2012 (2) TMI 468 - AT - Income Tax

Disallowance u/s 40(a)(ia) for non-deduction of tax at source on dividend/interest paid to the chit subscribers - Held that - The dividend distributed by the assessee herein does not partake the character of interest , and consequently, the assessee is not liable to deduct tax at source. 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 assessing officer by resorting to disallowance in terms of S.40(a)(ia) of the Act. Short Term Capital Gains on slump sale - Held that - The assessee did not produce any depreeciati0on schedule to substantiate the claim of the assessee, and in the absence of any evidence to show that depreciation has been wrongly calculated or the exact depreciation schedule, rejected the contention of the assessee and upholding the action of the assessing officer. Considering totality of facts and circumstances of the case and taking into consideration the fact that the assessing officer has not taken into account the revised computation filed by the assessee during the assessment proceedings, and the CIT(A) has confirmed the action of the assessing officer in the absence of depreciation schedule or any evidence produced before him to substantiate the claim of the assessee, we find it just and proper to set aside the orders of the lower authorities on this issue, and restore the matter to the file of the assessing officer with a direction to examine the same afresh after giving reasonable opportunity to the assessee to adduce the necessary evidence to substantiate its claim with regard to the depreciation.

Summary

Issues involved:
1. Disallowance under Section 40(a)(ia) of the Act for non-deduction of tax at source on dividend/interest paid to chit subscribers.
2. Dismissal of the ground of appeal by the assessee regarding the assessing officer's failure to consider income from business as per revised computation.

Issue 1: Disallowance under Section 40(a)(ia) of the Act:
The appeal by the Revenue and Cross-Objection by the assessee pertained to the assessment year 2008-09 and challenged the order of the Commissioner of Income-tax(Appeals)-V, Hyderabad dated 21.3.2011. The primary issue was the disallowance under Section 40(a)(ia) of the Act for non-deduction of tax at source on dividend/interest paid to chit subscribers. The Tribunal considered the nature of 'dividend' distributed by the assessee company to the subscribers of its chit fund schemes and its liability to deduct tax at source. Various coordinate benches of the Tribunal, including the Hyderabad Bench, had consistently held in favor of the assessee, ruling that the payment of dividend to chit subscribers did not qualify as interest, thereby absolving the assessee from the obligation to deduct TDS. The Tribunal cited precedents and emphasized the need for uniformity in decisions on the same matter. In the absence of contrary decisions from higher courts, the Tribunal upheld the order of the CIT(A) and dismissed the appeal of the Revenue.

Issue 2: Dismissal of the ground of appeal by the assessee:
The Cross-Objection filed by the assessee highlighted a delay in filing, which was condoned by the Tribunal. The main grievance of the assessee was the dismissal by the CIT(A) of the ground of appeal concerning the failure of the assessing officer to consider income from business as per a revised computation. The assessee had submitted a revised computation during the assessment proceedings, reflecting higher income from Short Term Capital Gains on a slump sale. However, the assessing officer did not account for this revised computation, leading to a discrepancy in the income from business. The CIT(A) rejected the assessee's contention due to a lack of supporting documentation. The Tribunal, considering the circumstances, set aside the orders of the lower authorities and directed the assessing officer to reexamine the issue after allowing the assessee to present necessary evidence for the depreciation claim. Consequently, the Revenue's appeal was dismissed, and the assessee's cross-objection was allowed for statistical purposes.

In conclusion, the judgment by the Appellate Tribunal ITAT Hyderabad addressed the issues of disallowance under Section 40(a)(ia) of the Act and the dismissal of the ground of appeal by the assessee regarding income from business. The Tribunal ruled in favor of the assessee concerning the disallowance, citing precedents and emphasizing the importance of consistent decisions. Additionally, the Tribunal directed a reexamination of the income from business issue, highlighting the need for proper substantiation of claims.