ITO, Ward-15(1) (TDS), Hyderabad v. M/s. Neeladri Chit Fund Pvt.Ltd., Hyderabad

ITA 1353/HYD/2011 | 2006-2007
Pronouncement Date: 16-11-2011 | Result: Dismissed

Appeal Details

RSA Number 135322514 RSA 2011
Bench Hyderabad
Appeal Number ITA 1353/HYD/2011
Duration Of Justice 3 month(s) 27 day(s)
Appellant ITO, Ward-15(1) (TDS), Hyderabad
Respondent M/s. Neeladri Chit Fund Pvt.Ltd., Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 16-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 16-11-2011
Assessment Year 2006-2007
Appeal Filed On 20-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBE R. ITA NO.1352/HYD/2011 : ASSESSMENT YEAR 2005-06 ITA NO.1353/HYD/2011 : ASSESSMENT YEAR 2006-07 ITA NO.1354/HYD/2011 : ASSESSMENT YEAR 2007-08 INCOME-TAX OFFICER WARD-15(1)(TDS) HYDERABAD V/S M/S. NEELADRI CHIT FUND (P)LTD. HYDERABAD. (PAN - NOT AVAILABLE ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.PERRYA RESPONDENT BY : NONE DATE OF HEARING 3 11.2011 DATE OF PRONOUNCEMENT 16.11.2011 O R D E R PER ASHA VIJAYARAGHAVAN JUDICIAL MEMBER THESE THREE APPEALS BY THE REVENUE FOR THE ASSESS MENT YEARS 2005-06 TO 2007-08 ARE DIRECTED AGAINST SIMIL AR BUT SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I I HYDERABAD ALL DATED 24.5.2011. SINCE A COMMON ISSUE IS INVOLVED THESE APPEALS ARE BEING DISPOSED OF WITH THIS COMMON ORDER FOR THE S AKE OF CONVENIENCE. 2. THOUGH ELABORATE COMMON GROUNDS HAVE BEEN RAISED IN THESE APPEALS THE ONLY COMMON ISSUE INVOLVED IN THESE AP PEALS IS WITH REGARD TO CANCELLATION OF ORDERS PASSED U/S. 201 AND 201(1A) OF THE INCOME-TAX ACT 1961 WITH REFERENCE TO NON-DEDUCTION OF TAX ON CHIT DIVI DEND PAID / DISTRIBUTED BY THE ASSESSEE WHICH ACCORDING TO THE APPELLANT/REVENUE REPRESENTS THE INTEREST AS PER SECTION 2(28A) AND WAS WITHIN THE MEANING AND P URVIEW OF SECTION 194A OF THE ACT. ITA NO.1352-54/HYD/2011 M/S. NEELADRI CHIT FUND (P)LTD. HYDERABAD. 2 3. NONE APPEARED ON BEHALF OF THE ASSESSEE-RESPO NDENT DESPITE SERVICE OF NOTICE OF HEARING. NOT EVEN AN ADJOURNM ENT PETITION HAS BEEN RECEIVED. IN THE CIRCUMSTANCES WE PROCEED TO DISP OSE OF THESE APPEALS EX-PARTE QUA THE ASSESSEE- ON THE BASIS OF MATERIAL AVAILA BLE ON RECORD. 4. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESE NTATIVE AND PERUSED THE IMPUGNED ORDERS OF THE LOWER AUTHORITIE S AND OTHER MATERIAL ON RECORD. SIMILAR ISSUE VIZ. NATURE OF CHIT DIVIDEN D PAID/CREDITED CAME UP FOR CONSIDERATION IN THE CASE OF MARGA SOOCHI CHIT PVT. LTD. IN I.T.A. NO. 995/BANG/2008 AND ALSO IN THE CASE OF SAHIB CHITS ( DELHI) (P) LTD. BEFORE THE DELHI HIGH COURT IN I.T.A. NO. 44 OF 2008 ORDER DAT ED 24.7.2009 WHEREIN IT WAS HELD THAT THE AMOUNT DISBURSED BY A CHIT FUND COMPA NY TO THE MEMBERS FROM THE CONTRIBUTION CANNOT BE TREATED AS INTEREST. AS THE PAYMENT MADE/DISBURSED TO THE SUBSCRIBERS/MEMBERS IS NOT INTEREST THE QUESTI ON OF DEDUCTING ANY TAX AT SOURCE FROM IT WOULD NOT ARISE. IN THE CASE OF A C HIT FUND THERE IS NO BORROWING OF MONEY NOR ANY DEBT IS INCURRED AND AS SUCH THE PROV ISIONS OF SECTION 194A AND 2(28A) OF THE ACT ARE NOT ATTRACTED. 5. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE O F BILAHARI INVESTMENTS (P) LTD. V. CIT 288 ITR 39 (MAD). THE VIEW WAS CONFI RMED BY THE SUPREME COURT IN THE CASE OF CIT VS. BILAHARI INVESTMENT PVT. LTD. ( 2008) 299 ITR 1 WHEREIN IT WAS HELD AS UNDER: A CHIT FUND SCHEME IS A KIND OF SAVINGS SCHEME IN WHICH A SPECIFIC NUMBER OF INDIVIDUALS COME TOGETHER TO POOL A SPECI FIC AMOUNT AT PERIODIC INTERVALS. USUALLY THE NUMBER OF INDIVIDU ALS AND NUMBER OF PERIODS IS THE SAME. AT THE END OF EACH PERIOD TH ERE IS AN AUCTION OF THE CHIT. THE MEMBERS OF THE CHIT PARTICIPATE I N THIS AUCTION FOR THE POOLED MONEY DURING THAT INTERVAL. THE BID AMO UNT IS DIVIDED BY THE NUMBER OF MEMBERS THUS DETERMINING THE CONTRIBU TION PER HEAD DURING THAT PERIOD. WHEN THE CHIT IS AUCTIONED EVE RY MONTH THE BIDDER TAKES THE CHIT FOR AN AMOUNT WHICH IS LESS T HAN THE FACE VALUE OF THE CHIT. THE DIFFERENCE BETWEEN THE FACE VALUE AND THE AUCTIONED VALUE DURING EVERY PERIOD IS GROSS DIVIDE ND GENERATED IN THIS PERIOD. THIS AMOUNT OF DIVIDEND GETS DISTRIBU TED AMONG ALL THE MEMBERS (SUBSCRIBERS) EQUALLY. THE MEMBERS (SUBSCR IBERS) NEED NOT PAY THE TOTAL MONTHLY SUBSCRIPTION AND INSTEAD THEY PAY THE ITA NO.1352-54/HYD/2011 M/S. NEELADRI CHIT FUND (P)LTD. HYDERABAD. 3 MONTHLY SUBSCRIPTION AFTER DEDUCTING THE AMOUNT OF DIVIDEND EARNED. MEMBERS WHO HAVE BID FOR THE CHIT IN AUCTI ON HAVE THE LIABILITY TO KEEP THE CONTRIBUTION TO THE CHIT TILL THE END OF THE CHIT PERIOD AND THE PRIZED MEMBERS GET DIVIDEND IN FUTUR E MONTHS ALSO. USUALLY THE DISCOUNT NAMELY THE SUM OF MONEY WHI CH THE PRIZED SUBSCRIBER IS REQUIRED TO FORGO DECREASES OVER PER IODS. THE PERSON GETTING MONEY IN THE LAST PERIOD RECEIVED THE FULL SCHEME AMOUNT. 6. FOLLOWING THE RATIO LAID DOWN BY VARIOUS CO URTS IN THE CASES NOTED ABOVE IT HAS BEEN CONSISTENTLY HELD BY THE COORDIN ATE BENCHES OF THIS TRIBUNAL AS IN ITA NOS.804/HYD/2011 FOR ASSESSMENT YEAR 2005 -06 IN THE CASE OF M/S. VIPANCHI CHIT FUNDS LTD. AND ANR DATED 11 TH AUGUST 2011; AND IN ITA NO.1280 AND 1281/HYD/2011 IN VINUTNA CHIT FUNDS (P)LTD. HY DERABAD DATED 31.10.2011 THAT THE PAYMENT TO THE SUBSCRIBERS OF A CHIT TOWAR DS DIVIDEND DOES NOT PARTAKE THE CHARACTER OF INTEREST. IN THIS VIEW OF THE MAT TER WE UPHOLD THE ORDERS OF THE CIT(A) IMPUGNED IN THESE APPEALS IN HOLDING THAT T HE ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S. 194A OF THE ACT AND NOT LIABLE FOR INTEREST U/S. 201(1) AND 201(1A) OF THE ACT AND CONSEQUENTLY REJECT THE GR OUNDS OF THE REVENUE IN BOTH THESE APPEALS.. 7. IN THE RESULT ALL THE THREE APPEALS OF THE R EVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 16.11.2011 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DT/- 16TH NOVEMBER 2011 COPY FORWARDED TO: 1. M/S. NEELADRI CHIT FUND (P)LTD. 1 - 10 - 233/B 1 ST FLOOR ASHOK NAGAR CROSS ROADS HYDERABAD-500 028. 2. INCOME - TAX OFFICER WARD - 15( 1 )(TDS) HYDERABAD 3. COMMISSIONER OF INCOME-TAX(A)-II HYDERABAD 4. COMMISSIONER OF INCOME - TAX (TDS) HYDERABAD 5. THE D.R. ITAT HYDERABAD. B.V.S.