Madras High Court
The Commissioner Of Income-Tax vs M/S.Sri Ram Investment Ltd on 27 October, 2005
Author: P.D.Dinakaran
Bench: P.D.Dinakaran
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 27/10/2005
CORAM
THE HON'BLE MR.JUSTICE P.D.DINAKARAN
and
THE HON'BLE MR.JUSTICE N.KANNADASAN
T.C.No.1072 of 2005
The Commissioner of Income-tax,
Chennai ... Appellant
-Vs-
M/s.Sri Ram Investment Ltd.,
Chennai. ... Respondent
T.C.Appeal filed against the order of Income-tax Appellate Tribunal
made in ITA.No.98/Mds/1999, dated 18.3.2005.
!For appellant : Mr.T.Ravikumar, Jr.SC. For IT
^For Respondent : ---
:JUDGMENT
(Delivered by P.D.DINAKARAN,J.) Against the order of the Appellate Tribunal in ITA.No.98/Mds/1999, dated 18.3.2005, the Revenue has preferred the appeal and raised the following substantial questions of law:
(1) Whether in the facts and circumstances of the case, the Tribunal was right in holding that hire purchase finance charges are not subject to interest tax, without going into the nature of the financial transactions?
(2) Whether in the facts and circumstances of the case, the Tribunal was right in holding that interest from Government securities is not subject to interest tax?
2. The Revenue is the appellant. The assessment year involved in the appeal is 1996-97. The assessee claimed deduction on hire purchase finance charges and interest received on Kisan Vikas Pathras. The assessing officer held that finance charges relating to hire purchase contracts and the interest earned from Government securities would be subject to interest tax. On appeal by the assessee, the Commissioner of Income-tax (Appeals) decided the issues in favour of the assessee, which was confirmed by the Appellate Tribunal on appeal filed by the Revenue. Hence, the Revenue has come forward with this appeal.
3. It is fairly submitted by learned counsel for the Revenue that the issue raised in the first question is covered against the Revenue by an unreported decision of this Court in T.C.No.73 of 2000 (between the Commissioner of Income-tax, Madras and M/s.Harita Finance Ltd., Madras) wherein a Division Bench of this Court, by judgment dated 1.2.2005, held as under:-
"The point involved in the question is whether the agreement entered into between the parties was a hire purchase agreement or not. We find that the Appellate Tribunal has examined the question in great detail and recorded a finding of fact that the agreement between the parties was a hire purchase agreement. The Appellate Tribunal in paragraph-10 of its order has found that it is not the case of the Revenue that the hirer is the real purchaser of the asset and the assessee is only a financier to help the purchaser and such things are not coming out from the agreement. We therefore hold that the finding recorded by the Appellate Tribunal is a finding of fact and there is nothing to interfere with the said finding".
4. In the instant case, the Appellate Tribunal decided the issue in favour of the assessee, following its earlier order in Harita Finance Ltd. Case, the appeal filed against which was decided in favour of the assessee by this Court as referred to above.
5. Accordingly, in so far as the first question is concerned, following the unreported decision of this Court in T.C.No.73 of 2000, dated 1.2.2005, we hold that the Appellate Tribunal was right in holding that hire purchase finance charges are not subject to interest tax. The first question is answered in the affirmative, against the Revenue and in favour of the assessee
6. In so far as the second question is concerned, it is submitted by the learned counsel for the Revenue that the issue is covered against the Revenue by the decision of Bombay High Court in DISCOUNT AND FINANCE HOUSE OF INDIA LTD. v. S.K.BHARDWAJ, COMMISSIONER OF INCOMETAX (259 ITR 295) wherein it is held as under:-
" .... one has to read section 2(7) in the context of the scheme of the Act. If so read, interest received from the Reserve Bank of India on dated Government securities will not fall within the meaning of the expression "interest on loans and advances" under section 2(7). The deletion of the exclusionary clause by the Finance (No.2) Act of 1991 would have no effect on section 2(7) a s the exclusionary clause was only clarificatory in nature."
6. Following the abovesaid proposition of law, we hold that the Appellate Tribunal was right in holding that interest from Government securities is not subject to interest-tax. Accordingly, the second question is also answered in the affirmative, against the Revenue and in favour of the assessee. The appeal is dismissed. No costs.
Index: Yes Website: Yes na.
To
1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar, Chennai (5 copies with records)
2. The Secretary, Central Board of Direct Taxes, New Delhi ( 3 copies)
3. The Commissioner of Income-tax (Appeals) VI, Madras.
4. The Joint Commissioner of Income-tax Special Range X, Madras.