Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2015 (7) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (7) TMI 56 - CALCUTTA HIGH COURTTransaction in the nature of hire-purchase - whether hire charges received under a hire purchase agreement amounts to interest liable to tax under the provisions of the Interest Tax Act? - Held that:- In the case before us there is nothing to show that assessee lent money to the hirer for purchasing the vehicle. Nor is there anything to show that the vehicle originally belonged to the assessee and the assessee in consideration of the hirer promising to pay the price in installments delivered possession thereof to the hirer. In a hire purchase agreement the hirer is under no obligation to buy the vehicle. He has an option either to buy the vehicle or to return the same. The transaction entered into by the assessee does not also disclose that the hirer was the owner of the vehicle and he entered into the hire purchase agreement only for the purpose of raising a loan. The hirer is a bailee as already indicated. In a bailment the bailor does not divest himself of ownership. He merely curtails his right of enjoyment of the thing bailed in favour of the bailee. Further, the rights which the bailee being a hirer acquires may be enjoyed by him in terms of the hire purchase agreement and not otherwise.The nomenclature given by the assessee is not decisive. It is the substance of the matter which has to be looked into. Mere fact that the assessee has treated the vehicle for the purpose of accounting as its current assets does not derogate from the concept of hire purchase. If the object of the Interest Tax Act is kept at the back of the mind, it would be clear that unlike loans and advances the hire purchase transactions resulting in sale of various household goods including cars and automobiles was not intended to be curbed by the Interest Tax Act. As a matter of fact, the sale of household goods including cars and automobiles through the hire purchase transactions provides a boost to the industry and is, therefore, to be encouraged rather than discouraged. We may reiterate that it is not possible to presume that the legislature was not aware of the distinction between hire purchase transaction and transaction in the nature of loans and advances. Therefore, if the legislature wanted to apply the provisions of the Interest Tax Act to the hire purchase transaction, a specific reference to that effect would have been made. We reiterate our view taken in the case of Pilani Investment & Industries [2015 (7) TMI 53 - CALCUTTA HIGH COURT] that in pith and substance, a completed hire purchase transaction may have some similarity with a purchase effected by obtaining a loan, but that similarity cannot obliterate the identity of a real hire purchase transaction which is a more complex transaction in contradistinction of a loan simplicitor as discussed in the case of Sundaram Finance (1965 (11) TMI 123 - SUPREME COURT OF INDIA) wherein held that the intention of the appellants in obtaining the hire- purchase and the allied agreements was to secure the return of loans advanced to their customers, and no real sale of the vehicle was intended by the customer to the appellants. The transactions were merely financing transactions. - Decided in favour of the assessee.
|