AI Drafter 
TaxTMI 
TaxTMI 
2004 (11) TMI 38
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....r 10, 1993, declaring chargeable interest at nil. The assessee claimed that the hire-purchase charges were not covered under the provisions of section 4(2) of the Act as the same pertained to arrangements for use of finance. It was contended that the charges could not termed as' interest as in such arrangements, no principal sum is advanced or lent by the hire-purchase company to the hirer of the vehicle whereas the definition of interest under the Act envisages giving of loan and advance. Reliance for this purpose was placed on the instructions of the Central Board of Direct Taxes contained in Circular No. 1425-F. No. 275/9/80-IT(B) dated November 16, 1981. For the assessment year 1993-94, the return was filed on December 23, 1993, declaring net chargeable interest at nil. In the statement of computation of chargeable interest the following note was given: "The assessee derives income from hire-purchase charges, and the same is not covered within the definition of chargeable interest under the Interest-tax Act." In part III of the return, under the head "Other sums not included in chargeable interest and claimed to be not taxable," the following amounts had been mentioned....
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....culating interest chargeable on the principal amount. He further observed that the hire-purchase agreement and the endorsement in the registration book that the vehicle was financed by the assessee, are only to secure the recovery of the money advanced so that the customers do not transfer the vehicles without getting "no dues clearance" from the assessee-company. Thus, the Commissioner of Interest-tax (Appeals) held that the hire-purchase transactions, in substance, were arrangements for lending money and that the hire charges earned in such transactions were in the nature of interest within the meaning of section 2(7) of the Act. Accordingly, he dismissed the appeal. The appeal for the assessment year 1993-94 was disposed of vide order dated August 9, 1996. The Commissioner of Interest-tax (Appeals) on the basis of his findings recorded in the assessment year 1992-93 upheld the action of the Assessing Officer in assessing hire-purchase charges and interest earned amounting to Rs. 8,94,859 and Rs. 2,267, respectively, as chargeable interest. He, however, deleted the addition of Rs. 7,178 on account of interest on Kisan Vikas Patra included in the chargeable interest. The appeal....
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....f interest stated to be other than hire-charges. Subsequently, it turned away from its earlier disclosure by filing a revised return claiming the total amount as hire charges beyond the scope of the Act including a sum which was earlier stated to be other than hire charges. This claim of the assessee also appears to be violative of the provisions of the Act. Under these circumstances, we are satisfied that it would be in the interest of justice to set aside the impugned order and restore the matter to the file of the Assessing Officer. We order accordingly. The assessing authority is directed to scrutinise all cases, one by one to sort out genuine hire-purchase transactions and then put to charge the interest by whatever name called on the rest of the advances. Needless to say, he will afford a reasonable opportunity of being heard to the assessee while disposing of the case in accordance with law." Mr. P. C. Jain, learned counsel appearing on behalf of the assessee, contended that after accepting the contention of the assessee that hire-charges could not be treated as interest under the Act. The Tribunal should have deleted the additions of Rs. 4,75,745 and Rs. 8,94,859 for the....
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....transactions which had been specifically analysed by the Commissioner of Interest-tax (Appeals) and, therefore, the Assessing Officer was bound to base the fresh order on the basis of these findings of the Commissioner of Interest-tax (Appeals) against the assessee. We have heard counsel for the appellant and have perused the records. It is clear that the Tribunal has accepted the claim of the assessee that the hire-purchase financing is one of the recognised modes in the commercial world and the hire charges cannot be equated with interest. The matter has been remanded only to find out if there are any transactions of simple financing. The Tribunal has clearly observed that in the return originally filed, the assessee had included sums of Rs. 2,282 and Rs. 2,267 for the assessment years 1992-93 and 1993-94, respectively, on account of interest in addition to the hire-purchase charges. It is thus clear that in addition to hire-purchase transactions, there were transactions involving simple financing as well. The authorities below had not separated such transactions from the hire-purchase transactions because they were of the view that hire-purchase charges were assessable as cha....