Income Tax Officer, Ward-15(3), Hyderabad V. M/s. Vijay Bhargavit Chit Funds Pvt.Ltd., Hyderabad

ITA 1036/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66367 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 05-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G SRINIVASA RAO
• Assessee Lawyers: PURNA CHANDRA RAO
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 1036 TO 1039/HYD/2012 ASSESSMENT YEARS: 2005-06 TO 2007-08 & B2009-10. ITO, WARD-15(3), HYDERABAD. .... APPELLANT VS. M/S. VIJAY BHARGAVI CHIT FUNDS PVT. LTD., HYDERABAD. RESPONDENT PAN: AAACV 8130 B APPELLANT BY : SHRI G. SRINIVASA RAO (DR ) RESPONDENT BY : SHRI PURNA CHANDRA RAO DATE OF HEARING : 17-10-2012 DATE OF PRONOUNCEMENT : 17 -10-2012 ORDER PER SAKTIJIT DEY, J.M.: THESE FIVE APPEALS FILED BY THE DEPARTMENT IN THE C ASE OF THE SAME ASSESSEE ARE DIRECTED AGAINST DIFFERENT OR DERS OF CIT (A)-II, HYDERABAD FOR ASSESSMENT YEARS 2005-06 TO 2 007-08 AND 2009-10 RESPECTIVELY. SINCE COMMON ISSUES ARE INVO LVED FOR CONSIDERATION IN ALL THESE APPEALS, THESE ARE CLUBB ED TOGETHER AND DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE SOLE COMMON ISSUE ARISING IN THESE BUNCH OF APPEALS IS AS TO WHETHER THE DIVIDEND PAID TO SUBSCRIBERS PART AKE THE CHARACTER OF INTEREST AS DEFINED U/S 2(28A) OF THE ACT AND HENCE 2 ITA NOS. 1036 TO 1039 OF 2012 VIJAY BHARGAVI CHIT FUNDS PVT. LTD. HYD.. IS SUBJECT TO TDS PROVISIONS AS CONTAINED UNDER SE CTION 194A OF THE ACT. BRIEFLY THE FACTS THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF RUNNING CHIT FUNDS UNDER THE AP CHIT FU ND ACT, 1971. ON 6-10-2004, SURVEY U/S 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE SURVEY OPERAT ION, IT WAS NOTICED THAT THE ASSESSEE HAD DISTRIBUTED CHIT DIVI DEND TO ITS SUBSCRIBERS WITHOUT DEDUCTING TAX AT SOURCE AS REQU IRED U/S 194A OF THE ACT. THE AO ISSUED A SHOW CAUSE NOTICE ASKI NG THE ASSESSEE TO SHOW CAUSE AS TO WHY IT SHOULD NOT BE T REATED AS AN ASSESSEE IN DEFAULT U/S 201(1) AND 201(1A) OF THE I T ACT. THE ASSESSEE IN ITS REPLY SUBMITTED THAT THE CHIT DIVID END PAID BY IT TO THE SUBSCRIBERS CANNOT BE TREATED AS INTEREST AS FI NDS PLACE U/S 2(28A) OF THE IT ACT. THE ASSESSEE SUBMITTED THAT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2004-05 THE CIT (A) FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT AS WELL AS DIFFERENT BENCHES OF ITAT HAS HELD THAT THE CHIT D IVIDEND PAID TO THE SUBSCRIBERS IS NOT IN THE CHARACTER OF INTEREST AND THEREFORE CANNOT BE SUBJECTED TO TDS U/S 194A OF THE ACT AND AS A CONSEQUENCE THEREOF THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) OR 201(1A) FOR NOT D EDUCTING TAX AT SOURCE. THE AO HOWEVER DID NOT ACCEPT THE CONTENTI ON OF THE ASSESSEE AND PASSED AN ORDER U/S 201(1) AND 201(1A) OF THE ACT TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE ON THE CHIT DIVIDEND. THE ASSESSEE B EING AGGRIEVED, FILED AN APPEAL BEFORE THE CIT (A) CHALLENGING THE ORDER PASSED BY THE AO U/S 201(1) AND 201(1A) OF THE ACT. 3. THE CIT (A) FOLLOWING THE ORDER PASSED BY HER FO R THE PRECEDING ASSESSMENT YEAR I.E. 2004-05 WHICH WAS AL SO C0ONFIRMED BY THE ITAT, HYDERABAD BENCH IN ITA NO.820/HYD/2011 DATED 26-12-2011 DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE IS NOT LIABLE TO 3 ITA NOS. 1036 TO 1039 OF 2012 VIJAY BHARGAVI CHIT FUNDS PVT. LTD. HYD.. DEDUCT TAX AT SOURCE U/S 194A ON THE CHIT DIVIDEND PAID TO THE SUBSCRIBERS. 4. WE HAVE HEARD THE LEARNED DR AND SHRI PURNACHAND RA RAO, GENERAL MANAGER OF THE ASSESSEE COMPANY. ON GOING THROUGH THE MATERIALS SUBMITTED BEFORE US, IT IS SEEN THAT FOR THE PRECEDING ASSESSMENT YEAR I.E. 2004-05, THE AO PASSED AN ORDE R U/S 201 (1) AND 201(1A) BY TREATING THE ASSESSEE AS AN ASSE SSEE IN DEFAULT FOR NOT DEDUCTING THE TAX U/S 194A OF THE A CT ON THE CHIT DIVIDENDS PAID TO THE SUBSCRIBERS. THE CIT (A) A LLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BY HOLDING THAT S INCE THE CHIT DIVIDEND DOES NOT PARTAKE THE CHARACTER OF INTEREST AS DEFINED U/S 2(28A) OF THE ACT, THE ASSESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 194A OF THE ACT. THE DEPARTMENT CHAL LENGED THE AFORESAID ORDER OF THE CIT (A) BEFORE THE ITAT. TH E ITAT, HYDERABAD BENCH IN ITA NO.820/HYD/2011 DATED 26-12- 2011 FOLLOWING DECISION OF THE HONBLE MADRAS HIGH COURT IN CASE OF BILAHARI INVESTMENTS PVT. LTD. VS. CIT (288 ITR 39) WHICH WAS CONFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BILAHARI INVESTMENTS PVT. LTD. (299 ITR 1) HELD IN THE FOLLOWING MANNER:- IN VIEW OF THE ABOVE FINDINGS OF THE VARIOUS COURT S, WE ARE OF THE OPINION THAT THE CIT (A) IS JUSTIFIED IN HOLDING THAT THE PAYMENT OF DIVIDEND TO THE SUBSCRIBERS OF A CHIT TOWARDS DIVIDEND DOES NOT PARTAKE THE CHARACTER OF INTEREST AND ACCORDINGLY T HE ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S 194A OF TH E ACT AND NOT LIABLE FOR INTEREST U/S 201(1) AND 201( 1A) OF THE ACT. THIS BEING THE VIEW OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING A SSESSMENT 4 ITA NOS. 1036 TO 1039 OF 2012 VIJAY BHARGAVI CHIT FUNDS PVT. LTD. HYD.. YEAR, WE RESPECTFULLY FOLLOW THE SAME AND HOLD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 194A ON T HE DIVIDENDS PAID TO THE SUBSCRIBERS OF THE CHITS. CONSEQUENTLY, THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201 (1) AND 201(1A) OF THE ACT. THE GROUNDS RAISED BY THE DEPA RTMENT ARE DISMISSED. 5. IN THE RESULT, ALL THE APPEALS FILED BY THE DEPA RTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 -10-2012 . SD/- S D/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 17 TH OCTOBER, 2012. COPY TO:- 1) INCOME-TAX OFFICER, WARD-15(3), INCOME-TAX TOWERS, 4 TH FLOOR, D- BLOCK, HYDERABAD. 2) M/S. VIJAY BHARGAVI CHIT FUND PVT. LTD., FLAT NO.20 7, TO 2012, SRI DATTA COMMERCIAL COMPLEX, RTC X ROADS, HYDERABAD. 3) THE CIT (A)-II,, HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 5 ITA NOS. 1036 TO 1039 OF 2012 VIJAY BHARGAVI CHIT FUNDS PVT. LTD. HYD..