ACIT, Circle-14(2) TDS, Hyderabad V. M/s. Margadarsi Chit Fund Pvt.Ltd., Hyderabad

ITA 922/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66322 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 08-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K GNANAPRAKASH
• Assessee Lawyers: V SIVA KUMAR
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.922 TO 925/HYD/2012 ASSESSMENT YEARS : 2005-06 TO 2009-10 ACIT, CIR-14(2), HYDERABAD. .... APPELLANT VS. M/S. MARGADARSHI CHIT FUND PVT. LTD., HYDERABAD. RESPONDENT PAN: AABCM 4751 G APPELLANT BY : SHRI K. GNANA PRAKASH RESPONDENT BY : SHRI V. SIVA KUMAR DATE OF HEARING : 10-09-2012 DATE OF PRONOUNCEMENT : 28-09-2012 ORDER PER SAKTIJIT DEY, J.M.: THESE FOUR APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS OF CIT (A)-II, HYDERABAD AN D THEY PERTAIN TO THE ASSESSMENT YEARS 2005-06, 2006-07, 2008-09 A ND 2009- 10. SINCE COMMON ISSUE IS INVOLVED IN THESE APPEALS , THESE ARE CLUBBED TOGETHER AND DISPOSED OF BY THIS COMBINED O RDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE COMMON GROUNDS IN ALL THESE APPEALS:- 1. THE CIT (A) HAS ERRED IN LAW AND AS TO FACTS. 2 ITA NOS. 922 TO 925/HYD/2012 MARGADARSHI CHIT FUND PVT. LTD.. 2. `THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE F ACT THAT THE DIVIDEND DECLARED AND DISTRIBUTED TO THE SUBSCRIBERS REQUIRED TDS TO BE MADE U/S 194A OF THE ACT DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06. 3. SINCE FACTS ARE SIMILAR AND IDENTICAL FOR ALL TH E YEARS UNDER CONSIDERATION, FOR THE SAKE OF BREVITY, WE DEAL WIT H FACTS AS MENTIONED FOR ASSESSMENT YEAR 2005-06.BRIEF FACTS O F THE CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CHIT FU ND, FOOD PROCESSING AND FARM MAINTENANCE. IN COURSE OF ASSE SSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE COMP ANY HAD PAID DIVIDEND OF RS.5000/- AND ABOVE TO EACH SUBSCRIBER AMOUNTING TO RS.1,61,52,71,824/- TO DIFFERENT INDIVIDUALS AND RS.26,92,13,800/- TO THE CORPORATES WITHOUT DEDUCT ION OF TDS. THE AO WHEN ASKED THE ASSESSEE TO EXPLAIN THE REASO N FOR NON DEDUCTION OF TAX AT SOURCE, THE ASSESSEE SUBMITTED THAT IT ACTS AS A FOREMAN FOR THE CHIT SUBSCRIBERS AND THE FOREMAN IN THIS BUSINESS NEITHER LENDS HIS MONEY TO THE SUBSCRIBERS NOR BORROWS MONEY FROM THE SUBSCRIBERS AND THEREFORE THE ISSUE OF PAYMENT OF INTEREST DOES NOT ARISE. IT IS FURTHER SUBMITTED BY THE ASSESSEE THAT THE DIVIDEND PAID IS NOT IN THE NATURE OF INTE REST COVERED UNDER SECTION 194 A(1) OF THE ACT AND NO TDS IS TO BE DEDUCTED AS THE AMOUNT PAID BY WAY OF CHIT DIVIDEND IS NOT C OVERED WITHIN THE MEANING OF INTEREST U/S 2(28A) OF THE ACT. THE AO HOWEVER REJECTED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE CHIT DIVIDEND PAID BY THE ASSESSEE TO THE SUBSCRIBERS IS COVERED WITHIN THE MEANING OF INTEREST U/S 2(28A) OF THE ACT. ON THE AFORESAID CONCLUSION, THE AO HELD THAT SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE, THE ASSESSEE IS LIABLE TO PAY TAX DEMAND OF RS.24,16,15,910 U/S 201(1) AND INTEREST OF RS.20,29 ,88,443/- U/S 3 ITA NOS. 922 TO 925/HYD/2012 MARGADARSHI CHIT FUND PVT. LTD.. 2012(1A). THE ASSSSEE BEING AGGRIEVED OF THE ORDER S PASSED U/S 201 (1) AND 201(1A) , PREFERRED APPEALS BEFORE THE CIT (A). 4. THE CIT (A) RELYING UPON HIS OWN ORDER PASSED EA RLIER WHICH WAS CONFIRMED BY THE ITAT, HYDERABAD BENCH VIDE IT S ORDER PASSED IN ITA NOS. 526 TO 529/HYD/2011 DATED 29-9-2 011 WHEREIN IT WAS HELD THAT THE PAYMENT OF DIVIDEND TO THE SUBSCRIBERS OF CHIT DOES NOT PARTAKE THE CHARACTER OF INTEREST AND ACCORDINGLY THE ASSESSEE IS NOT LIABLE TO DEDUCT TA X AT SOURCE U/S 194A. ON THE AFORESAID FINDING, THE CIT (A) HELD T HAT THE ASSESSEE IS NOT LIABLE FOR TAX AND INTEREST U/S 201 (1) AND 201(1A) OF THE ACT RESPECTIVELY. 5. THE LEARNED DR AT THE OUTSET, FAIRLY SUBMITTED T HAT THE ISSUE IS COVERED BY THE DECISION OF ITAT, HYDERABAD B B ENCH IN THE CASE OF THE SAME ASSESSEE PASSED IN ITA NO.973/HYD /2011 DATED 24-2-2012 RELATING TO THE ASSESSMENT YEAR 2008-09. LEARNED DR FURTHER SUBMITTED THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE TRIBUNAL AND HAS FILED APPEAL IN THE HIGH CO URT AGAINST IT. THE LEARNED AR SUBMITTED THAT THE ISSUE IS FULLY CO VERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE ORDER PAS SED BY THIS TRIBUNAL IN ITA NO.973/HYD/2011 IN THE CASE OF THE SELF SAME ASSESSEE WHEREIN THE ITAT, HYDERABAD BENCH FOLLOWIN G ITS OWN DECISION IN THE CASE OF VIPANCHI CHIT FUNDS LTD., (ITA NOS. 804- 805/HYD/2011) AND IN THE CASE OF VINUTNA CHIT FUND S (P) LTD. IN ITA NOS. 1280-1281/HYD/2011 FOR THE ASSESSMENT YEAR S 2006-07 AND 2007-08 VIDE ORDER DATED 31-10-2011 HELD THAT T HE DIVIDEND TO THE SUBSCRIBERS DOES NOT PARTAKE THE CHARACTER O F INTEREST AND ACCORDINGLY, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX UNDER 4 ITA NOS. 922 TO 925/HYD/2012 MARGADARSHI CHIT FUND PVT. LTD.. ECTION194A OF THE ACT AND NOT LIABLE TO INTEREST U/ S 201(1) AND 201(1A) OF THE ACT. THE TRIBUNAL HELD IN THE FOLLO WING MANNER:- WE ARE FORTIFIED IN FOLLOWING THE CONSISTENT VIEW TAKEN BY THE DECISION IN SIMILAR MATTERS BY THE RAT IO OF THE DECISION OF THE MADRAS HIGH COURT IN THE CA SE OF CIT VS. L.G. RAMAMURTHY AND OTHERS (110 ITR 453), WHEREIN EMPHASISING THE NECESSITY OF UNIFORM CONCLUSION ON SAME MATTER, AND SCOPE OF ADJUDICATIO N BY A TRIBUNAL, IT HAS BEEN HELD BY THE HONBLE HIGH COURT AS FOLLOWS:- NO TRIBUNAL OF FACT HAS ANY RIGHT OR JURISDICTION TO COME TO A CONCLUSION ENTIRELY CONTRARY TO THE ONE REACHED BY ANOTHER BENCH OF THE SAME TRIBUNAL ON SAME FACTS. IT MAY BE THAT THE MEMBERS WHO CONSTITUTED THE TRIBUNAL AND DECIDED ON THE EARLIER OCCASION WERE DIFFERENT FROM THE MEMBERS WHO DECIDED ON THE PRESENT OCCASION. BUT WHAT RELEVANT IS NOT THE PERSONALITY OF THE OFFICERS PRESIDING OVER THE TRIBUNAL OR PARTICIPATING IN THE HEARING BUT THE TRIBUNAL AS AN INSTITUTION. IF IT IS TO BE CONCEDE D THAT SIMPLY BECAUSE OF THE CHANGE IN THE PERSONNEL OF TH E OFFICERS WHO MANNED THE TRIBUNAL, IT IS OPEN TO THE NEW OFFICERS TO COME TO A CONCLUSION TOTALLY CONTRADICTORY TO THE CONCLUSION WHICH HAD BEEN REACHED BY THE EARLIER OFFICERS MANNING THE SAME TRIBUNAL, ON THE SAME SET OF FACTS, IT WILL NOT ONL Y SHAKE THE CONFIDENCE OF THE PUBLIC IN JUDICIAL PROCEDURE AS SUCH, BUT IT WILL ALSO TOTALLY DESTROY SUCH CONFIDENCE. THE RESULT OF THIS WILL BE CONCLUSIONS BASED ON ARBITRARINESS AND WHIMS AND FANCIES OF THE 5 ITA NOS. 922 TO 925/HYD/2012 MARGADARSHI CHIT FUND PVT. LTD.. INDIVIDUALS PRESIDING OVER THE COURTS OR THE TRIBUN ALS AND NOT REACHED OBJECTIVELY ON THE BASIS OF THE FAC TS PLACED BEFORE THE AUTHORITIES. IF A BENCH OF A TRIBUNAL ON THE IDENTICAL FACTS IS ALLOWED TO COME TO A CONCLUSION DIRECTLY OPPOSED TO THE CONCLU SION REACHED BY ANOTHER BENCH OF THE TRIBUNAL ON AN EARL IER OCCASION, THAT WILL BE DESTRUCTIVE OF THE INSTITUTI ONAL INTEGRITY ITSELF..... IN THIS VIEW OF THE MATTER, THE PROVISIONS OF S. 40 (A)(IA) OF THE ACT ARE NOT ATTRACTED, AND ACCORDINGLY THE CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSE SSING OFFICER BY RESORTING TO DISALLOWANCE IN TERMS OF S. 40(A)(I A) OF THE ACT. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT (A ) AND DISMISS THE APPEAL OF THE REVENUE. 7. ON GOING THROUGH THE DECISION WE FIND THAT THIS TRIBUNAL HAS CONSISTENTLY HELD THAT CHIT DIVIDEND PAID TO A SUBS CRIBER OF A CHIT FUND DOES NOT PARTAKE THE CHARACTER OF INTEREST AS DEFINED U/S 2(28A) OF THE ACT. THEREFORE THE ASSESSEE IS NOT LI ABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194A OF THE ACT. NO CO NVINCING ARGUMENT WAS ADVANCED BY THE LD. DR TO DEVIATE FROM THE AFORESAID VIEW OF THE CO-ORDINATE BENCH. WE THEREF ORE RESPECTFULLY FOLLOW THE AFORESAID DECISIONS OF THIS TRIBUNAL AND UPHOLD THE ORDER OF THE CIT (A) FOR THE YEARS UNDER CONSIDERATION AND DISMISS THE GROUNDS RAISED BY THE DEPARTMENT. 6 ITA NOS. 922 TO 925/HYD/2012 MARGADARSHI CHIT FUND PVT. LTD.. 8. IN THE RESULT, ALL THE APPEALS FILED BY THE DEPA RTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 28-09-2012. SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 28 TH SEPT., 2012. COPY TO:- 1)ACIT, CIR-14(2), HYDERABAD. 2)M/S. MARGADARSHI CHIT FUND (P) LTD., 5-10-195, CO RPORATE OFFICE, OPP. POLICE CONTROL ROOM, FATEH MAIDAN ROAD , HYDERABAD. 3) THE CIT (A)-V, HYDERABAD 4) THE CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 7 ITA NOS. 922 TO 925/HYD/2012 MARGADARSHI CHIT FUND PVT. LTD..