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: 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 tax under the Interest Tax Act on finance charges and hire charges and also on interest received from Indira Vikas Pathra. First part of the question stands decided by this court vide judgment in COMMISSIONER OF INCOME-TAX V. KERALA STATE FINANCIAL ENTERPRISES LTD. (220 CTR 286). Following the said judgment we reverse the order of the Tribunal and that of the first appellate authority leaving freedom to the Assessing Officer to assess interest component of hire charges and finance charges received by the assessee. So far as assessee's liability for interest tax on the default interest collected is concerned, the issue is covered in favour of the revenue by our judgment in I.T.A. No.57/2009 dated 23.3.2009. Following the above judgment we declare that the assessee is liable for interest tax for the default/delay interest recovered. 2 2. However, we turn down the department's contention that assessee is liable to pay interest tax on the interest received from Indira Vikas Pathra and Kisan Vikas Pathra. We have already taken the view that these deposits with the Post Office are in the nature of investment and not by way of loan or advance. We, therefore, decline to entertain department'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 and finance charges and liability for interest tax for the delay/default interest collected. The orders of the Tribunal and that of the first appellate authority are set aside to the extent relating to these issues and we direct the Assessing Officer to recompute liability based on judgments abovereferred after issuing notice and giving opportunity to the appellant along with copy of this judgment which should also be forwarded by the Assessing Officer before revision of assessment. C.N.RAMACHANDRAN NAIR Judge C.K.ABDUL REHIM Judge pms