Page 196 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 12: Hire Purchasing

In a contract of hire purchase, the element of sale is inherent as the hirer always has the Notes
option to purchase the movable asset by making regular payment of hire charges and the
property in the goods passes to him on payment of the last instalment.
The taxation aspects of hire purchase transaction can be divided into three parts, viz.
Income Tax, Sales Tax and Interest Tax.

Each type has its own aspect related to the hire purchase agreement.

12.5 Keywords

Document of title to goods: A document of title to goods is one which entitles and enables its
rightful holder to deal with the goods represented by it, as if he were the owner.

Goods: The subject matter of a contract of sale is the 'goods'.
Hire purchase: It is a mode of financing the price of the goods to be sold on a future date.
Security deposit: In certain contract the buyer pays an amount in advance as earnest money
deposit or as a security deposit, for the due performance on his part of the contract.

12.6 Self Assessment

Fill in the blanks:
1. The hire purchase finance companies, have to pay interest tax under the Interest Tax
Act,............ .
2. ..................... means 'voluntary transfer of possession of goods from one person to another'.
3. The buyer is said to have ..................... the goods, when he signifies his assent that he has
received the goods under, and in performance of the contract of sale.
4. A ..................... delivery is a delivery by attornment which takes place when the person in
possession of the goods acknowledges that he holds the goods on behalf and at the disposal
of the other person.
5. A hire purchase agreement is defined in the Hire Purchase Act, ......................
6. Under ..................... system, the buyer takes possession of goods immediately and agrees
to pay the total hire purchase price in installments.
7. The ..................... is free to return the goods without being required to pay any further
installments falling due after the return.
8. The ..................... of the goods passes from the seller to the buyer on the payment of the last
installment.
9. The hirer has the right to ..................... the agreement any time before the property passes.
10. In absence of any specific law, the hire purchase transactions are governed by the provisions
of the ..................... and the ..................... .
11. A ..................... of goods is a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a price.

12. A ..................... is a transfer of interest in the goods from a mortgagor to mortgagee to
secure a debt.
13. If the hirer makes payments ....................., he gets an option to purchase the goods on
making the full payment.

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