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

ITA 1219/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66514 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: N NARASIMHA RAO
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1219/HYD/2012 ASSESSMENT YEAR : 2008-09 INCOME-TAX OFFICER, APPELLANT WARD 15(3), HYDERABAD. VS. VIJAYA BHARGAVI CHIT FUNDS PVT. LTD., RESPO NDENT HYDERABAD. (PAN NO. AAACV8130B) APPELLANT BY : SHRI K.E. SUNIL BABU RESPONDENT BY : SHRI N. NARASIMHA RAO DATE OF HEARING : 04/12/2012 DATE OF PRONOUNCEMENT : 04/12/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, HYDERABAD DATED 28/06/2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE REVENUE HAS RAISED 7 GROUNDS OF APPEAL, THE SUM AND SUBSTANCE OF WHICH IS AS TO WHETHER THE DIVIDEND PA ID TO SUBSCRIBERS PARTAKE THE CHARACTER OF INTEREST AS DEFINED U/S 2( 28A) OF THE ACT AND HENCE VIJAY BHARGAVI CHIT FUNDS PVT. LTD. HYD. IS SUBJECT TO TDS PROVISIONS AS CONTAINED UNDER SECTION 194A OF THE A CT. 2 ITA NO. 1219/HYD/2012 M/S VIJAYA BHARGAVI CHIT FUNDS PVT. LTD. 3. BRIEFLY THE FACTS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING CHIT FUNDS UNDER THE AP CHIT FUND ACT, 1971 . ON 6-10-2004, SURVEY U/S 133A WAS CONDUCTED IN THE BUSINESS PREMI SES OF THE ASSESSEE. DURING THE SURVEY OPERATION, IT WAS NOTIC ED THAT THE ASSESSEE HAD DISTRIBUTED CHIT DIVIDEND TO ITS SUBSC RIBERS WITHOUT DEDUCTING TAX AT SOURCE AS REQUIRED U/S 194A OF THE ACT. THE AO ISSUED A SHOW CAUSE NOTICE ASKING THE ASSESSEE TO S HOW CAUSE AS TO WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFA ULT U/S 201(1) AND 201(1A) OF THE IT ACT. THE ASSESSEE IN ITS REPL Y SUBMITTED THAT THE CHIT DIVIDEND PAID BY IT TO THE SUBSCRIBERS CAN NOT BE TREATED AS INTEREST AS FINDS PLACE U/S 2(28A) OF THE IT ACT. T HE ASSESSEE SUBMITTED THAT FOR THE PRECEDING ASSESSMENT YEAR I .E. 2004-05 THE CIT (A) FOLLOWING THE DECISION OF HONBLE DELHI HIG H COURT AS WELL AS DIFFERENT BENCHES OF ITAT HAS HELD THAT THE CHIT DI VIDEND 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 C ONSEQUENCE THEREOF THE ASSESSEE CANNOT BE TREATED AS AN ASSES SEE IN DEFAULT U/S 201(1) OR 201(1A) FOR NOT DEDUCTING TAX AT SOUR CE. THE AO HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESS EE 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 SOU RCE ON THE CHIT DIVIDEND. 4. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE CIT (A) CHALLENGING THE ORDER PASSED BY THE AO U/S 201(1) AND 201(1A) OF THE ACT. 3 ITA NO. 1219/HYD/2012 M/S VIJAYA BHARGAVI CHIT FUNDS PVT. LTD. 3. THE CIT (A) FOLLOWING THE ORDER PASSED FOR THE PRECEDING ASSESSMENT YEAR I.E. 2004-05 WHICH WAS ALSO CONFIRM ED BY THE ITAT, HYDERABAD BENCH IN ITA NO.820/HYD/2011 DATED 26-12- 2011 DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE BY HOL DING THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 194A ON THE CHIT DIVIDEND PAID TO THE SUBSCRIBERS. 4. WE HAVE HEARD THE LEARNED DR SHRI K.E. SUNIL BA BU AND THE LEARNED COUNSEL FOR THE ASSESSEE SHRI N. NARASIMHA RAO. ON GOING THROUGH THE MATERIALS SUBMITTED BEFORE US, IT IS SE EN THAT FOR THE PRECEDING ASSESSMENT YEAR I.E. 2004-05, THE AO PASS ED AN ORDER U/S 201 (1) AND 201(1A) BY TREATING THE ASSESSEE AS AN ASSESSEE 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) ALLO WED THE APPEAL IN FAVOUR OF THE ASSESSEE BY HOLDING THAT SINCE THE CH IT 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 CHALLENGED THE AFORESAID OR DER OF THE CIT (A) BEFORE THE ITAT. THE ITAT, HYDERABAD BENCH IN I TA NO.820/HYD/2011 DATED 26-12-2011 FOLLOWING DECISION OF THE HONBLE MADRAS HIGH COURT IN CASE OF BILAHARI INVES TMENTS PVT. LTD. VS. CIT (288 ITR 39)WHICH WAS CONFIRMED BY THE HON BLE 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 HOLDIN G THAT THE PAYMENT OF DIVIDEND TO THE SUBSCRIBERS OF A CHIT TO WARDS DIVIDEND DOES NOT PARTAKE THE CHARACTER OF INTEREST AND ACCORDINGLY THE ASSESSEE IS NOT LIABLE TO DEDUCT TD S U/S 194A OF THE ACT AND NOT LIABLE FOR INTEREST U/S 201(1) A ND 201(1A) OF THE ACT. 4 ITA NO. 1219/HYD/2012 M/S VIJAYA BHARGAVI CHIT FUNDS PVT. LTD. 5. WE FIND THAT IN ASSESSEES OWN CASE FOR ASSESSM ENT YEARS 2005-06 TO 2007-08 & 2009-10, SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH IN ITA NO S. 1036 TO 1039/HYD/2012(APPEALS FILED BY THE REVENUE) VIDE OR DER DATED 17/10/2012 WHEREIN THE TRIBUNAL FOLLOWING THE DECIS ION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2004 -05 IN ITA NO. 820/HYD/2011 VIDE ORDER DATED 26/12/2011 DISMISSED THE APPEALS OF THE REVENUE. 6. RESPECTFULLY, FOLLOWING THE DECISION OF THE COOR DINATE BENCHES IN ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS AND SUBSEQUENT YEAR(SUPRA), WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 194A ON THE DIVIDENDS PAID TO THE SUBSCRIBERS OF THE CHITS. CONSEQUENTLY, THE ASSESSE E CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) AND 20 1(1A) OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) AND THE GROUNDS RAISED BY THE DEPARTMENT ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 04/12/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAY ARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 04 TH DECEMBER, 2012 KV 5 ITA NO. 1219/HYD/2012 M/S VIJAYA BHARGAVI CHIT FUNDS PVT. LTD. COPY TO:- 1) ITO, WARD-15(3), HYDERABAD. 2) M/S VIJAYA BHARGAVI CHIT FUNDS PVT. LTD., FLAT NO. 207, 208, 210 TO 212, SRI DATTA SAI COMMERCIAL COMPLEX, RTC X ROAD, HYDERABAD 500 020. 3) THE CIT(A)-II, HYDERABAD 4) CIT(TDS), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYD ERABAD.