High Court Of Andhra Pradesh
CIT, Andhra Pradesh-I, Hyderabad Vs. N.K. Leasing & Construction (P.) Ltd.
Section : 8
Assessment Years : 1992-93 To 1994-95
L. Narasimha Reddy And M.Satyanarayana Murthy, JJ.
I.T.T.A. No. 92 Of 2001
July 2, 2014
JUDGMENT
L. Narasimha Reddy, J. – This appeal is preferred by the Revenue against the order, dated 14.12.2000, passed by the Hyderabad Bench A of the Income Tax Appellate Tribunal (for short, the Tribunal).
2. The respondent is a financial institution. It entered into a hire purchase agreement with one of its customers in relation to a vehicle. In the return submitted by it, reference was made to such a transaction. In case the transaction between the appellant and the customer is treated as one of extending finance, it attracts Section 8 (3) of the Interest Tax Act, 1974 (for short, the Act) and tax is payable on the component of interest received by the respondent. The Income Tax Officer (ITO), who processed the return submitted by the respondent for the assessment years 1992-93 to 1994-95, treated the said transactions as constituting finance and not hire purchase agreement. Aggrieved thereby, the respondent filed appeals before the Commissioner of Income Tax (Appeals). The appeals were dismissed through order, dated 19.01.2000. Thereupon, the respondent filed Income Tax Appeal Nos.2 to 4 before the Tribunal. Through a detailed order, dated 14.12.2000, the Tribunal allowed the appeals by accepting the contention of the respondent i.e., the assessee. Hence, this appeal.
3. Sri S.R. Ashok, learned Senior Standing Counsel for the Income Tax Department, submits that though the transaction in relation to a vehicle in question is termed as hire purchase, it has all the ingredients of a financial transaction. He submits that as against the total cost of the vehicle, only part of it was paid by the respondent and that the ownership of the vehicle was in the name of the lessee under the hire purchase agreement. He contends that these and other ingredients are sufficient to treat a transaction as a financial one and that the Tribunal was not justified in reversing the findings of the assessing authority and the Commissioner. On the other hand, Sri Challa Gunuranjan, learned counsel for the respondent, submits that the Tribunal has not only applied the principles of law, but also examined the facts on record in detail, and arrived at the conclusion that the transaction is purely, one of hire purchase. He contends that the Tribunal has taken the correct view of the matter.
4. Whenever individuals, who do not have their own financial resources, intend to purchase vehicles, they approach the agencies to arrange the same. Two courses are open in this behalf. The first is, where financial agency simply advances the required amount by levying interest. As a measure of security for repayment, the vehicle is hypothecated and endorsement to that effect is made in the registration certificate itself. The second is, where the agency, which arranges the finance, purchases the vehicle in its name, but under an agreement, hires it to the one who availed the facility. The installments that are required to be paid by the lessee of the vehicle would have two components, namely, hire charges and part of consideration. Once all the installments are paid, the hire ceases and the ownership stands transferred to the lessee.
5. In the instant case, it is not in dispute that there existed a hire purchase agreement. However, the ITO went a bit deep into the contents of the agreement and on analysis of the same, he arrived at the conclusion that the transaction par takes the character of financial arrangement. We are of the view that such a course is not permissible. Once there exists a hire purchase agreement, further questions as to how much part of the consideration of the vehicle was paid by the assessee, and what are the other terms, become immaterial.
6. Realizing that the hire purchase agreements are very complex in nature, the Central Board of Direct Taxes issued guidelines and clarifications from time to time. The Tribunal has relied upon the clarifications issued through instruction No.1425, dated 16.11.1981. The relevant portion of it was extracted. Thereafter, the actual contents of the hire purchase agreement and the purport thereof were discussed by the Tribunal, in detail. We are not able to find any defect on facts or in law in the conclusions arrived at by the Tribunal.
7. Hence, the appeal is dismissed. There shall be no order as to costs.
8. The miscellaneous petitions, if any, filed in this appeal shall stand disposed of.
[Citation : 367 ITR 720]
