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TMI Blog2012 (11) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee with one Sh. Amit Singh, discloses that the hirer was to pay Rs.12,500/- per month, effective from 10.02.2001 and that the hirer could, at any time during the hire, become owner of the vehicle on making payment of hire fully for the whole period of agreement. Having provided so, the agreement is silent as to what constituted the period of its tenure. Hire-purchase concerns two elements - bailment and sale in the sense that it visualizes an eventual sale which fructifies when the option is exercisable by the purchaser after fulfilling the terms of the agreement. In the present case, however, the tenure of the agreement itself is unknown; the hirer, in fact, is the registered owner of vehicle. Having regard to these features and the other discussed elaborately by the Tribunal and the CIT(A), this Court is of the opinion that findings impugned in this case do not call for any interference on the merits. This question too is answered against the assessee - appeal is meritless; it is, therefore, dismissed. Decision in K.L. Johar & Co. (1964 (11) TMI 58 - SUPREME COURT OF INDIA), followed - IT APPEAL NO. 437 OF 2012 - - - Dated:- 3-10-2012 - S. RAVINDRA BHAT AN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t company and uphold the order of CIT(A)-II, Agra for the A. Yrs. 1994-95, 1995-96, 1996-97, 1997-98 and 1999-2000. [F]urther in the light of Board's circular and the ratio laid down by the Hon'ble Supreme Court in the case of Sundram Finance Ltd. and in view of the various decisions discussed therein, it would be evident that the transactions of the appellant company were in the nature of loan and not hire purchase. Similar nature of business transactions involve in subsequent year 2000-2001. The hire purchase charges are nothing but interest charged on money financed to hirers, therefore, the hire charges come in the definition of chargeable interest u/s 5 read with section 2(7)/2(5B) of the Interest Tax Act, 1974. As per this office record, no return has been filed by the appellant for the AY 2000-01. Keeping in view the above, I have reason to believe that income chargeable under Interest Tax Act, 1974 has escaped assessment for the AY 2000-01. Accordingly notice u/s 10 of the Interest Tax Act, 1974 is issued for the AY 2000-01." 4. The appellate commissioner, on considering the records, held that the Assessing Officer issued notice on 13.11.2003 under Section 10 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case, such as a hire-purchase agreement, the requirement of monthly payment to the assessee by the hirer; the power to repossess the vehicle in the event of default in payment of the charges and eventual vesting of the title in the vehicle after all instalments were paid by the hirer. 8. In this regard, learned counsel also relied upon the decision of the Supreme Court reported as K.L. Johar Co. v. Dy. CTO AIR 1965 SC 1082. 9. Learned counsel for the Revenue, on the other hand, contended that the Tribunal's order cannot be found fault with because it followed its order in the previous assessment years. It was submitted that the challenge to the reassessment is baseless since the assessee did not respond to the notice issued by the Assessing Officer at the relevant time and having regard to the overall circumstances, proceedings were initiated under Section 10. It was submitted that the reasoning of the CIT(A) and the Tribunal on the merits of the assessment are in conformity with the decision of the Supreme Court in K.L. Johar Co. (supra). The true nature of the transaction in the present case was a sale and not leasing or hire-purchase as contended by the assessee. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into between the assesses-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 colour of hire purchase. It can be seen from clause-4 of the declaration 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. (assesses-company) and I have only right to ply the vehicle on hire under Motor Vehicle 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 fire. Under the hire purchase agreement my ownership on the vehicle will be only when I shall pay full instalment and on fulfilment 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 has been issued in the same of the hirer, however, in declaration form given in the so-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 instalment to the assessee-company. The situation of bailment doesn't arise because vehicle has already possessed by the customer and thus neither the assessee-company is bailer nor the customer is bailee." 13. It is quite evident from the circumstances that the vehicle at inception itself was registered in the name of the ostensible borrower; most importantly, the findings also show that the condition of the transaction being one of hire, was shown to be at the request and as per agreement of the assessee. 14. Another interesting aspect and the most revealing feature which emerges from a reading of the agre ..... 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