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The Tax Publishers ITO v. Indian Leasing & Trading (P) Ltd. [ITA No. 1278/Kol/2013, dt. 4-5-2016] : 2016 TaxPub(DT) 2231 (Kol-Trib) TDS on hire purchase *Facts:* Assessee was in the business of running lorries/trucks and from financing. Assessing officer disallowed finance charges paid to Tata finance under section 40(a)(ia) holding that they were subjected to TDS under section 194H while the fact of the transaction was hire purchase which fell outside sec. 194A as well. Commissioner (Appeals) deleted the disallowance. On appeal: Held in favour of the assessee that the hire purchase finance charges did not fall in section 194A or in section 194H. As for why they did not fall in the scope of section 194A the below mentioned CBDT circular was quoted: CBDT's Instruction No. 1425 dtd.16-11-81 "T.D.S. Section 194A of the Income-tax Act-Hire Purchase Transactions Applicability of-Clarification Regarding. Instruction No. 1425 F. No. 275/9/80 IT(B) dated 16-11-81 from CBDT. In a hire-purchase contract the owner delivers goods to another person upon terms on which the hirer is to hire them at a fixed periodical rental. The hirer has also the option of purchasing the goods by paying the total amount of agreed hire at any time or of returning the same before the total amount is paid. It may be pointed out that part of the amount of the hire purchase price is towards the hire and part towards the payment of price. The agreed amount payable by the hirer in periodical instalments cannot, therefore, be characterised as interest payable in any manner within the meaning of section 2 (28A) of the Income-tax Act, as it is not in respect of any money borrowed or debt incurred in this view of the matter it is clarified that the provisions of section 194A of the Income-tax Act are not attracted in such transactions"

The Tax Publishers

ITO v. Indian Leasing & Trading (P) Ltd. [ITA No. 1278/Kol/2013, dt. 4-5-2016] : 2016 TaxPub(DT) 2231 (Kol-Trib)

TDS on hire purchase

Facts:

Assessee was in the business of running lorries/trucks and from financing. Assessing officer disallowed finance charges paid to Tata finance under section 40(a)(ia) holding that they were subjected to TDS under section 194H while the fact of the transaction was hire purchase which fell outside sec. 194A as well. Commissioner (Appeals) deleted the disallowance. On appeal:

Held in favour of the assessee that the hire purchase finance charges did not fall in section 194A or in section 194H. As for why they did not fall in the scope of section 194A the below mentioned CBDT circular was quoted:

CBDT's Instruction No. 1425 dtd.16-11-81

"T.D.S. Section 194A of the Income-tax Act-Hire Purchase Transactions Applicability of-Clarification Regarding. Instruction No. 1425 F. No. 275/9/80 IT(B) dated 16-11-81 from CBDT.

In a hire-purchase contract the owner delivers goods to another person upon terms on which the hirer is to hire them at a fixed periodical rental. The hirer has also the option of purchasing the goods by paying the total amount of agreed hire at any time or of returning the same before the total amount is paid. It may be pointed out that part of the amount of the hire purchase price is towards the hire and part towards the payment of price. The agreed amount payable by the hirer in periodical instalments cannot, therefore, be characterised as interest payable in any manner within the meaning of section 2 (28A) of the Income-tax Act, as it is not in respect of any money borrowed or debt incurred in this view of the matter it is clarified that the provisions of section 194A of the Income-tax Act are not attracted in such transactions"