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Issues involved: Interpretation of provisions of Income Tax Act regarding chit fund transactions and applicability of tax deduction at source under Section 194A.
Summary: The High Court of Andhra Pradesh, in a common judgment by Chief Justice Sri Kalyan Jyoti Sengupta, considered the appeal related to the assessment year 2004-05. The main question raised was whether the discount paid by a foreman to subscribers in a chit fund transaction should be considered as interest under Section 2(28A) of the Income Tax Act, necessitating tax deduction at source under Section 194A. The Tribunal's decision was based on previous rulings in similar cases, where it was held that such payments do not constitute interest as there is no borrowing of money or debt incurred by the chit fund company. The Madras High Court and the Supreme Court also supported this view in previous cases. The High Court, relying on the precedents, concluded that the issue at hand was settled by previous decisions and hence declined to admit the appeal to avoid unsettling the established position. Consequently, the appeal (I.T.T.A. No. 64 of 2013) was dismissed. Subsequently, another appeal (I.T.T.A. No. 22 of 2013) was also dismissed as it raised an identical issue to the first appeal, which had been rejected based on the same grounds. In conclusion, both appeals were dismissed by the High Court of Andhra Pradesh based on the interpretation of relevant provisions of the Income Tax Act regarding chit fund transactions and the applicability of tax deduction at source under Section 194A.
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