2001 (3) TMI 280 - AT - Income Tax

Summary

Issues involved: Determination of whether the assessee is a Leasing Company or a Finance Company liable to Interest-tax.

Summary:
The appeal raised the issue of whether the assessee was a Leasing Company or a Finance Company liable to Interest-tax. The assessee, classified by the Reserve Bank of India as an 'Equipment Leasing Company', contended that it was primarily engaged in leasing activities and not in providing finances. The Assessing Officer, however, concluded that the assessee was a "Loan Company" based on interest earned on loans and advances. The CIT(A) sided with the assessee, emphasizing that the principal business was leasing, supported by the composition of income and RBI's classification. The ITAT Pune analyzed the income bifurcation and RBI's clarification, determining that leasing constituted over 72% of the total income, thus affirming the CIT(A)'s decision that the assessee was a Leasing Company and not liable to Interest-tax.

The ITAT Pune rejected the Revenue's argument that leasing activities also constitute financing, citing specific Circulars that differentiate between hire purchase and leasing transactions. It highlighted that ownership of equipment is crucial, and in the case of the assessee, the company retained ownership, distinguishing it from a loan transaction. The ITAT Pune also noted that the Assessing Officer had acknowledged the assessee as a leasing company during assessment under section 143(3), further supporting the conclusion that the assessee was not a loan company but a leasing company. Consequently, the ITAT Pune upheld the CIT(A)'s decision that the assessee was not liable to Interest-tax, dismissing the appeal.