TMI Blog2012 (11) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... any is not liable to tax under the Act as it does not fit into the definition of a financial Company within the scope of any of the clauses of sub-section (5B) of Section 2 of the Act - against revenue. Validity of reopening of the assessment – Held that:- As the main matter itself has been decided against the revenue, the question relating to reopening of assessments becomes academic and does not survive for an independent answer – appeal dismissed answering the substantial question of law in favour of the respondent assessee and against the appellants revenue. - IT APPEAL NOS. 1002,1003 & 1391 OF 2006 - - - Dated:- 29-5-2012 - D.V. SHYLENDRA KUMAR AND B. SREENIVASE GOWDA, JJ. G. Kamaladhar for the Appellant. Suryanarayana for the Respondent. JUDGMENT D.V. Shylendra Kumar, J. Appeal by the revenue under section 260-A of the Income-tax Act 1961 is directed against the order of the Income Tax Appellate Tribunal, Bangalore 'B' Bench, dated 20th January 2006 as per Annexure 'A'. 2. The Tribunal having allowed the appeal of the respondent-assessee and having reversed the assessment order affirmed by the Commissioner of Income-tax (Appeals-I) assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TOTAL Rs. 10,44,34,930" 5. Assessee being aggrieved by this order filed an appeal to the Commissioner of Income-tax (Appeals) and met with part success resulting in the reduction of liability under the Act. However, the assessee being not satisfied with this order and being of the view that it is not at all liable to pay any tax under the provisions of the Act, in respect of its activities, carried the matter further by way of appeal to the Income-tax Appellate Tribunal. 6. The Tribunal in terms of the impugned order has allowed the appeal and has opined that when the assessee was not a credit institution in the nature of a financial Company, to which the provisions of Section 2(5A) of the Act are attracted, there is no liability on the assessee under the provisions of the Act and therefore set aside the order and has exonerated the assessee of any liability under the Act. Therefore, the present appeal by the revenue. 7. We have heard Sri Kamaladhar, learned standing counsel for the Income-tax Department and Sri Suryanarayana, learned counsel appearing for the respondent - Company. 8. Mr. Kamaladhar, learned standing counsel for the revenue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly held that a Company essentially dealing with equipment leasing activities is to be understood as a loan Company in the sense, Company advancing loans and charging Interest and therefore, the submission that the main activity of the assesses - company being leasing of equipment, the view taken by the Tribunal is not sustainable. 12. Mr. Kamaladhar has also placed reliance on a division Bench decision of this Court in the case of CIT v. Jai Bharath Mills (P.) Ltd. 23rd October 2010 in I.T. Appeal No. 1111/2006 connected with I.T.A. Nos. 1112/2006, 578/2007 and 579/2007, wherein it was held that moneys lent to credit institution qualifies an. assessee - company of this nature for liability under the provisions of the Act in the wake of the rulings of the Supreme Court, dwelling upon the provisions of Section 2(5A) and of the Act and therefore submits that the present appeal of the revenue is to be allowed. 13. Mr. Kamaladhar has also brought to our attention the definition of the word 'merchant bank: as Indicated in wikipedia, the free encyclopedia. "A Merchant Bank is a financial institution which provides capital to companies in the form of share ownership instead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch transactions; ( ii ) an investment company, that is to say, a company which carries on, as its principal business, the acquisition of shares, stock, bonds, debentures, debenture stock, or securities issued by the Government or a local authority, or other marketable securities of a like nature; ( iii ) a housing finance company, that is to say, a company which carries on, as its principal business, the business of the financing of acquisition or construction of houses, including acquisition or development of land in connection therewith; ( iv ) a loan company, that is to say, a company not being a company referred to in sub clauses (i) to (iii) which carries on, as its principal business, the business of providing finance, whether by making loans or advances or otherwise; ( v ) a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which declared by the Central Government under section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society; 6[***] ( v-a ) a residuary non-banking company [other than a financial company referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law and no interference is warranted. 17. We have bestowed our attention to the submissions made at the bar and perused the orders of the authorities and the Tribunal and have looked into the authorities relied upon at the bar. 18. Under the scheme of the Interest-Tax Act, while the subject matter of charge is interest earned and chargeable interest as indicated in Section 4 of the Act and the scope of the charge is indicated in Section 5 of the Act and it is in respect of chargeable interest of any-previous year of a credit institution. It is because of this nature of charge and scope .of the same, 'the. definition of credit institution" assumes importance and it is to be found either in Section 2(5A) per se or it is a residuary financial company not covered under clauses (i) to (iii) of Section 2(5A) then, it can be anyone of situations coming under clauses (i), (ii), (iii) (iv), (v), (va) or residuary clause (vi) of Section (5B) of Section 2 of the Act. 19. An examination of the present facts vis-a-vis statutory provisions indicate that the assessee - company does not fit into any one of the situations contemplated in clauses (i) to (iii) of sub-section (5A) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a financial Company within the scope of any of the clauses of sub-section (5B) of Section 2 of the Act. 25. Therefore, we answer the question posed in this appeal in the affirmative and against the revenue and accordingly, dismiss this appeal. Parties left to bear their own respective cost. RE.I.T.A. No. 1002/2006 C/W ITA No. 1391/2006 These two appeals by the revenue are also relating to the very assessee as was involved in the above appeal. The question also being the same, arising in respect of a different assessment years, namely, in I.T.A. No. 1002/2006 relating to the assessment year 1993-94 and I.T.A. No. 1391/2006 relating to the assessment year 1997-1998, the question which is common in these appeals is answered as in the above appeal. In ITA No. 1002/2006, though the other question relating to the validity of reopening of the assessment is also involved as the main matter itself has been decided against the revenue, the question relating to reopening of assessments becomes academic and does not survive for an independent answer. In view of our disposal of I.T.A. No. 1003/2006 above and answering the question in favour of the assessee and dismissing the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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