Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

COMMISSIONER OF INCOME TAX Versus M/s. GRUH FINANCE LTD

2016 (8) TMI 228 - GUJARAT HIGH COURT

Interest payable to NHB on financing scheme - amount on this account considered chargeable under the Interest Tax Act by the Assessing Officer was directed to be deleted by the CIT(A) confirmed by ITAT - Held that:- Tribunal is justified in dismissing the claim of the revenue inasmuch as whatever is collected by the Bank has to be passed over to the NHB and it is in the nature of repayment with regard to the money advanced by NHB alone and therefore in such a situation the concerned amount canno .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nature of interest but in the nature of service charges and therefore the same cannot be subjected to interest tax. Therefore we answer both the questions in favour of assessee and against the revenue. - Amount being processing fees, reimbursement charges and damage charges and interest portion of lease rental deleted from the chargeable interest - Held that:- The expenses such as processing fees, damage charges, verification charges, reimbursement charges and lease rent etc are expenses an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, JJ. FOR THE APPELLANT : MRS MAUNA M BHATT, ADVOCATE FOR THE OPPONENT : MR MANISH J SHAH, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench B (hereinafter referred to as the Tribunal ), the revenue has preferred the present Tax Appeals assailing the following orders: Tax Appeal No. Date of Tribunal s order ITA/CO No. Assessment Year 113 of 2007 19.0 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an amount of ₹ 14,98,43,517/- being interest paid to National Housing Bank, from the chargeable interest? (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting an amount of ₹ 14,33,592/- being processing fees, reimbursement charges and damage charges, from the chargeable interest? (C) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting an amount of S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bunal is right in law and on facts in confirming the Order passed by the CIT [A] directing the Assessing Officer to exclude from chargeable interest ₹ 9,02,09,133/= being interest paid to NHB on refinance arrangement ? Whether, the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT [A] and thereby deleting the addition of ₹ 2,30,01,009/= being fees and other charges which are in the nature of interest for the loans and advances given ? Whether t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

law and on facts in reversing the order passed by the CIT(A) deleting the addition of ₹ 1,33,81,775/- in respect of interest component of lease rent? Tax Appeal No. 1305 of 2009 Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) deleting the addition of ₹ 78,75,490/- made by the Assessing Officer on account of leased rent? Tax Appeal No. 1054 of 2010 [A] Whether the Appellate Tribunal is right in law and on facts in confirming the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

residual? 3. Heard learned advocates for both the sides. We shall consider and discuss the aforesaid questions framed one after the other and accordingly the following two questions are being discussed first: [1] Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT(A) in deleting the disallownace of ₹ 17,67,67,067/- being interest paid NHB? [2] Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT(A) i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Counsel appearing with Ms. Mauna Bhatt, learned advocate for the revenue has drawn the attention of this Court to section 2(5), 2(7), 5 and 6 more particularly explanation to section 6 of Interest Tax Act and contended that if we look closely to the provisions of these sections, it is clear that under the Interest Tax Act it is the gross interest which is chargeable to tax and the direction of the Tribunal is contrary to the provisions of the Act. In this regard he has relied upon a decision of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ween an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence in law does not follow. It is the first kind of payment which can truly be excused and not the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rightly held that the said amount is in the nature of interest on loans and advances and included the same in the chargeable interest of the assessee. 5. Mr. J.P. Shah, learned advocate appearing for the assessee has drawn the attention of this Court has drawn the attention of this Court to the circular no. 760 with regard to instructions regarding taxability of hire charges as interest and submitted that the Tribunal is justified in confirming the order passed by CIT(A). He has relied upon the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ks to the industrial concerns for setting up of industrial projects and for their expansion, modernisation and diversification schemes. Such industrial concerns include village, tiny, small and medium scale industries and such others which could be commonly understood as credit institutions eligible. The needy industrial concerns have to approach the eligible credit institutions for getting term loans for financing their projects and for this purpose the credit institutions have to apply, in tur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

k bears the primary responsibility regarding the loan assistance granted by it. In the context of the question for our consideration, the bank would be the assessee before us and the industrial concern would be the maker of the document or, in other words, the person who has received the loan in accordance with the terms and conditions from the point of view of compliance. Even the Industrial Development Bank of India has power to inspect the accounts. 17. Particularly Chapter V of the scheme re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he latter maturities/repayments to the Industrial Development Bank of India. It is emphasised there that alternatively the bank may repay proportionate of such instalment to the Industrial Development Bank of India. It is also further emphasised that the bank must remit instalments of refinance to the Industrial Development Bank of India on due dates regardless of whether or not the individual repayments of instalment loan have been received by it from the borrowers. It is also found in the cont .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ent of refinance is to the Industrial Development Bank of India and is to be made in the same proportion as the refinance bears to the loan. The Industrial Development Bank of India Refinance Scheme has been placed before us to appreciate, in the context, as to whether it could be said, in accordance with the statutory provisions, that there is any facet of the interest amount in question having the character of the "chargeable interest" or, in other words, whether it could be consider .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion of the scheme that is placed before us, makes it abundantly clear that whatever is collected by the assessee-bank is to pass over to the Industrial Development Bank of India and it is to be understood in the nature of repayment obviously with regard to the money advanced by the Industrial Development Bank of India alone. In such a situation, the concerned amount cannot have the legal requirement in terms of the Interesttax Act to be the "chargeable interest" because it cannot be s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

raised by the revenue. The concerned amoutn cannot have the legal requirement in terms of Interest Tax Act to be the chargeable interest because it cannot be said that on the said amount interest has accrued or arisen to the credit of the assessee bank. We are supported in this regard by the decision of the Punjab and Haryana High Court in the case of Commissioner of Income Tax vs. Punjab State Industrial Development Corporation reported in [2010] 326 ITR 390 (P & H) wherein the Court relied .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rt of the chargeable interest in the hands of the assessee bank under Section 5 of the Interest Tax Act. Similar law has been laid down by the Madras High Court in the case of Commissioner of Income Tax vs. Karur Vysya Bank Ltd reported in [2000] 242 ITR 734 (Mad) and by the Karnataka High Court in the case of Commissioner of Income Tax vs. Canara Bank reported in [1989] 175 ITR 601 (Kar). 8. Thus, from the aforesaid discussion and the decisions, we are of the opinion that the Tribunal is justif .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

loan portfolis the assessee has no right over the same but by virtue of agreement it is entitled to receive agreed percentage of interest component of each EMI towards the service of collection and rendering them to HDFC. Therefore the amount received is not in nature of interest but in the nature of service charges and therefore the same cannot be subjected to interest tax. Therefore we answer both the questions in favour of assessee and against the revenue. 10. The other two questions which we .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vocate appearing for the assessee submitted that so far as the above two questions are concerned, the assessee is the owner and it is a lease income and cannot be considered as interest income. He has relied upon the decision of the Apex court in the case of State Bank of Patiala vs. Commissioner of Income Tax reported in [2016] 383 ITR 244 (SC) wherein paras 17 & 18 read as under: 17. It will be interesting to notice at this stage that the expression interest is also defined under the Incom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n is much wider than that contained in Section 2(7) of the Interest Tax Act, 1974. The expression payable in any manner in respect of any moneys borrowed is an expression of considerable width. It will be noticed that the aforesaid language of the definition section contained in the Income Tax Act is broader than that contained in the Interest Tax Act in three respects. Firstly, interest can be payable in any manner whatsoever. Secondly, the expression in respect of includes interest arising eve .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

taxable event which does not include within its ken interest payable on default in payment of amounts due under a discounted bill of exchange. 11.1 Mr. Shah has also relied upon an unreported decision of this Court in Tax Appeal No. 120 of 2004 rendered on 17.03.2015. 12. Having heard learned advocates for both the sides on the aspect of these two questions, we are of the opinion that the expenses such as processing fees, damage charges, verification charges, reimbursement charges and lease rent .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version