COMMISSIONER OF INCOME TAX Vs. AIKYATA FINANCE LTD.

JUDGEMENT

(1.) APPEAL Nos. 24 and 25/Bang/2003 by the Tribunal, Bangalore Bench 'A', on the following substantial questions of law : "[I] Whether the appellate authorities were correct in holding that the assessee had entered into only a hire purchase transaction with third parties and therefore no interest was received by the assessee in order to attract interest -tax provisions ? (II) Whether the appellate authorities were correct in holding that the Interest -tax Act was not applicable without properly appreciating the judgment of the apex Court in AIR 1966 SC 1178 ? (III) Whether the appellate authorities were correct in not taking into consideration that the vehicles financed by the assessee stood registered in the name of third parties and in the event of default of instalments the same would be transferred to the assessee and in respect of the advance paid, assessee would be entitled to interest as could be seen from the agreement and consequently recorded a perverse finding ? (IV) Whether the appellate authorities should have taken into consideration the definition prescribed under ss. 5A and 5B cl. (i) of the Interest -tax Act which clearly contemplated business of hire purchase transaction or the financing of such transactions would also deemed to be finance companies like that of the assessees and therefore the amounts received would amount to interest liable to tax under the Interest -tax Act -

(2.) THE facts in brief are, even though the respondent assessee (common in both appeals) was being assessed for the asst. yrs. 1997 -98 and 1998 -99, it has not filed the income -tax returns. Therefore, the assessing authority was constrained to initiate proceedings under s. 8(2) r/w s. 10 of the Interest -tax Act, 1974. The assessing authority, after examining various hire purchase agreements executed by the assessee with the third parties, found that the vehicles over which the assessee had advanced loans belong to third parties in whose name it was registered. The said agreement clearly contemplated that in the case of default of payment of instalments, the agreement can be terminated and the vehicle will be transferred to the name of assessee. Accordingly, the assessing authority, after considering the relevant material available on file, passed the order. Assailing the correctness of the order passed by the assessing authority, the assessee filed the first appeal before the CIT(A) in proceedings Nos. Interest -tax Appeal Nos. 5 and 6/R - 11/CIT(A) -I/2001 -02 respectively. The said authority, in turn, allowed the appeals filed by the assessee. Assailing the correctness of the said order passed by the CIT(A) -I, Bangalore, the ITO, Ward 11(1), Bangalore, filed an appeal before the Income -tax Appellate Tribunal, Bangalore Bench 'A' (Tribunal' for short). The said matter came up for consideration before the Tribunal and the Tribunal, in turn, by its impugned common order, dismissed the appeals, on the sole ground that hire charges/lease rentals are not to be treated as interest under the Act, as consistently held by the Bangalore Benches of the Tribunal in the case of ICDS Ltd. and by the Tribunal, Madras in the case of Haritha Finance Ltd. without considering the grounds urged by the appellant on merits. Being aggrieved by the impugned common order passed by the Tribunal, the appellants herein have presented these appeals, seeking appropriate reliefs as stated supra.

(3.) THE principal submission canvassed by learned counsel appearing for appellants, at the outset is that, the impugned common order passed by the Tribunal is unsustainable and is therefore liable to be set aside at the threshold. To substantiate the said submission, he relied upon the judgment of this Court in IT Appeal No. 107 of 2000 and connected the said appeal of the Revenue and set aside the order passed in favour of ICDS Ltd. Therefore, he submitted that, these interest -tax appeals are also liable to be allowed and the impugned common order passed by Tribunal is liable to be set aside.