TMI Blog2001 (3) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Assessing Officer that it is out of the purview of the Interest-tax as it is not a Loan Company as envisaged in section 2(5B)(iv) of the Interest-tax Act, 1974. It was submitted before the Assessing Officer that the principal business of the assessee was that of leasing and following bifurcation was furnished to prove this point: -------------------------------------------------------------------------------- Nature of activity Income in % to total income Lakhs -------------------------------------------------------------------------------- Leasing 627.42 72.36 Hire purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company remains to be equipment leasing activity". On these facts, it was argued that Interest-tax Act, 1974 was not applicable to the assessee. The CIT(A) found force in the submissions made before him and holding that the principal business of the assessee was leasing business and after giving an opportunity of being heard to the Assessing Officer, Whose report he has reproduced on pages 4 5 of his order, held that the assessee was not a finance company, but a leasing company and accordingly, it was not liable to Interest-tax. 5. Shri K. Srinivasan, the learned D.R. submitted that even leasing of equipments is financing activity and in support of this, he relied upon the Board's Circular No. 376 dated 13-1-1998 and Circular No. 378 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or otherwise and hence, it cannot be a 'Finance Company' as contemplated in section 2(5B)(iv) of the Interest-tax Act, 1974 and interest income on loans and advances etc. disclosed by the assessee-company in the return cannot be taxed to Interest-tax. The learned counsel further drew our attention to the assessment framed by the Assessing Officer under section 143(3) for the assessment year under appeal (copy placed on record), where the Assessing Officer has admitted that the assessee is a Leasing Company and has also granted depreciation on the leased equipments as per chart enclosed with the assessment and has given further depreciation on the Entry-tax paid by the assessee on re-possessed vehicles which were earlier leased, as additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est charges put together constitute merely 13%. In such a situation, we agree with the findings of the CIT(A) that the principal business of the assessee is none other than that of leasing and accordingly, the assessee-company cannot be termed "Loan Company" as envisaged in section 2(5B)(iv) of the Interest-tax Act, 1974. 8. Coming to the two circulars of the CBDT relied upon by the learned D.R., we find that the same arc not applicable to the facts of the case before us. Circular No. 760 dated 13-1-1998 is about the 'hire purchase' activity and does not speak about the 'leasing activity'. Even for the hire purchase, the Circular says "when a hirer is the real purchaser of the asset but does not pay full purchase price and the hire purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the companies engaged in the business of financing. 4. The Board are of the view that the finance charges accruing or arising to hire purchase finance companies are in the nature of interest as defined in section 2(7) of the Interest-tax Act and, therefore, chargeable to interest-tax." Obviously, the above instructions of the CBDT do not apply to the facts of the present case because, as held by us supra, the principal business of the assessee is leasing and not hire purchase transactions. 9. Again we find that the Assessing Officer while making assessment under section 143(3) for the assessment year under appeal has admitted that the assessee is a leasing company and also granted depreciation on the leased equipments as per chart ..... X X X X Extracts X X X X X X X X Extracts X X X X
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