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TMI Blog2011 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the ld. CIT(A)-X, New Delhi, raises the following grounds: - 1. That the CIT(A) has erred on facts and in law in inferring that there is no specific objection against the reason recorded or assuming of jurisdiction by the AO for initiating reassessment proceedings u/s 10 of the I.T. Act. 2. That the CIT(A) has erred on facts and in law in not appreciating the objection filed against initiation of proceedings of Interest Tax Act vide letter dated 10.03.2006 which specifically read the submission/objections made before proceeding further may kindly be decided by passing a speaking order to enable the assessee company to make further submission in its support. 3. That the assessment order passed in appellant case without disposing off the objection and passing a speaking order against the objections filed by the assessee against initiation of reassessment proceedings of Interest Tax Act is bad in law and deserves to be quashed. 4. That the CIT(A) has erred on facts and in law in not following the ratio as laid down by the Hon ble Supreme Court in the case of G.K.N. Driveshafts (India) Ltd. vs. ITO Others reported in (2003) 259 ITR 19 (SC). 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act. 12. That the authorities below have erred on facts and in law in taxing the hire charges receipts shown at ₹ 30986822/- as chargeable under the Interest Tax Act. 13. That the ld. CIT(A) has erred on facts and in law in confirming the addition of ₹ 30986822/- made by the AO on the basis of non-speaking order passed by the AO without adjudicating the evidence produced by the appellant both factual and legal deserves to be quashed. 14. That the CIT(A) has erred on facts and in law in ignoring the legal issue propounded by the jurisdictional Allahabad High Court in the case of Mithlesh Kumar Tripathi vs. CIT and others (2006) 280 ITR 16 (All.) that the provision in a legislative enactment is to be interpreted in a manner which conforms to the rules of natural justice Preference is to be given to an interpretation which fulfills the legislative intent and is also not opposed to principles of nature justice, unless otherwise expressly excluded by the legislature. 15. That the appellant craves to add or alter any other ground of appeal as may be warranted. 2. Adverting first to ground nos. 1 to 4 in the appeal, facts, in brief, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AO was upheld by the CIT(A) for A.Y. 1994-95 to 1997-98 and for A.Y. 1999-2000, whereas in A.Y. 1998-99 the CIT(A) had not confirmed the view of the AO and accepted the contention of the appellant. However, the Hon ble ITAT in their order dt. 14.08.2003 in interest tax appeal No. 15, 16, 17, 18, 19/Agra/2002 for A.Yrs. 1994-95, 1995-96, 1996-97, 1997-98 and 1999-2000 and interest tax appeal No. 01/Agra/02 for A.Y. 1998-99 held that the appellant company was engaged in financing business and only advancing loan on interest and cannot be considered by any stretch of imagination a hire purchase company. The Hon ble ITAT affirmed the decision of the AO that the hire charges represented the interest received by the appellant on loans and was chargeable to tax under Interest Tax Act, 1974. With this information in position, the AO has recorded reasons for A.Y. 2000-01 for issue of notice u/s 10 of the Interest Tax Act, 1974 on 13.11.2003 as under: - In the appellant s case, the Hon ble ITAT in Interest Tax appeal numbers 15, 16, 17, 18 and 19/Agra/2002 and Interest Tax Appeal No. 01/Agra/2002 for the A.Yrs. 1994-95, 1995-96, 1996-97, 1997-98 and 1999-2000 and 1998-99 has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that in the written submission the appellant had simply argued on the merit of the case that the hire charges shown by the appellant were not in the nature of interest but were only hire charges on hire purchase transactions. In this submission, there is no specific objection against the reasons recorded or assuming of jurisdiction by the AO for initiating reassessment proceedings u/s 10 of the Interest Tax Act. Thus, the contention of the appellant is not tenable that the AO had not disposed off the objections before proceeding to complete the assessment. Moreover, notice u/s 10 was served upon the appellant on 24.11.2003, and the submission was furnished by the appellant on 10.03.2006 at the fag end of the limitation for completion of assessment in March, 2006. However, it may be noted, as discussed hereinabove, that substantially the AO was justified in initiating proceedings u/s 10 of the Interest Tax Act and the jurisdiction was validly assumed by the AO. Hence, this issue is decided against the appellant. 4. Regarding treatment of hire charges as interest chargeable u/s 5 of the Act, the ld. CIT(A), following the decision dated 14th August, 2003 of ITAT Agra Bench i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were not registered in its name because of huge risks involved therein, cannot be accepted. Firstly, whatever be the amount of risk involved, no person would allow 'hirer' or any other person to register the goods vehicle in their names it really belongs to him. If the company was the real owner than these vehicles would have been definitely registered in its name. Secondly, it is not understood as to how by the registering the vehicles in the purchaser's name, the risk would be minimized. If the company is the real owner, it would still run the risk of whatever nature. In fact the vehicles are registered in the names of the hirers purchasers only because they are the real owners of these vehicles. Since the appellant is merely a financer it was not in a position to get the vehicles registered in its name. It may be mentioned that though registration with RTO is not conclusive proof of ownership but it is very important factor for determining the same . During the course of appellant proceedings reference was made to the Allahabad high court s decision in the case of Uma Shankar Tiwari and another AIR 1950 (All) 231. In view of aforesaid decision, it has been st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) The hire purchase agreement and other papers/ declarations entered in to between the assesse company and the hired are concerned on a careful and close examination of various clauses of declaration made by hirer, we find that the intention of the parties in executing the agreement is to advance or take loan and all the formalities - documents are made to insure the recovery of loans advances and to give the color of hire purchase. It can be seen from clause-4 of the deceleration made as under English translation :- That the hire purchase agreement has been made on my request and as per agreement, ownership of the vehicle vest in M/S S.E Investment Ltd (assessee company) and I have only right to ply the vehicle on hire. Under MotorVvehicle Act the registration made in my name does not prove my ownership in the vehicle but only to provide facility to ply the vehicle on hire. Under the hire purchase agreement my ownership on the vehicle will be only when I shall pay full installment and on fulfillment of all other conditions. From the above, it is seen that the vehicle has already been registered in the name of the so called hirer and even the sale invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the option and the fulfillment of the terms of the agreement, tax is not eligible at the time when the hire purchase agreement is made, for at that time the taxable event has not been taken place, it can only be regular when the option has been exercised and all the terms of the agreement fulfilled and the sale actually takes places . 20. In the instant case, question of exercising of the option by the customer doesn't arise as the sale has directly been effected through the dealer to the customer and the sale invoices is issued in his name and further the vehicle has already been registered in the name of the customer under the motor vehicle act and all the sales effected before repayment of any installment to the assessee company. The situation of bailment doesn't arise because vehicle is already possessed by the customer and thus neither the assessee company is bailer nor the customer is bailee. 21. The learned Sr. D. R. filed a paper book containing 34 pages, which is placed on record. In the said paper book at page -8 to 11, there are invoices issued by the dealers directly in the name of the customers and it further proves that the name of the assesses comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s Case are almost identical to facts of this case. In that case also the vehicles were registered in the names of the Hirers'. The vehicles were directly purchased by them from the dealers. The hire purchase company was not dealing in motor vehicles. It is the hirers who had paid the insurance premium, the road etc. The documents like hire purchase agreement promissory note etc. were executed between the hire purchase company and the hirers. The hire purchase company had the right to seize the vehicles in case default in the registration book the name of the hire purchase company was mentioned indicating that the vehicle was financed by it. The vehicles were all along in possession of the hirers. The right of hire purchase company got extinguished at the time of full payment, which could be pre-mature payment also. In view of these facts, the court held that the transactions were in the nature loan and not hire purchase. The court further held that the intention of the parties was to obtain loan and all the documents including hire purchase agreement, promissory note etc. were executed only to secure the return of loan advanced to the hirers. It was also held that the right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertaining the reality. However, we noted that the ITAT Lucknow Bench in the combined order of Commercial Motor Finance Ltd. Vs. ACIT and others, Kailash Motor Finance Limited and Kailash Auto Finance Limited (2003) 175 Taxation 16, the intention of the applicant has been judged not only from the hire purchase agreement but through the other evidence/ documents. We have already mentioned that hire purchase agreement is not in fact hire purchase agreement but a color has been given to it as hire purchase transaction.In fact, it is a transaction of loan advanced by the assessee company to its customers. The test laid down by ITAT Lucknow Bench clearly indicates that in the instant case it is a finance company advancing loan.In the case dealt with by ITAT Lucknow Bench, referred above, the facts are different than the instant case as in that case the sale invoices were issued in the name of the assessee company and the vehicle was also registered in the name of assess company while in the instant case, the facts are entirely different discussed above. 28. During the course of hearing, our attention was drawn to para 18 of page-5 of the assessment order for the assessment year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout considering the views of the other authorities. Regarding the observation made by CIT(A)- I, Agra that the order of the CIT(A) -II, Kanpur has been reversed by ITAT, Lucknow Bench, we noted that the facts of the case dealt with by ITAT, Lucknow are entirely different from the facts of the instant case. In the case referred by CIT(A)-II Kanpur, the ownership of the vehicle was established of the asssessee companies involved in the decision of ITAT, Lucknow Bench. In those cases, the vehicle was first purchased from the dealer directly by the assessee companies and thereafter agreements were made with the customer to run the vehicle and to pay monthly installment, which includes principal and hire charges. After payment of full installments, the vehicle was transferred second time in the name of the customer. Therefore, the Hon'ble ITAT Lucknow Bench has decided the issue in favor of the assessee companies.But in the instant case, the first sale itself is directly made to the customers and they remained the owners of the vehicle. Therefore, the inference drawn from the decision of ITAT, Lucknow Bench by CIT(A)- I, Agra is erroneous as he has decided the issue of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. it is also noted that undertaking from the purchaser of vehicle was also obtained by the bank. In view of all these facts, since the bank had already secured its advance against a number of securities, it was not very much concerned to ascertain as to whether the vehicles were actually the stock of the company or not. 32. We further noted that several decisions were cited before CIT (A)-II, Agra and each and every decision has been discussed in length in the order of the CIT(A)-II, Agra and we noted that the judgment relied upon by the assesse company are on different contexts and the Supreme Court in the case of CIT Vs. Sun Engineering Works Pvt. Ltd. 198 ITR-297 has held that it is neither desirable nor permissible Interest Tax Appeal No.1/D/2008 16 to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. It was further held that the judgment must be read as a whole and the observations from the judgment have to be considered in the light of the question which were before the court. Similar view has also been expressed by the consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. 7. As regards ground nos.5 to 14 in the appeal, we find that the ITAT on the said issue concluded in their aforesaid order dated 14 th August, 2003 as under: - 33. Keeping in view the facts, circumstances and the legal position, we are of the view that the assesse company is engaged in financing business and only, advancing loan on interest and by no stretch of imagination it can be considered as a Hire Purchase Company. Thus, we dismiss all the three grounds of appeal of the assesse company and uphold the order of CIT(A)-II, Agra for A.Y. 1994-95, 1995-96, 1996-97, 1997-98 1999-2000. 8. In the light of the view taken by the ITAT in the assessee s own case in the AYs.1994-95 to 1997-98 1999-2000, especially when the ld. AR did not bring to our notice any contrary decision nor placed any other material before us so as to enable us to take a different view in the matter, we are not inclined to interfere. In these circumstances, we do not find any infirmity in the findings of ld. CIT(A), treating the hire charges receipt as chargeable interest under the Act. Consequently, ground nos. 5 to 14 in the appeal are also dismissed. 9. No additional ground ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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