ITO, Ward-15(2), Hyderabad V. M/s Suman Chit Funds Private Limited, Hyderabad

ITA 1064/HYD/2013

• Counselvise Citation: 106422514 RSA 2013
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 09-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K HARITA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Non-deduction of tax
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE THE HONBLE VICE PRESIDENT, SHRI D.MANMOHAN AND SHRI B.RAMAKOTAIAH, HONBLE ACCOUNTANT MEMBER ITA NO.1 064 /HYD/2013 : ASST. YEAR 20 0 8 - 09 ITA NO.1 065 /HYD/2013 : ASST. YEAR 20 11 - 12 INCOME TAX OFFICER WARD 15( 2 ), HYDERABAD. V/S. M/S. SUMAN CHIT FUNDS P VT. LTD., HYDERABAD ( PAN - AA F C S 3713 E ) (APPELLANT) (RESPONDENT) APPELLANT BY : S MT. K.HARITA DR RESPONDENT BY : SHRI K.A.SAI PRASAD DATE OF HEARING 6 . 2 .201 4 DATE OF PRONOUNCEMENT 6 .2.2014 O R D E R PER D.MANMOHAN, VICE PRESIDENT: THESE TWO APPEALS ARE FIL E D AT THE INSTANCE OF THE R E VENUE AND THEY ARE DIRECT E D AGAINST THE O R D ERS PASSED BY T H E COMMISSIONER OF INCOME - TAX(APPEALS) II , HYDERABAD . 2. COMMON EFFECTIVE GROUND URGED IN BOTH THE SE APPEALS READ S AS UNDER - 1 .. 2. THE LD. CIT(A) ER R ED IN HOLDING THAT THE CHIT DIVIDENDS PAID TO THE SUBSCRIBERS, DO NOT PAR T AKE THE CHARA C T ER OF INTEREST, AND CONSEQUENTLY THE CHIT FUND COMPANY IS NOT LIABLE TO DEDUCT TAX U/S. 194A WHILE MAKING PAYMENT OF DIVIDEND TO THE SUBSCRIBERS. 3. .. 3. FAC T S IN BRIEF ARE THAT THE ASSESSEE I S ENGAGED IN CHIT FUND BUSINESS . IN THE CO U R SE OF ITS BUSINESS , IT HAD DISTRIBUTED CHIT DIVIDEND TO ITS SUBSCRIBERS WITHOUT DEDUCTING TAX AT SO U R CE. IN THE OPINION OF THE ASSESSING OFFICER , IT SHOULD B E TREATED ON PAR WITH INTEREST PAYMENT , AND HENCE , THE ASSESSEE IS DUTY BOUND TO DEDUCT TAX AT SOURCE UNDER S.194A OF T HE AC T AND FAILURE TO DEDUCT TAX ITA NO. 1064 & 1065 / HYD/ 2013 M/S. SUMAN CHIT FUNDS P VT. LTD., HYDERABAD 2 SHO ULD BE TREATED AS DEFAULT WITHIN THE MEANING OF S.201(1) AND 201A OF THE AC T . THE CASE OF THE ASSESSEE , ON THE OTHER HAND, WAS THAT THE AMO UNT PAID BY IT IS TO ITS CHIT MEM B E RS AND N O T OUTSIDERS, AND HENCE, IT DOES N O T PARTAKE T HE CHARA C TER OF I N T ER E ST. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE , W H E REAS ON APPEAL FILED BY THE ASSESSEE , THE LEARNED CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBS E RVI N G IN PARA 5 OF HIS ORDER AS UNDER - 5. THERE IS ONLY ONE ISSUE IN THIS APPEAL AND THAT RELATES TO THE TREATMENT OF CHIT DIVIDEND PAID/DISTRIBUTED BY THE APP ELLANT AS INTER E ST AS PER SECTION 2(28A) OF THE A C T AN D THE APPLICABILITY O F SECTION 194A OF THE A C T. O N THE ISSUE OF LEVY O F TAX AND I N T E R E ST ON THE C H IT DIVIDEND UNDER SE CT I ON 201(1) AND 201(1A) OF THE AC T HAS BEEN DECIDED BY ME IN APPELLANT S OWN CA S E FOR THE ASST. YEAR 2006 - 07 IN ITA N O .0189/ CIT(A) - II/2009 - 10 DATED 14.02.2010. IT WAS HELD THAT THE DIVIDEND PAID BY THE APPELLANT COMPANY TO VARIOUS CHIT MEMBERS WAS N O T IN THE CHARACTER OF I N T ER E ST PAYMENT AND T H E R E F O RE, T HERE WAS NO APPLICABILITY OF SECTION 194A OF T H E AC T AND NO LIABILITY ON THE PART OF THE APPELLANT TO DEDUCT TDS ON CHIT FU N D DIVIDENDS . IT MA Y B E NOTED THAT THE HO N BLE JURISDI CTIONAL TRIBUNAL VIDE I T S ORDER IN ITA NOS.604 & 605/ HYD/2011 DATED 10.10.2011 FOR THE TWO YEARS VIZ. 2006 - 07 & 2007 - 08, HAS CONFIRMED THE SAID ORDER. FOR T H E A.YS. 2009 - 10 & 2010 - 11 ALSO THE APPEALS DECIDED BY ME VIDE ORDERS IN ITA NO.0910 & 0911/ CIT(A) - II/2011 - 12 DAT ED 28.0 8.2012 HAS BEEN CONFIRMED BY THE ITAT, HYDERABAD , VIDE O R DER IN ITA NO.1610 & 1611/HYD/2012 DATE D 11.02.2013. 5 .1 SI N C E THE ISSUE INVOLVED IS IDENTICAL, THE DECISION AS OUTLINED IN T HE ORDER DATED 14.12.2010 ALSO APPLIES TO THE CURRENT CA S E AND THE APPEAL FOR TH E YE A R U N D ER CONSIDERATION IS ALSO ALLOWED AND THE DEMAND OF R S .88,98,590/ - U/S. 201(1) AND I N TE R E ST OF R S .53,39,154/ - U N D ER SECTION 201(1A) OF THE AC T RAISED BY THE ASSESSING OFFICER IS ORDERED TO BE DELE TED . 4. AGGRIEV ED, R E VENUE PREFERRED THESE APPEALS BEFORE US. 5. AT THE TI M E OF H E ARING, THE LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE PLACED R E L I A N C E ON T H E FOLLOWI N G DECISIO N O F THE ITAT IN SUPPORT OF T HE CONTENTIO N S OF THE ASSESSEE THAT TH E RE IS NO OBLIGATION ON THE ASSESSEE TO DEDUCT TAX AT SO U R CE ON THE PAYMENTS MADE IN THE FORM OF CH I T DIVIDEND TO ITS SUBSCRIBERS, AN D CONSEQUENTLY, IT IS NOT L IABLE FOR INT E REST UNDER S.201 AND 201(1A) OF THE AC T. ITA NO. 1064 & 1065 / HYD/ 2013 M/S. SUMAN CHIT FUNDS P VT. LTD., HYDERABAD 3 ORDER DATED 11.2.2013 IN ITA NOS.1610 & 1611 /HYD/2012 FOR THE ASSESSMENT YEAR S 2009 - 10 AND 2010 - 11 IN INCOME TAX OFFICER , W A RD 15(2), HYDERABAD VS. M/S. SUMAN C HIT FU N D S P VT. LTD., HYDERABAD 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER . 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION A ND PERUSED THE RECOR D . SI N C E T HE V IEW TAKEN BY THE LEARNED CIT(A) IS CONSI S TE NT WITH THE VIEW TAKEN BY THE T RIBUNAL IN ASSESSEE S OWN CA S E FOR THE ASSESSMENT YEAR 2009 - 10 AND 2010 - 11 , WE DO NOT FIND ANY INFIRMITY IN THE O R DERS PASSED BY THE LEARNED CIT(A) . THER E FORE, AS PRONOUNCED IN THE OPEN COURT, THE SE APP E ALS FI L E D BY THE R E VE NUE ARE DISMISSED . 8. IN THE RESULT, BOTH THE APPEALS O F THE R E VENUE ARE DISMISSED . ORDER PRONOUNCED IN THE COURT ON 6 .2.2014 SD/ - SD/ - (B.RAMAKOTAIAH ) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT DT/ - 6 TH FEBRUARY 2014 COPY FORWARDED TO: 1. M/S. SUMAN CHIT FUNDS P VT. LTD., 5 - 4 - 36/1, J.N.ROAD, ABIDS , HYDERABAD 2 . INCOME TAX OFFICER 15( 2 ), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) II, HYDERABAD COMMISSIONER OF INCOME - TAX I HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S