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TMI Blog2016 (6) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and confirmed the order passed by the Commissioner of Income Tax (Appeals) [for short CIT (A)]. 2. While admitting these appeals, this Court has framed following substantial questions of law. "(i) Whether, in the facts and under the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the Appellant is a credit institution under the provisions of Interest Tax Act and further liable to pay tax on chargeable interest earned by it ? (ii) Whether, in the facts and under the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that gross interest receipt should be compared with the service charges earned and not the net interest income which is much lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a like nature; (iii) a housing finance company, that is to say, a company which carries on, as its principal business, the business of financing of acquisition or construction of houses, including acquisition or development of land in connection therewith; (iv) a loan company, that is to say, a company[ not being a company referred to in subclauses (i) to (iii)] which carries on, as its principal business, the business of providing finance, whether by making loans or advances or otherwise; (v) a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A of the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent is admittedly engaged in hire-purchase business, it is not covered by sub-clause (i) of the definition clause because admittedly, the finding of the lower authorities including the Tribunal is that its principal business is chitty and not hire-purchase business or the financing of such transaction. The respondent will come under the tax net as a hirepurchase finance company only if it's principal business is hire-purchasing or financing of such transactions. The Department admittedly does not have a case that the respondent's principal business is in hire-purchase or in financing of such transaction. On the other hand, it is on record that I.T.A.Nos.199 of 2009 and connected cases the respondent is mainly engaged in chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on loans and advances made in India and also includes the nature of receipts covered by sub-clauses(a) and (b) of Section 2(7). It is common knowledge that the chitty business is not one which involves advancing of loans. In fact, interest happens to be levied only when subscriber fails to remit the kuri subscription amount in time. The interest on default charged on subscribers cannot be treated as interest on loans or advances. Since chitty business does not involve advancing of loan, we do not think, the legislature I.T.A.Nos.199 of 2009 and connected cases intended to cover chitty business under the Act. Therefore, in our view, so long as respondent's principal business is chitty, it will not fall within the definition of 'fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, not a finance company in view of the decision in the case of Kirloskar Leasing & Finance Ltd. 82 ITD 720 (Pune) and Rajesh Leasing & Finance Ltd. 89 ITC 289 (Rjt). We do not find any merit in the contention of the assessee. Interest income in the three years is Rs. 14,97,441/-, Rs, 11,15,533 and Rs. 4,46,972/- whereas the service charges are only Rs. 5,40,132/-, Rs. 3,95,405/- and Rs. 2,95,098/- which is far less than income receipts. Assessee wants us to take net interest and then compare with gross service charges. That cannot be accepted. Like should be compared with like. 8. The next contention of the assessee is that interest is received and paid to sister concern, group companies as loans and not as a business venture and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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