2017 (12) TMI 1422

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....rala State Financial Enterprises Ltd., Thrissur, a Kerala State Government Undertaking, engaged in the business of conducting chitties, advancing loans, etc. The assessee had filed it's return of chargeable interest at Rs. 14,78,47,770/-. However, while completing the assessment under Section 8(2) of the Income Tax Act, the assessing officer made various additions to the tune of Rs. 18,43,38,284/- on account of interest received from hire purchase transaction (Finance charges), F.D. loan interest, trade loan interest, interest on housing loan/vehicle loans to employees, etc; and raised a demand of Rs. 99,65,582/- on the premise that the assessee company is "credit institution", a taxable entity under the Interest Tax Act. 2. On appea....

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....on unutilised portion of any credit sanctioned for being availed of in India; and (b) discount on promissory notes and bills of exchange drawn or made in India, but does not include - (i) interest referred to in sub-section (1B) of S.42 of the Reserve Bank of India Act, 1934(2) of 1934; (ii) discount on treasury bills." The Tribunal had relied on another decision of the Tribunal dated 19-04-2004 to conclude that financial charges may not be subjected to tax and following the decision, the appeal was partly allowed in favour of the assessee. Admittedly, the finance charges involved in the instant case are from hire purchase of vehicles. The position has now been settled by a precedent of this Court involving the....

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....assessees is that of the Punjab & Haryana High Court in Deep Hire Purchase (P) Ltd. v. CIT (2005) 195 CTR (P&H) 174: (2005) 274 ITR 69 (P&H). We notice that this is a case where Punjab & Haryana High Court had only confirmed the order of the Tribunal remanding the matter to the AO with an observation that interest on financing only attracts tax under s.2(7) of the Act. However, the question whether motor vehicle financing of the kind carried on by the respondent which is the issue in this case attracts tax under the Act or not was not raised or decided by that Court. Similarly, another decision relied on by the respondent is that of the Madras High Court in CIT v. Harita Finance Ltd. (2006) 283 ITR 370 (Mad) also does not deal with the natu....