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Input credit on hp goods

GUHAN (Practicing CA & CS ) (321 Points)

06 October 2014

is it possible to claim input tax credit on goods which s under hypothication. for ex. a person engaged in transport business bought a new car in loan from a bank. can he claim IT credit in this scenario. cos one of the nbfc claims that they r d legal owner till payment of dues and hirer can claim IT credit only after paying last emi... is this correct?

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Harshal (CA) (106 Points)
Replied 06 October 2014

Dear Guhan,

You can definately claim Input tax Credit on Goods Purchased under Hypothication. Transactions under Hypothication Sysrem (Under Hire Purchase/Lease Transaction) are treated as Deemed Sales under Article 266 (29A) of Constitution of India. According to this article sale under hypothication system is deemed to be normal sales & the provisions of tax apply to it as they apply to normal sales. In such transactions buyer is the only & real owner & NBFC is just financer. So in my opinion you can definately claim Input Credit.

Regards: -

CA Harshal Pahade

Contact: - 9272344759