TaxTMI 
TaxTMI 
2016 (5) TMI 921
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....ctively as against Rs. 190/- and Rs. 2,330/- respectively shown by the assessee. The assessee filed appeal before the Ld. CIT(A), who allowed the appeals of the assessee. Against the order of the CIT(A), the department preferred appeal before the ITAT who restored the matter to the file of the AO for passing a fresh order after giving opportunity to the assessee. The AO after examining the matter afresh taking into consideration the documents filed by the assessee being agreements entered into with the customers for financing the purchase of vehicle and considering the claim of the assessee that the interest received by it was only part of hire charges, held that the assessee was engaged in financing business only, advancing loan on interest and its transactions could not be termed as hire purchase. The AO held as follows: "It is also noted that the assessee company used to obtain from the customers blank signed documents. Even terms and conditions for so called hire are also signed blank. On those documents except the signatures of the hirers / purchasers, all other columns are blank. These factual position shows that various documents were executed by the assessee company just....
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....ench on similar issue in the case of M/s Automobile & General Finance Ltd. and M/s Ashoka Auto finance and leasing Ltd. In pursuance to the above direction of the ITAT, the matter was reconsidered by the Ld. CIT(A), who thereafter upheld the order of the AO by holding as follows : 8.1 "I have considered the facts of the case as brought before me in the written submissions filed by the Ld. AR along with various documents in form of copies of hirepurchase agreements and registration documents of the vehicles and I have also considered the information given by the Ld. AR in the last hearing held on 29.11.2013 with respect to the purchase of vehicle. I have already examined the decision of Hon'ble ITAT, Agra in the case of M/s Automobile and General Finance Company (P) Ltd. (supra) as well as in the case of M/s Ashoka Finance & Leasing Ltd. (supra) along with another decision of Hon'ble ITAT, Agra in the case of M/s S.E. Investment Ltd. (supra). ON examining the facts of the present case under appeal, I find that the facts of the case of the present appeal are similar to the facts of M/s S.E. Investment Ltd. and not to the facts of former two decisions of Hon'ble ITAT Agra because i....
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....d hirers and the sale invoices had also been issued in the name of the hirers before they entered in the so called hire-purchase agreements with the assessee (appellant) and hence, the so called hire-purchase agreements produced by the Ld. AR are nothing but a device created for ensuring the recovery of loan/advances given to customers on the security of these vehicles along with interest thereon. Exactly similar facts were found in case of M/s S.E. Investment Ltd. and after examining these facts, the Hon'ble ITAT, Agra has held the transaction as being finance transaction and hire charges shown by the assessee has been taxed under the Interest Tax Act. In the case of M/s S.E. Investments Ltd., despite that company getting registered with Reserve Bank of India as a hire purchase company, the Hon'ble ITAT Agra after considering the facts of that case and examining the real intention behind executing the hire-purchase agreements, held that it is noted that merely because it is registered so with RBI, the nature of transaction would not alter. In the present case under appeal, the assessee (appellant) company is not even registered as hire-purchase company but it is registered as Non-....
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.... 5. The only issue to be decided in the present appeals is whether the assessee is liable to pay interest tax as per the Interest Tax Act. Alternatively the issue to be decided is whether the transaction entered into by the assessee is in the nature of a Hire Purchase transaction not amenable to Interest Tax or a financing transaction, which is amenable to Interest Tax. For determining the nature of the transaction whether Hire Purchase & Financing guidelines have been prescribed by the CBDT in its Circular No. 760 dated 13.01.1998 which is reproduced hereinunder: " 2. The Board have since considered the issue and are advised that in the case of transactions which are, in substance, in the nature of hire purchase, the receipts of hire charges would not be in the nature of interest. On the other hand, if the transactions are in substance in the nature of financing transactions, the hire charges should be treated as interest subject to interest-tax. 3. As to what constitutes a transaction in the nature of hire-purchase, the assessing officer should consider the issue on merits taking into account, interpreted alia, the following facts and circumstances:- (i) The terms of the....
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....er. The agreement, ignoring variations of detail, broadly takes one or the other of two forms : (1) when the owner is unwilling to look to the purchaser of goods to recover the balance of the price, and the financier who pays the balance undertakes the recovery. In this form, goods are purchased by the financier from the dealer, and the financier obtains a hire-purchase agreement from the customer under which the latter becomes the owner of the goods on payment of all the instalments of the stipulated hire and exercising his option to purchase the goods on payment of a nominal price. The decision of this Court in K. L. Johar & Company v. Deputy Commercial Tax Officer(1) dealt with a transaction of this character. (2) In the other form of transactions, goods are purchased by the customer, who in consideration of executing a hirepurchase agreement and allied documents remains in possession of the goods, subject to liability to pay the amount paid by the financier on his behalf to the owner or dealer, and the financier obtains a hire-purchase agreement which gives him a licence to seize the goods in the event of failure by the customer to abide by the conditions of the hire-purchase a....
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.... goods and with a view to finance his purchase he enters into an arrangement which is in the form of a hire purchase agreement with the financier, but in substance evidences a loan transaction, subject to a hiring agreement under which the lender is given the license to seize the goods." The Hire Purchase Act, 1972 defines Hire Purchase agreement as under : " Hire-purchase agreement' means an agreement under which goods are let on hire and under which the hirer has an option to purchase them in accordance with the terms of the agreement and includes an agreement under which - Possession of goods is delivered by the owner thereof to a person on condition that such person pays the agreed amount in periodical instalments, and the property in the goods is to pass to such person on the payment of the last of such instalments, and , such person has a right to terminate the agreement at any time before the property so passes. " What derives from the above is that the distinguishing features of a Hire Purchase Transactions are: 1) The real owner of the goods is the financier who purchases the goods in the first place. 2) The Financier thereafter enters into an agreement w....
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....rer under this agreement, but not before, the hiring shll come to an end and the Vehicle shall at the option of the Hirer become his absolute property. But the Hirer shall have the option of purchasing the Vehicle at any earlier time during the currency of this agreement by paying in one lump sum the balance of the total h ire then remaining unpaid with all other sums then due by the Hirer to the Owners under this agreement. Upon such prepayment the Hirer shall be allowed such rebate as the Owners, may judge to be fair and reasonable. Notwithstanding anything contained herein, the Hirer shall not be bound to exercise the option to purchase. But if he so exercise the option, he shall do it either at any time during the currency of this agreement or as stipulated after full payment of all the dues. The agreements also states at point no. 9 & 20 that the hirer holds the vehicle as a trustee and bailee of the owners as follows: 9. The Hirer further agrees and affirms that for the purposes of this contract the word "Owner" used in the Registration Certification of the Vehicle means only a temporary possessor of the Vehicle and that the Hirer possesses the Vehicle in trust for t....