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Dy. Commissioner of Income tax (TDS) , TDS Circle – 1 (1) , Hyderabad Versus APR Constructions Ltd.

2016 (6) TMI 842 - ITAT HYDERABAD

Penalty u/s.271C - liability to deduct tax at source u/s 194A(1) of the Income Tax Act, 1961 on payments made to non-banking financial institutions as the payments include component of interest - Held that:- We find that the assessee made payments towards hire purchase installments and not made separate payments towards interest. Therefore, the financial charges on hire purchase are not in the nature of interest. - The payment made by the assessee on account of hire purchase transaction and .....

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COURT] - Decided in favour of assessee - ITA No. 253 /Hyd/2016 - Dated:- 17-6-2016 - Smt P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member For the Revenue by : Shri B. Kurmi Naidu For the Assessee : None ORDER Per S. Rifaur Rahman, A. M. This appeal is preferred by the Revenue against the order of the learned Commissioner of Income-tax(Appeals) - 8, Hyderabad for AY 2010-11. 2. Briefly the facts of the case are that the Assessee-deductor is a limited company engaged i .....

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Thus the re-assessment proceedings were completed on 11.3.2014 for the said asst. year by raising a demand of ₹ 1,09,238/-. 3. Consequent to survey, the default on the part of the assessee to comply with provisions of TDS on financial charges paid to certain companies was pointed out. During the course of re-assessment proceedings, the information submitted by the assessee was examined by the AO and it was concluded that the deductees in respect of whom TDS was not made had offered the sam .....

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. TML Finance, M/s. SREI International and M/s. GE Capital and accordingly, the proceedings u/s 201(1) and 201(1A) for the asst. year 2010-11 were concluded as above. As the assessee failed to deduct tax on interest payments made to Nonbanking Financial Institutions, the AO initiated penalty proceedings u/s 271C of the I.T. Act. As the failure to adhere to the provisions of TDS under Chapter XVII B attracts penalty u/s 271C, a notice was issued to the assessee 23/04/2014 which was duly served on .....

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respect of payments made of ₹ 1,30,25,758/- at the rate of 10% which works out to ₹ 13,02,576 u/s 194A of the I.T. Act in respect of M/s. TML, M/s. SREI and M/s. GE capital as above. According to the AO, the explanation furnished by the assessee in this regard is not acceptable. As such, the assessee was treated as assessee in default and held that the penalty provisions are clearly attracted in the case of the assessee. Accordingly, the AO imposed a penalty of ₹ 13,02,576/- u/ .....

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by the AO u/s 271C. 7. Aggrieved with the above order of the CIT(A), the revenue is in appeal before us raising the following grounds of appeal. 1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty levied u/s 271C for the AY 2010-11. 2. The ld. CIT(A) has failed to appreciate the fact that the assessee was liable to deduct tax at source u/s 194A(1) of the Income Tax Act, 1961 on payments made to non-banking financial institutions as the payments .....

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nterest. Therefore, the financial charges on hire purchase are not in the nature of interest. The issue in dispute is squarely covered by the decision of the ITAT, Hyderabad in case of M/s R. Balarami Reddy & Co. (supra) wherein the Bench has held as under: 5. We have heard the arguments of both the parties, perused the record and have gone through the orders of the authorities below. We find that the issue in dispute whether it is interest or not on hire purchase contract has been decided b .....

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owner or not. In the event, he exercises his option t buy them, then, the owner of the goods is bound to convey the same by transferring title in favour of the hirer. On the other hand, if the hirer does not exercise his option, then the goods in question must be returned and the payments so far made are treated to be rentals. Therefore, the whole concept is with regard to payment of consideration money or rental not repayment of loan amount in financial transaction. Unless there is involvement .....

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hiring out goods on the terms and conditions set out in the agreement, and the option to purchase exercisable by the customer on payment of all the instalments of hire arises when the instalments are paid and not before. In such a hire purchase agreement there is no agreement to buy goods; the hirer being under no legal obligation to buy, has an option either to return the goods or to become its owner by payment in full of the stipulated hire and the price for exercising the option. This class o .....

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