Partly allowed

The Commissioner of Income Tax v. the Kerala State Financial Enterprises

Kerala HC7 Apr 2009ITA/73/2009

Case brief

AI extract

What is this about?

The High Court of Kerala decided connected income tax appeals concerning the assessability of finance charges, hire purchase charges, and default interest under the Interest Tax Act, relying on a previous judgment of this court.

What did the court decide?

Finance charges, hire purchase charges, and default interest declared taxable; Appeals allowed in part; Assessing Officer directed to revise assessment.

The Commissioner of Income Tax Vs the Kerala State Financial… — Income Tax | Kerala HC (2009)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN

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TUESDAY, THE 7TH APRIL 2009 / 17TH CHAITHRA 1931

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ITA.No. 73 of 2009() -------------------ITA.8/C0CH//2000 of I.T.A.TRIBUNAL,COCHIN BENCH

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APPELLANT/APPELLANT

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THE COMMISSIONER OF INCOME TAX,TRICHUR.

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BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX

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RESPONDENT(S): RESPONDENT/RESPONDENT

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THE KERALA STATE FINANCIAL ENTERPRISES LTD.,TRICHUR.

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THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07/04/2009, ALONG WITH I.T.A.NO.81/2009 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ.

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I.T.A. NOS:73, 81 & 82 OF 2009

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Dated this the 7^th April, 2009.

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JUDGMENT

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RAMACHANDRAN NAIR, J.

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Since the questions raised in all the connected appeals filed by the revenue are generally covered by our judgment in asssessee's own case, we proceed to dispose of the cases without issuing notice to the respondent. The main issue raised pertains to assessability of finance charges and hire purchase received under the Interest Tax Act. In view of our decision in Commissioner of

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Income Tax v. Kerala State Financial Enterprises Ltd and others (220 CTR 286) we declare that finance charges and charges received under hire purchase agreement will be subject to levy of tax under the Interest Tax Act. Besides hire purchase charges and interest charges received assessee appears to have collected default charges also along with finance charges and hire purchase charges. The default interest also will form part of the interest taxable under the Interest Tax Act. Questions 1 to 3 raised in ITA 82/09, question No:1 raised in ITA 81/09 and questions 1 to 3 raised in ITA 73/90 will stand answered in favour of the revenue

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ITA Nos: 73/09 etc. 2

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and against the assessee. Following the judgment in the connected cases of same assessee and disposed of by us yesterday in ITA 74/2009 we answer questions 4, 6 and 7 in ITA 73/2009 raised by the revenue in favour of the assessee and against the revenue. So far as questions 8 and 9 are concerned which pertain to default interest on R.R dues and interest received on NFDL and NHFS we do not think the questions can be answered by us because Tribunal has not considered these issues in their order and so much so the questions do not arise from the order of the Tribunal. We therefore decline to answer these two questions raised in I.T.A 73/2009 leaving freedom to the department to move the Tribunal for rectification of their order, if tenable. So far as question No:4 in ITA 82/09 is concerned we hold that the default interest represents interest payable for defaulted payment of hire charges for loans and advances. Therefore such default interest also will form interest assessable under the Interest Tax Act. The Assessing Officer is directed to verify and pass appropriate orders. Tribunal's order will stand modified as above. The position is the same so far as question No:1 in ITA 81/09 also is concerned. So far as question Nos:3 and 4 in ITA 81/09 are concerned, we do not find these questions as arising from the order of the Tribunal because

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ITA Nos: 73/09 etc.

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they have not decided the issues raised by the department. Therefore, we decline to answer these two questions pertaining to default interest on R.R dues and interest received on transactions referred as NFDL and NHFS. The appeals are allowed in part as stated above. The Assessing Officer will revise assessment after giving opportunity to the assessee. Since appeals are disposed of without issuing notice to respondents, appellants will deposit bata for the Registry to forward copy of the judgment along with one set of appeal in all the cases .

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C.N. RAMACHANDRAN NAIR Judge

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K. SURENDRA MOHAN Judge

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K.K.DENESAN & V. RAMKUMAR, JJ.

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M.F.A.NO:

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JUDGMENT

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