TMI Blog2017 (12) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on charge of interest on loans and advances. It is immaterial whether a loan or advance is called hire-purchase agreement or not. On the other hand, what is to be considered is whether the transaction involved is really a loan or advance and if the transaction is found so, then the interest earned on the same is taxable under the Interest-tax Act. - Decided against assessee. - I.T.A. 134 of 2007 - - - Dated:- 18-12-2017 - MR. K. VINOD CHANDRAN AND MR. ASHOK MENON, JJ. For The Appellant : sri .george k. George, SC for it For The Respondent : Sri.Anil D. Nair, Sri. P.Benny Thomas, Sri. K.John Mathai, Sri. E.K.Nandakumar And Smt.Preetha S.Nair JUDGMENT Ashok Menon, J. The Revenue is on appeal aggrieved by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only legal issue that arises for consideration in this appeal is whether finance charges such as, interest received from hire purchase transaction, and other interest would attract tax on interest under the Interest Tax Act, 1974. 4. The argument advanced for the Revenue is that, finance charges collected by the respondent for vehicle financing as well as other hire purchase is nothing, but interest attracting tax. Whereas, the respondent contended that hire purchase transactions are outside the scope of interest tax and hence not taxable. 5. We heard the learned Counsel appearing for the Revenue and the assessee. 6. It would be apposite to extract the definition of 'interest' under Section 2(7) of the Interest Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this is that no deduction should be made at the time of payment of hire-purchase installment. We do not know how this circular prohibiting deduction of tax at source on hire-purchase installment of which interest is only an element can apply to the facts of this case. Moreover, it is to be noted that hire purchase companies are squarely covered by definition of credit institutions under the Act and are liable to pay tax on charge of interest on loans and advances. It is immaterial whether a loan or advance is called hire-purchase agreement or not. On the other hand, what is to be considered is whether the transaction involved is really a loan or advance and if the transaction is found so, then the interest earned on the same is taxable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above, we find no justification for the Tribunal to come to the findings different from that of the two lower authorities. Besides this, we have already noticed that the exercise of option provided in the agreement relied on by the Tribunal is contrary to the real deal and against the provisions of the Motor Vehicles Act because of registration of vehicles by the borrowers in their own names. The Tribunal's findings are based on wrong assumption of facts and they have decided the matter without even referring to the provisions of the Motor Vehicles Act which comprehensively deal with all transactions in motor vehicles. We, therefore, allow the appeals by reversing the order of the Tribunal and restoring the assessments confirmed in fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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