Ramachandran Nair, J v. The Appeal Is, Therefore, Allowed In Part Declaring Assessee's

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM MONDAY, THE 13TH JULY 2009 / 22ND ASHADHA 1931 ITA.No. 449 of 2009() --------------------- ITA.95/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT: ----------------------------- THE COMMISSIONER OF INCOME TAX, TRICHUR. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- M/S.RIGHT LEASING & HIRE PURCHASE CO.P. LTD., RICE BAZAR, TRICHUR. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 13/07/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ON 13/07/2009, THE COURT ON THE SAME DAY DELIVERED THE C.N.RAMACHANDRAN NAIR &C.K.ABDUL REHIM, JJ.....................................................................I.T. Appeal No.449 of 2009 ....................................................................Dated this the 13th day of July, 2009. JUDGMENT Ramachandran Nair, J. Questions raised pertain to assessee's liability for interest taxunder the Interest Tax Act on finance charges and hire charges and alsoon interest received from Indira Vikas Pathra. First part of the questionstands decided by this court vide judgment in COMMISSIONER OFINCOME-TAX V. KERALA STATE FINANCIAL ENTERPRISESLTD. (220 CTR 286). Following the said judgment we reverse theorder of the Tribunal and that of the first appellate authority leavingfreedom to the Assessing Officer to assess interest component of hirecharges and finance charges received by the assessee. So far asassessee's liability for interest tax on the default interest collected isconcerned, the issue is covered in favour of the revenue by ourjudgment in I.T.A. No.57/2009 dated 23.3.2009. Following the abovejudgment we declare that the assessee is liable for interest tax for thedefault/delay interest recovered. 2. However, we turn down the department's contention thatassessee is liable to pay interest tax on the interest received from IndiraVikas Pathra and Kisan Vikas Pathra. We have already taken the viewthat these deposits with the Post Office are in the nature of investmentand not by way of loan or advance. We, therefore, decline to entertaindepartment's appeal on this issue. The appeal is, therefore, allowed in part declaring assessee's liability for interest tax on the interest component of hire charges andfinance charges and liability for interest tax for the delay/defaultinterest collected. The orders of the Tribunal and that of the firstappellate authority are set aside to the extent relating to these issuesand we direct the Assessing Officer to recompute liability based onjudgments abovereferred after issuing notice and giving opportunity tothe appellant along with copy of this judgment which should also beforwarded by the Assessing Officer before revision of assessment. C.N.RAMACHANDRAN NAIRJudge C.K.ABDUL REHIM Judge