appeals) and decide this issue in favour of the Revenue. 5. We would like to note that in the absence of any documentary evidence, the only conclusion which can be reached in the case of old assets is that such transactions were entered into for the purpose of finance only. For example, if somebody is alreay owning a car and if he goes to the financier for obtaining finance, then his intention is not to sell the car, but to ob....