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 THURSDAY, THE 23RD JULY 2009 / 1ST SRAVANA 1931 ITA.No. 575 of 2009() --------------------- ITA.6/2004 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): RESPONDENT: ------------------------- M/S.ROYAL HIRE PURCHASE (P) LTD., TRICHUR. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 23/07/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & C.K.ABDUL REHIM, JJ. ----------------------------------- I.T.A. No.575 of 2009 -------------------------------------- Dated this the 23rd day of July, 2009 J U D G M E N T ---------------------- Ramachandran Nair,J. Since the questions raised are covered by our decisions partly in favour of the assessee and partly against it, we dispose of the appeal without issuing notice to the respondent assessee. Interest recovered under the head finance charges and hire charges will attract interest tax under the provisions of the Interest Tax Act by virtue of our decision reported in Commissioner of Income Tax Vs. Kerala State Financial Enterprise and others (220 CTR 286). Following the said judgment we answer the question pertaining to liability for Interest Tax Act on hire charges and finance charges against the assessee. The departmental appeal is therefore allowed to this extent reversing the order of the Tribunal and that of the first appellate authority and by remanding the matter to the assessing officer for re-computation of liability based on the decision above referred after issuing notice to the assessee along with a copy of this judgment. 2. So far as the other questions raised namely, liability for interest tax on interest received from post office deposits I.T.A.575/09 2 under the Indira Vikas Pathra and Kisan Vikas Pathra schemes are concerned the questions will stand answered against the Revenue and in favour of the assessee because in many cases we have taken the view that these are investments which are not in the nature of advance or loan, the interest from which alone will attract liability under the Interest Tax Act. The departmental appeal on these issues are therefore dismissed. 3. So far as the other issues, that is the liability under Interest Tax Act for default interest and penalty are concerned we direct the Assessing Officer to re-examine the matter in the light of the decision above referred and include so much of the additional interest charged for default in payment of hire charges whether called penalty, surcharge or default interest. We make it clear that the Assessing Officer should along with a copy of this judgment issue a proposal for revision of assessment based on the direction above referred and the assessee should be given sufficient opportunity of hearing before orders are issued. C.N.RAMACHANDRAN NAIR, JUDGE. C.K.ABDUL REHIM, JUDGE. okb