Income Tax Officer, Ward-14(3), Hyderabad V. Jyothi Chits and Finance, Secunderabad

ITA 165/HYD/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6453 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 03-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K HARITA
• Keywords: Condonation of delay
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.165/HYD/2014 ASSESSMENT YEAR 2010-2011 ITO, WARD 14(3) HYDERABAD. VS. JYOTHI CHITS & FINANCE, SECUNDERABAD. PAN AACFJ-0820B (APPELLANT) (RESPONDENT) FOR REVENUE : MS. K. HARITA FOR ASSESSEE : MR. K.C. DEVDAS DATE OF HEARING : 15.05.2014 DATE OF PRONOUNCEMENT : 23.05.2014 ORDER PER B. RAMAKOTAIAH, A.M. THE ISSUE IN THE PRESENT APPEAL PREFERRED BY REVENUE IS WHETHER THE CHIT DIVIDEND PAID BY THE AS SESSEE IS IN THE NATURE OF INTEREST REFERRED TO UNDER THE PROVIS IONS OF 194A OF THE I.T. ACT, 1961. 2. BRIEFLY STATED, ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF CHIT FUNDS. DURING THE FINANCIAL YEAR R ELEVANT TO A.Y. 2010-11, THE ASSESSEE PAID CHIT DIVIDEND TO TH E TUNE OF RS.1.84 CRORES TO ITS CUSTOMERS. THE A.O. WAS OF TH E VIEW THAT CHIT DIVIDEND PAID/DISTRIBUTED BY THE FOREMAN UNDER OBLIGATION IN TERMS OF THE CHIT AGREEMENT CLEARLY REPRESENTS I NTEREST AS PER SECTION 2(28A) OF THE INCOME TAX ACT, 1961 AND THEREBY FALLS WITHIN THE MEANING AND PURVIEW OF SECTION 194 A OF THE INCOME TAX ACT, 1961. SINCE THE ASSESSEE FAILED TO DEDUCT TAX IN TERMS OF SECTION 194A OF INCOME TAX ACT, 1961 FR OM THESE 2 ITA.NO.165/HYD/2014 JYOTHI CHITS & FINANCE, SECUNDERABAD. PAYMENTS, THE A.O., RELYING ON CERTAIN CASE LAW AND CBDT INSTRUCTIONS, HELD THAT THE ASSESSEE WAS IN DEFAULT UNDER SECTION 201(1) AND 201(1A) OF THE ACT AND RAISED DE MAND OF RS.22,20,815/- VIDE HIS ORDER DATED 20.03.2012. 3. LD. CIT(A) FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE IN EARLIER YEARS DECIDED AS UND ER : 4. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER, THE INFORMATION/PAPERS FURNISHED BY THE APPELLANT, PETITION FOR CONDONATION OF DELAY IN FILING THE APP EAL ETC. SINCE THE DELAY IN FILING THE APPEAL IS ATTRIBUTABL E TO THE CIRCUMSTANCES WHICH WERE BEYOND THE CONTROL OF THE APPELLANT, THE DELAY IS HEREBY CONDONED. THE ONLY I SSUE TO BE DECIDED IN THIS APPEAL IS WHETHER THE CHIT DIVID END PAID BY THE APPELLANT IS IN THE NATURE OF INTEREST REFERRED TO UNDER THE PROVISIONS OF 194A OF THE ACT OR NOT. ON A PERUSAL OF THE ORDER OF THE HON'BLE JURISDICTIONAL ITAT SUBMITTED BY THE APPELLANT, IT IS NOTICED THAT THIS ORDER WAS PASSED IN APPELLANT'S OWN CASE FOR EARLIER YEAR S ON THE SAME ISSUE. THE HON'BLE ITAT HELD THAT THE TDS PROVISIONS CONTAINED U/S.194A OF THE ACT ARE NOT APPLICABLE TO CHIT DIVIDEND. THE RELEVANT EXTRACT O F THE TRIBUNAL'S ORDER IS REPRODUCED HEREUNDER: '5. 'WE HAVE HEARD SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IDENTICAL ISSUE IN CASE OF THE SAME ASSESSEE FOR THE EARLIER ASSESSMENT YEARS I.E., 200 4-05 TO 2007-08 IN ITA. NOS.530/HYD/2011 TO 533/HYD/2011 CAME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL. A COORDINATE BENCH OF THE TRIBUNAL FOLLOWING THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CIT VS. BILHARI INVESTMENTS P. LTD., 29 9 ITR 1 HELD IN THE FOLLOWING MANNER : 'FOLLOWING THE RATIO LAID DOWN BY VARIOUS COURTS IN THE CASES NOTED ABOVE, IT HAS BEEN CONSISTENTLY HELD BY THE TRIBUNAL, AS IN ITA.NO.804/HYD/2011 FOR ASSESSMENT YEAR 2005-06 IN THE CASE OF M/S. VIPANCHI CHIT FUNDS LTD. AND ANR. DATE D 11 TH AUGUST, 2011, THAT THE PAYMENT TO THE SUBSCRIBERS OF A CHIT TOWARDS DIVIDEND DOES NOT PARTAKE THE CHARACTER OF INTEREST. IN THIS VIEW OF THE MATTER, WE UPHOLD THE ORDERS OF T HE CIT(A) IMPUGNED IN THESE APPEALS, IN HOLDING THAT THE ASSE SSEE IS NOT 3 ITA.NO.165/HYD/2014 JYOTHI CHITS & FINANCE, SECUNDERABAD. LIABLE TO DEDUCT TDS U/S 194A OF THE ACT AND NOT LI ABLE FOR INTEREST U/S 201(1) AND 201(1A) OF THE ACT, AND CONSEQUENTLY, REJECT THE GROUNDS OF THE REVENUE IN THESE APPEALS. ' THE ISSUE IN THE PRESENT APPEAL BEING IDENTICAL AND THE ASSESSEE BEING THE SAME AS IN THE CASE OF AFORESAID ORDER PASSED BY THE CO-ORDINATE BENCH, WE RETROSPECTIVELY FOLLOW THE SAME AND HOLD THAT THE PAYMENT OF CHIT DIVIDEND MAD E TO THE SUBSCRIBERS DOES NOT PARTAKE THE CHARACTER OF INTER EST AND AS SUCH THE TDS PROVISION CONTAINED U/S. 194A OF THE A CT IS NOT APPLICABLE. ACCORDINGLY, WE UPHOLD THE ORDERS PASSE D BY THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENU E. 4.1 THE APPELLANT AND THE FACTS PREVAILING IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF THE ABOVE C ASE. IN VIEW OF THIS, RESPECTFULLY FOLLOWING THE ABOVE DECI SION OF THE HON'BLE JURISDICTIONAL LTAT, THIS APPEAL IS DEC IDED IN FAVOUR OF THE APPELLANT AND THE AO IS DIRECTED TO T HE DELETE THE DEMAND RAISED. 4. SINCE THE DECISION OF THE CIT(A) IS IN TUNE WIT H THE COORDINATE BENCH DECISION IN ASSESSEES OWN CASE IN EARLIER YEAR, WE AFFIRM THE ORDER OF CIT(A). 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.05.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 23 RD MAY, 2014 VBP/- COPY TO : 1. ITO, WARD 14(3), HYDERABAD 2. JYOTHI CHITS & FINANCE, SHOP 6 TO 8, 2 ND FLOOR, HYDRI COMPLEX, RANIGUNJ, SECUNDERABAD. 3. CIT(A), VIJAYAWADA 4. CIT (TDS), HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.