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TMI Blog2015 (2) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... have withstood the scrutiny of law. However, the Appellate Commissioner chose to give partial relief, based, again, on a similar line of logic. However, this cannot result in our holding that the ITAT can be faulted in its conclusions. As to whether charges or amounts received from borrowers or subscribers of schemes, are truly, “interest” necessarily has to be dependent on a fact to fact determination, and cannot rest on the suspicions of the revenue officials. Another important factor in the present case is that these financial charges were one time charges and were not recurring. - Decided against revenue. - ITA 96/2006 - - - Dated:- 5-2-2015 - MR. S. RAVINDRA BHAT AND MR. R.K.GAUBA, JJ. For the Appellant : Mr. N P Sahni, sr. st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and advances made in India that would be considered as interest within the meaning of the I. T. Act 974 (sic). Section 5 of the Interest Tax Act, contemplates interest accruing or arising to the assessee in the previous year. It is generally the agreement between the parties, which will determine the quantum of interest to be paid on loans and advances. Admittedly, the financing charges which were considered as interest by the revenue authorities was not payable as interest on the loans and advances given by the assessee as per agreement between the parties. The Ld. CIT(A) while setting aside the original order of assessment framed by the AO had specifically given a direction that AO should place before the assessee all aspects of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strue then as interest on loans and advances. Apart from the above, the Ld. CIT(A) has not given any basis of coming to the conclusion that 50% of the financing charges should be treated as chargeable interest. The quantum of 50% is adopted without any basis and purely as a guess work. This was not permissible in law. Since there was no material to come to the conclusion that the processing fees charged by the assessee was in the nature of interest and that the assessee by charging excess processing fees attempted to divert the chargeable interest by claiming higher processing fees, the addition sustained by the Ld. CIT(A) was without any business and the same deserves to be deleted and the same is directed to be deleted. The 8th ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. In State Bank of Indore (supra) the Madhya Pradesh High Court decided to deal with the issue as to whether charges for delayed payment of loan and advances would be treated as interest. The High Court was of the opinion that it could not so be treated given that it was by way of damages that the amounts were payable. In the present circumstance, what swayed the AO to bring the income in question to tax, was what he considered to be unusual high rates of financing charges, from assessee by its members. 6. Whilst such a factor might itself constitute a suspicious circumstance, by no means can it be determinative or conclusive. In order to support his conclusions, the AO ought to have made further enquiries such as what was the ordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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