Shri Gautam Chopra, Jamshepur V. DCIT, Jamshepur

ITA 61/RAN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8561 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 13-05-2013
• Court: TRIBUNAL
• Department Lawyers: RAKESH KR DAS SENIOR S C LD
• Assessee Lawyers: NITIN KR PASARI; ANANAD PASARI LD
• Keywords: Principle of natural justice
• Section: 234B

Judgement Text

1 ITA NO.61/RAN/13 SH.GAUTAM CHOPRA INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, RANCHI BEFORE HON'BLE SHRI H.L. KARWA, PRESIDENT , AND HON'BLE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 61 /RAN/201 3 A.Y 200 9 - 10 SHRI GAUTAM CHOPRA VS. D .C.I.T, CIRCLE - 1 , JSR PAN: A CWPC7127J ( APPELLANT ) ( RESPOND ENT ) FOR THE APPELLANT : S/ SHRI NITIN KR. PASARI & ANANAD PASARI , LD.AR S FOR THE RESPONDENT : SHRI RAKESH KR. DAS, SENIOR S.C, LD.DR DATE OF HEARING : 27 - 11 - 2014 DATE OF PRONOUNCEMENT: 27 - 11 - 2014 ORDER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 25.3.2013 PASSED BY LD CIT(A), JAMSHEDPUR AND IT RELATES TO THE ASSESSMENT YEAR 2009 - 10. 2. THE ASSESSEE HAS URGED AS MAN Y AS TEN GROUNDS. AT THE TIME OF HEARING, THE LD COUNSEL APPEARING FOR THE ASSESSEE DID NOT PRESS GROUNDS NO.1 AND 2 AND ACCORDINGLY THEY ARE DISMISSED AS NOT PRESSED. GROUND NO.10 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION . 3. THE GROUND NO. 3 AND 4 RELATED TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. THE FACTS RELATING THERETO ARE STATED IN BRIEF. ACCORDING TO LD A.R, T HE ASSESSEE HAD PURCHASED VEHICLES BY AVAILING HIRE PURCHASE FINANCE FROM CERTAIN FINANCIAL COMPANIES. IN ITS BOOKS OF ACCOUNT, T HE FINANCE CHARGES/HIRE CHARGES WAS CLAIMED AS INTEREST EXPENDITURE. THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE FROM THE INTEREST E XPENSE SO ACCOUNTED FOR. HOWEVER, THE AO TOOK THE VIEW THAT 2 ITA NO.61/RAN/13 SH.GAUTAM CHOPRA THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194A OF THE ACT ON THE INTEREST EXPENDITURE AND ACCORDINGLY DISALLOWED THE SAID CLAIM BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE SAID ADDITION. 4. WE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE LD D.R SUPPORTED THE ORDER OF LD CIT(A). THE LD A.R ATTACKED THE ADDITION ON DIFFERENT GROUNDS, BUT WE ARE CONVINCED WITH THE CONTENTION THAT THE HIRE CHARGES PAID UNDER THE HIRE PURCHASE AGREEMENT SHALL NOT FALL IN THE CATEGORY OF INTEREST LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194A OF THE ACT. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION DATED 04 - 03 - 2014 RENDERED BY THE HYDERABAD BENCH OF ITAT IN THE CASE OF ACIT VS. M/S R.BALARAMI REDDY & CO. IN ITA NO.2224/HYD/2011. WE NOTICE THAT THE HYDERABAD BENCH OF ITAT IN THE ABOVE CITED CASE PLACED ITS RELIANCE ON THE DECISION DATED 05.12.2003 RENDERED BY HON BLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. M/S M.G. BROTHERS FINANCE LTD IN ITTA NOS. 43,44,45,50 OF 2007. THE HON BLE ANDHR A PRADESH HIGH COURT, IN TURN, HAD PLACED RELIANCE ON THE DECISION RENDERED BY HON BLE SUPREME COURT IN THE CASE OF SUNDARAM FINANCE LTD VS. THE STATE OF KERALA. THE RELEVANT OBSERVATIONS MADE BY HON BLE ANDHRA PRADESH HIGH COURT IS EXTRACTED BY THE ITAT AS UNDER: - THE OWNER OF THE GOODS, WHICH ARE USABLE MOVABLE GOODS LET OUT TO THE HIRER ON PAYMENT OF CERTAIN AMOUNT EITHER ON MONTHLY OR QUARTERLY OR YEARLY BASIS AND AFTER PAYMENT OF THE ENTIRE AMOUNT AS CLAIMED BY THE OWNER BEING THE PRICE OF THE GOODS, IT IS OPTIONAL FOR THE HIRER TO BUY UP TO BECOME OWNER OR NOT. IN THE EVENT, HE EXERCISES HIS OPTION TO BUY THEM, THEN, THE OWNER OF THE GOODS IS BOUND TO CONVEY THE SAME BY TRANSFERRING TITLE IN FAVOUR OF THE HIRER. ON THE OTHER HAND, IF THE HIRER DOES NOT EXERCISE HIS OPTION, THEN THE GOODS IN QUESTION MUST BE RETURNED AND THE PAYMENTS SO FAR MADE ARE TREATED TO BE RENTALS. THEREFORE, THE WHOLE CONCEPT IS WITH REGARD TO PAYMENT OF CONSIDERATION MONEY OR RENTAL, NOT REPAYMENT OF LOAN AMOUNT IN FINANCIA L TRANSACTION. UNLESS THERE IS INVOLVEMENT OF LOAN TRANSACTION, THE QUESTION OF PAYMENT OF INTEREST DOES NOT ARISE. THE AFORESAID PECULIAR SITUATION WITH REGARD TO THE HIRE PURCHASE AGREEMENT HAS BEEN EXPLAINED BY THE SUPREME COURT LONG TIME BACK IN THE C ASE OF SUNDARAM FINANCE LTD VS. THE STATE OF 3 ITA NO.61/RAN/13 SH.GAUTAM CHOPRA KERALA. IN PARAGRAPH - 24 OF THE SAID JUDGMENT, THEIR LORDSHIPS HAVE EXPLAINED THE POSITION STATING THUS: - BUT A HIRE PURCHASE AGREEMENT .. IS MORE COMPLEX TRANSACTION. THE OWNER UNDER THE HIRE PURCHASE AGR EEMENT ENTERS INTO A TRANSACTION OF HIRING OUT GOODS ON THE TERMS AND CONDITIONS SET OUT IN THE AGREEMENT, AND THE OPTION TO PURCHASE EXERCISABLE BY THE CUSTOMER ON PAYMENT OF ALL THE INSTALMENTS OF HIRE ARISES WHEN THE INSTALMENTS ARE PAID AND NOT BEFORE. IN SUCH A HIRE PURCHASE AGREEMENT THERE IS NO AGREEMENT TO BUY GOODS; THE HIRER BEING UNDER NO LEGALOBLIGATION TO BUY, HAS AN OPTION EITHER TO RETURN THE GOODS OR TO BECOME ITS OWNER BY PAYMENT IN FULL OF THE STIPULATED HIRE AND THE PRICE FOR EXERCISING THE OPTION. THIS CLASS OF HIRE PURCHASE AGREEMENT MUST BE DISTINGUISHED FROM TRANSACTION IN WHICH THE CUSTOMER IS THE OWNER OF THE GOODS AND WITH A VIEW TO FINANCE HIS PURCHASE HE ENTERS INTO AN ARRANGEMENT WHICH IS IN THE FORM OF HIRE PURCHASE AGREEMENT. IN THIS CASE, THE LEARNED TRIBUNAL HAD ADMITTEDLY HELD THAT THERE IS A HIRE PURCHASE AGREEMENT FACTUALLY. THEREFORE, WE AFFIRM THE JUDGMENT AND ORDER OF THE LEARNED TRIBUNAL. THE APPEALS FAIL AND THEY ARE ACCORDINGLY DISMISSED. BY FOLLOWING THE AB OVE SAID DECISION, THE HYDERABAD BENCH OF ITAT HELD THAT THE PAYMENT OF FINANCE CHARGES/HIRE CHARGES ON ACCOUNT OF HIRE PURCHASE TRANSACTION CANNOT BE CONSTRUED AS INTEREST SO AS TO DEDUCT TDS U/S 194A OF THE IT ACT. 5. IN THE INSTANT CASE, THE LD A.R SUBMITTED THAT THE INTEREST PAYMENTS DEBITED IN THE ACCOUNTS ARE IN FACT, THE PAYMENT OF FINANCE CHARGES/HIRE CHARGES UNDER HIRE PURCHASE AGREEMENTS. HOWEVER, WE NOTICE THAT THE ASSESSEE IS RAISING THIS CONTENTION FOR THE FIRST TIME BEFORE US. THE TAX A UTHORITIES HAVE ALSO NOT EXAMINED ABOUT THE NATURE OF HIRE PURCHASE AGREEMENTS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE AVAILABILITY OF HIRE PURCHASE AGREEMENTS AND THE TERMS AND CONDITIONS THERE OF ARE REQUIRED TO BE EXAMINED AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE SAME IN THE LIGHT OF DISCUSSIONS MADE SUPRA. 4 ITA NO.61/RAN/13 SH.GAUTAM CHOPRA 6. THE GROUND NO.5 AND 6 RELATES TO THE DISALLOWANCE OF INTEREST CLAIMED ON PERSONAL LOAN. ACCORDING TO THE LD A.R, EVENTHOUGH THE LOANS WERE TAKEN IN PERSONAL NAMES, YET THE SAID LOANS HAVE BEEN UTILISED FOR THE PURPOSES OF BUSINESS ONLY. ACCORDINGLY HE CONTENDED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFI RMING THE DISALLOWANCE OF INTEREST AS PERSONAL IN NATURE WITHOUT VERIFYING THE UTILISATION OF THE LOAN. HOWEVER, WE NOTICE THAT THE TAX AUTHORITIES HAVE DISALLOWED THE INTEREST CLAIM ONLY ON THE REASONING THAT THE ASSESSEE COULD NOT PROVE THAT THE SAID LO ANS WERE USED FOR BUSINESS PURPOSES. WHEN THIS ASPECT WAS POINTD OUT, THE LD A.R SUBMITTED THAT THE ASSESSEE WOULD BE IN A POSITION TO PROVE THE SAME, IF ONE MORE OPPORTUNITY IS GIVEN. HENCE, IN THE INTEREST OF THE NATURAL JUSTICE, WE ARE OF THE VIEW THA T THE ASSESSEE MAY BE GIVEN ONE MORE OPPORTUNITY. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER FOR ITS FRESH EXAMINATION. THE ASSESSEE IS DIRECTED TO SATISFY THE AO THAT THE LOAN S TAKEN IN PERSONAL NAMES WERE IN FACT USED FOR THE PURPOSES OF BUSINESS. ON EXAMINATION OF THE INFORMATION AND EXPLANATIONS GIVEN BY THE ASSESSEE ON THIS ISSUE, THE AO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 7. THE GROUND NO. 7, 8 AND 9 ARE RELATED TO THE CHARGING OF INTEREST U/S 24A, 234B AND 234C OF THE ACT. THE CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE BINDING DECISION RENDERED BY HON BLE JHARKHAND HIGH COURT IN TH E CASE OF AJAY PRAKASH VERMA IN TA NO.38 OF 2010 REPORTED IN 2013(1) TMI 140. WE ORDER ACCORDINGLY. 5 ITA NO.61/RAN/13 SH.GAUTAM CHOPRA 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUN CED ACCORDINGLY ON 27 - 11 - 2014 SD/ - SD/ - [ H.L. KARWA ] [ B.R. BASKARAN ] PRESIDENT ACCOUNTANT MEMBER DT. 27 - 11 - 2014 PLACE : RANCHI PP, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT : SHRI GAUTAM CHOPRA C/O S.K. CHPRA, F.NO. G - 708, GR.FL , ORCHID RESIDENCY , ROAD NO.7, EXTENSION, SONARI, JSR(JH) 2 THE RESPONDENT: THE D CIT, C - 1, JSR 3..THE CIT, 4.THE CIT(A), 5.DR, ITAT CIRCUI T BENCH, RANCHI 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT. REGISTRAR 6 ITA NO.61/RAN/13 SH.GAUTAM CHOPRA 1. DATE OF DICTATION .............27 - 11 - 2014.. ON MEMBER S LAPTOP ..................... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DI CTATING MEMBER ........................OTHER MEMBER .... 28 ... - 11 - 2014........................ 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. ..................... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRO NOUNCEMENT..................................27 - 11 - 2014................................................... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S ................ 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .................... ................... 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ......................................... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ........................................................ ......................................... 9. DATE OF DESPATCH OF THE ORDER .............................................................. 7 ITA NO.61/RAN/13 SH.GAUTAM CHOPRA