ITO, Ward-15(3), Hyderabad V. M/s. Vijaya Bhargavi Chit Fund Pvt. Ltd., Hyderabad

ITA 1518/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74717 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1518/HYD/2013 ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER, WARD 15(3), HYDERABAD VS. M/S VIJAYA BHARGAVI CHIT FUND PVT. LTD., HYDERBAD. PAN AAACV8130B APPELLANT RESPONDENT REVENUE BY: SMT. K. HARITHA ASSESSEE BY: NONE DATE OF HEARING: 19/03/2014 DATE OF PRONOUNCEMENT: 19/03/2014 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE CIT(A)-II, HYDERABAD DATED 13/01/2013 FOR THE ASSESSMENT YEAR 2011-12 WHEREIN THE REVENUE HAS RAI SED THE FOLLOWING SUBSTANTIAL GROUND: THE LEARNED CIT(A) ERRED IN HOLDING THAT THE CHIT D IVIDENDS PAID TO THE SUBSCRIBERS DOES NOT PARTAKE THE CHARACTER O F INTEREST AND CONSEQUENTLY THE CHIT FUND COMPANY IS NOT LIABL E TO DEDUCT TAX U/S 194A WHILE MAKING PAYMENT OF DIVIDEND TO TH E SUBSCRIBER. 2. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE AT THE TIME OF HEARING OF THIS APPEAL. HOWEVER, WE PROCEE D TO DECIDE THE APPEAL AFTER HEARING THE LEARNED DR AS THE ISSUE IN DISPUTE IS COVERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE IN EARLIER YEARS. 3. THE ASSESSING OFFICER HELD THAT THE DIVIDEND PAI D BY THE ASSESSEE TO CHIT SUBSCRIBERS IS IN THE NATURE OF IN TEREST, HENCE, THE 2 ITA NO. 1518/H/2013 M/S VIJAYA BHARGAVI CHIT FUND PVT. LTD. SAME IS LIABLE FOR TDS U/S 194A OF THE ACT. SINCE N O TDS WAS MADE BY THE ASSESSEE, THE ASSESSEE WAS DEEMED TO BE IN D EFAULT AND TDS U/S 201(1) AND INTEREST U/S 201(1A) WAS CHARGED BY THE ASSESSING OFFICER. 4. ON APPEAL, THE ASSESSEE BEFORE THE CIT(A) WAS SU BMITTED THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A)-II FOR AYS 2004-05 TO 2009-10. IT WAS FURTHER SUBMITTED TH AT THE ITAT, HYDERABAD HAS DECIDED THE APPEALS IN FAVOUR OF THE ASSESSEE FOR AY 2004-05 VIDE ITA NO. 820/HYD/11 AND FOR AY 2005-06 TO 2007-08 AND FOR AY 2009-10 VIDE ITA NOS. 1036 TO 1039/HYD/2012. IT WAS CONTENDED THAT THOUGH THESE FACTS WERE BROUGHT TO T HE NOTICE OF THE ASSESSING OFFICER, THE ASSESSING OFFICER COMPUTED T HE LIABILITY U/S 201(1) AND 201(1A) ON THE GROUND THAT THE DEPARTMEN T HAS FILED FURTHER APPEAL TO THE HIGH COURT OF AP. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UN DER: 7. IT IS PERTINENT TO MENTION THAT IN THE CASE OF C IT VS. SAHIB CHITS (DELHI) (PVT.) LTD. IN ITA NO. 44/2008 DATED 24/07/2009, THE HONBLE HIGH COURT OF DELHI HELD THAT THE DIVID END DISTRIBUTED TO THE MEMBERS OF CHIT FUND CANNOT BE T REATED AS INTEREST AND THE PROVISIONS OF SECTION 194A ARE NOT APPLICABLE. THE SLP FILED BY THE DEPARTMENT IS DISMISSED BY THE HONBLE SUPREME COURT ON 18/02/2013. IN RESULT, THE FINALIT Y IS REACHED ON THE ISSUE THAT DIVIDEND DISTRIBUTED BY THE CHIT FUND COMPANY CANNOT BE TREATED AS INTEREST AND ARE NOT LIABLE TO TDS U/S 194A OF THE IT ACT, 1961. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE LEARNED DR AND PERUSED THE REC ORD AS WELL AS GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITI ES. SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN AS SESSEES OWN CASE FOR AY 2005-06 TO 2007-08 AND 2009-10 IN ITA NOS. 1 036 TO 1039/HYD/2012 VIDE ORDER DATED 17/10/2012 WHEREIN I T HAS BEEN HELD AS FOLLOWS: 3 ITA NO. 1518/H/2013 M/S VIJAYA BHARGAVI CHIT FUND PVT. LTD. 4. WE HAVE HEARD THE LEARNED DR AND SHRI PURNACHAND RA RAO, GENERAL MANAGER OF THE ASSESSEE COMPANY. ON GOING T HROUGH THE MATERIALS SUBMITTED BEFORE US, IT IS SEEN 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 ASSES SEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING THE TAX U/S 1 94A OF THE ACT ON THE CHIT DIVIDENDS PAID TO THE SUBSCRIBERS. THE CIT (A) ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE BY HOL DING THAT SINCE THE CHIT DIVIDEND DOES NOT PARTAKE THE CHARAC TER OF INTEREST AS DEFINED U/S 2(28A) OF THE ACT, THE ASSE SSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 194A OF THE AC T. THE DEPARTMENT CHALLENGED THE AFORESAID ORDER OF THE CI T (A) BEFORE THE ITAT. THE ITAT, HYDERABAD BENCH IN ITA NO.820/H YD/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. (29 9 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 THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S 194A OF THE ACT AND NOT LIABLE FOR I NTEREST 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 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. CON SEQUENTLY, THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DE FAULT U/S 201(1) AND 201(1A) OF THE ACT. THE GROUNDS RAISED B Y THE DEPARTMENT ARE DISMISSED. 7.1 AS THE ISSUE IN DISPUTE IS IDENTICAL TO THAT OF 2005-06 TO 2007-08 AND 2009-10 IN ASSESSEES OWN CASE (SUPRA), RESPECT FULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE SAID YEARS, WE UPHOLD THE ORDER OF THE CIT(A) IN ALLOWING THE APPEAL OF THE ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 4 ITA NO. 1518/H/2013 M/S VIJAYA BHARGAVI CHIT FUND PVT. LTD. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 19/03/2014. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 19/03/2014. KV COPY FORWARDED TO: 1. ITO, WARD 15(3), IT TOWERS, 4 TH FLOOR, D-BLOCK, HYDERABAD. 2. M/S VIJAYA BHARGAVI CHIT FUNDS PVT. LTD., FLAT N O. 207, 210 TO 212, SRI DATTA COMMERCIAL COMPLEX, RTC X ROAD, HYDERABAD 20. 3. CIT(A)-II, HYDERABAD 4. CIT(TDS), HYDERABAD. 5. THE DR, ITAT, HYDERABAD