ITO., Ward-15(3), Hyderabad V. M/s Vipanchi Chit Funds Private Limited, Hyderabad

ITA 1423/HYD/2014

• Counselvise Citation: 142322514 RSA 2014
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-12-2014
• Assessment Year: 2012-2013
• Appeal Filed On: 28-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: SHILPA MAINYAR
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1423/HYD/2014 (ASSESSMENT YEARS 2012 - 13) INCOME TAX OFFICER WARD 15(3), HYDERABAD V/S. M/S. VIPANCHI CHIT FUNDS PVT. LTD., HYDERABAD. ( PAN - AAACV 8243 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJAT MITRA DR RESPONDENT BY : SMT. SHILPA MAINYAR DATE OF HEARING 08 .0 1 .201 5 DATE OF PRONOUNCEMENT 09.01.2015 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX( APPEALS) II, HYDERABAD DATED 26.6.2014, AND THE SOLITARY ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE CHIT DIVIDENDS PAID BY THE ASSESSEE TO ITS SUBSCRIBERS PARTAKE THE CHARACTER OF INTEREST AND CONSEQUENTLY THE ASSESSEE IS LIABLE TO DEDUCT TAX UNDER S.194 A OF THE ACT, WHILE MAKING PAYMENT OF DIVIDEND TO THE SUBSCRIBER. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF RUNNING A CHIT FUND. A SURVEY OPERATION UNDER S.133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE COMPANY ON 14.3.2007, DURING TH E COU R SE OF SURVEY, I T WAS NO T ICED THAT THE ASSESSEE COMPANY HAD DISTRIBUTED CHIT DIVIDENDS TO ITS SUBSCRIBERS WITHOUT DEDUCTING TAX AT SOU R CE AS REQUIRED UNDER S.194A OF THE ACT. A LETTER DATED 26.6.2013 WAS I TA NO. 1 423 /HYD/2014 M/S. VIPANCHI CHIT FUNDS PVT. LTD., HYDERABAD. 2 ADDRE SSED TO THE ASSESSEE REQUESTING TO FURNISH THE DETAIL S O F DIVIDEND PAID/PAYABLE ( MONTH - WISE), DIVIDENDS PAID/PAYABLE BELOW RS.5000, DIVIDEND ON VACANT CHITS AND REQUESTING TO FURNISH WHETHER TDS W AS DE D U C TED ON THE DIVIDENDS DISTRIBU T ED TO ITS SUBSCRIBERS, AND I F NOT, TO SHOW CAUSE AS TO WHY IT SHOULD NO T B E TR EAT ED AS AN ASSESSEE IN DEFAULT U/S. 201(1) AND 201(1A ) OF THE I.T. ACT FOR NON - DEDUCTION OF TAX AT SOU R CE ON DIVIDENDS PAID TO SUBSCRIBERS. IN RESPONSE TO THE SAID LETTER, THE ASSESSEE VIDE LETTER DATED 22.7.2013, BESI D ES FURNISHING THE DETAIL S O F DIVIDEND PAID DURING THE FINANCIAL Y E AR 2011 - 12, CONTENDED THAT THE CHIT DIVIDEND PAID/PAYABLE DOES NO T PARTAKE THE CHARACTER OF INTEREST, AN D THE PROVI S ION S OF S.194A ARE NO T ATTRACTED, AND THERE IS NO OBLIGATION ON IT TO DEDUCT TAX AT SOURCE WHILE MAKING SUCH PAYMENTS ON ACCOUNT O F CHIT DIVIDENDS. NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER TREATED THE ASSESSEE AS AN ASSESSEE IN DEFAULT AND RAISED DEMAND FOR AN AMOUNT OF RS .53,58,328, COMPRISING OF TAX UNDER S.201(1) OF RS.40,58,388 AND INTEREST UNDER S.201(1A) OF RS.12,99,940, VIDE ORDER DATED 28.11.2013 PASSED UNDER S.201 ( 1) READ WITH S.201(1A) OF THE ACT. 3. ON APPEAL, THE LEARNED CIT(A) TAKING NOTE OF THE FACT THAT T HE ISSUE AS TO THE NATURE OF CHIT DIVIDEND PAID BY THE ASSESSEE, IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF CIT(A) IN ASSESSEES OWN CASE, AND ALSO REFERRING TO VARIOUS OTHER JUDICIAL PRONOUNCEMENTS ON THE ISSUE, ALLOWED THE APPEAL OF THE ASS ESSEE. AGGRIEVED BY THE ORDER O F THE LEARNED CIT(A), REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT HAS BEEN AGREED I TA NO. 1 423 /HYD/2014 M/S. VIPANCHI CHIT FUNDS PVT. LTD., HYDERABAD. 3 BY THE LEARNED REPRESENTATIVES OF BOTH SIDES TH AT THE ISSUE IN DISPUTE RELATING TO THE NATURE OF CHIT DIVIDENDS PAID BY THE ASSESSEE AND APPLICABILITY OF THE PROVISIONS OF S.194A IS COVERED IN FAVOUR O F THE ASSESSEE AND AGAIN S T THE REVENUE BY THE DECISION OF TH IS T RIBUNAL IN ASSESSEES OWN CASE FOR ASS ESSMENT YEAR 2005 - 06, VIDE ORDER DATED 11 TH AUGUST, 2011. THIS APART, IN A RECENT DECISION OF THIS TRIBUNAL IN THE CASE OF MARGADARSI CHIT FUND LTD.(ITA NO.1553/HYD/2010) DATED 24.9.2014, THE ISSUE AS TO THE NATURE OF CHIT DIVIDEND, IN THE CONTEXT OF APP LICABILITY OF THE PROVISIONS OF S.40(A)(IA), WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE , IN THE FOLLOWING MANNER - 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARNED REPRESENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 RENDERED VI DE ORDER DATED 24.2.2012 IN ITA NO.973/HYD/2011, WHEREIN A SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS HELD TO BE UNSUSTAINABLE, FOLLOWING THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF BILAHARI INVESTMENTS (P)LTD.(288 ITR 39), WHEREIN I T WAS HELD THAT THE DIVIDEND DISTRIBUTED BY THE ASSESSEE DID NOT PART - TAKE THE CHARACTER OF INTEREST AND CONSEQUENTLY, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. THE SAID DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2008 - 09 HAS BEEN UPHELD BY THE HONBLE ANDHRA PRADESH HIGH COURT VIDE ITS JUDGMENT DATED 10 TH JULY, 2013 PASSED IN ITTA NO.228 OF 2013 AND EVEN THE SLP FILED BY THE REVENUE AGAINST THE ORDER OF THE HONBLE ANDHRA PRADESH HIGH COURT HAS ALSO BEEN DISMISSE D BY THE HONBLE SUPREME COURT RECENTLY ON 30 TH JULY, 2014 IN PETITION FOR SPECIAL LEAVE TO APPEAL (C) NO.9457/2014. RESPECTFULLY FOLLOWING THESE JUDICIAL PRONOUNCEMENTS IN ASSESSEES OWN CASE ON SIMILAR ISSUE, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED C IT(A), DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER S.40A(IA) ON ACCOUNT OF DIVIDEND PAID BY THE ASSESSEE TO THE CHIT SUBSCRIBERS FOR NON - DEDUCTION OF TAX AT SOURCE AND DISMISS THE APPEAL OF THE REVENUE. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE IMPU G N E D ORDER O F THE CIT(A) IN HOLDING THAT THE TDS PROVISIONS OF I TA NO. 1 423 /HYD/2014 M/S. VIPANCHI CHIT FUNDS PVT. LTD., HYDERABAD. 4 S.194A ARE NO T ATTRACTED TO THE CHIT DIVIDEND PAYM E N T S MADE BY THE ASSESSEE. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND DI S MI S S THE G R OUNDS OF THE REVENUE IN THIS APPEAL. 3. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ` `` ORDER PRONOUNCED IN THE COURT ON 9 TH JANUARY, 2015 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 9 TH JANUARY, 201 5 COPY FORWARDED TO: 1. M/S. VIPANCHI CHIT FUNDS PVT. LTD., FLAT NO.607, BABU KHAN ESTATE, BASHEERBAGH, HYDERABAD. 2 . INCOME TAX OFFICER WARD 15(3), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) II HYDERABAD COMMISSIONER OF INCOME - TAX I, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S