Supreme Court issues notice to GE Capital on I-T department plea
The dispute between the revenue department and GE Capital Transport Finance Services on delayed payment of lease rental and hire purchase installments has landed in the Supreme Court.
By Sanjay K Singh, TNN |
NEW DELHI: The dispute between the revenue department and GE Capital Transport Finance Services on delayed payment of lease rental and hire purchase installments has landed in the Supreme Court. The revenue department feels that such payments are financial charges that form part of the chargeable interest under provisions of the Interest Tax Act. The company, on the other hand, feels this interpretation is not correct.
A bench headed by Justice SH Kapadia recently issued notices to GE Capital Transport Finance Services on the basis of an appeal filed by the department of revenue.
Advocate Chinmoy Pradip Sharma, appearing on behalf of the revenue department, argued before the apex court that delayed payment of lease rental and hire purchase installments form part of chargeable interest as defined under section 2(7) read with section 5 of the Interest Tax Act.
Such interest and delayed payments should be treated as financial charges and be included in the chargeable interest within the meaning of section 2(7) of the Interest Tax Act, he said.
In 1996, the non-banking finance company had filed a return declaring chargeable interest of Rs 19,77,33,870. The department issued notice to the company, saying that the amount of interest on securties was not chargeable to interest taxes. This view was rejected by the authorities and Rs 3,59,80,028 –– being interest on securities –– was added to the computation of chargeable interest.
The company further said that hire charges on different sales not covered under section 5 of the Interest Tax Act was not included and thus the amount of Rs 43,42,81,746 was not covered under the provision of the Act.
Aggrievd by the order of the assessing officer, the company appraoched CIT (Appeals) and won a mixed verdict. Thereafter, the issue went to the Income Tax Appellate Tribunal and then Delhi high court, before reaching the Supreme Court.
A bench headed by Justice SH Kapadia recently issued notices to GE Capital Transport Finance Services on the basis of an appeal filed by the department of revenue.
Advocate Chinmoy Pradip Sharma, appearing on behalf of the revenue department, argued before the apex court that delayed payment of lease rental and hire purchase installments form part of chargeable interest as defined under section 2(7) read with section 5 of the Interest Tax Act.
Such interest and delayed payments should be treated as financial charges and be included in the chargeable interest within the meaning of section 2(7) of the Interest Tax Act, he said.
In 1996, the non-banking finance company had filed a return declaring chargeable interest of Rs 19,77,33,870. The department issued notice to the company, saying that the amount of interest on securties was not chargeable to interest taxes. This view was rejected by the authorities and Rs 3,59,80,028 –– being interest on securities –– was added to the computation of chargeable interest.
The company further said that hire charges on different sales not covered under section 5 of the Interest Tax Act was not included and thus the amount of Rs 43,42,81,746 was not covered under the provision of the Act.
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The assessing officer, however, held that hirer was not real purchaser of the assests and does not pay the price thereof and hire purchase agreement was entered into merely as an arrangement. Such arrangement is a security for repayment of the loan, it was argued. Therefore, Rs 47,17,50,039 was included in computation of chargeable interest.Aggrievd by the order of the assessing officer, the company appraoched CIT (Appeals) and won a mixed verdict. Thereafter, the issue went to the Income Tax Appellate Tribunal and then Delhi high court, before reaching the Supreme Court.
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