2013 (11) TMI 156 - AT - Income Tax

TDS on dividend declared to subscribers - Held that - Following Vipanchi Chit Funds Ltd., (ITA Nos. 804- 805/Hyd/2011) Chit fund dividend to the subscribers does not partake the character of interest defined u/s 2(28A) and accordingly, the assessee is not liable to deduct tax under section194A - The provisions of s. 40(a)(ia) are not attracted Decided in favour of assessee.

Summary

Issues involved:
Appeals against CIT (A) orders for assessment years 2005-06, 2006-07, 2008-09, and 2009-10 regarding non-deduction of TDS on dividend paid by the assessee to subscribers.

Analysis:
1. Common Issue and Clubbing of Appeals:
The appeals were filed against separate orders of CIT (A)-II, Hyderabad for various assessment years. The common issue of non-deduction of TDS on dividends paid by the assessee led to clubbing the appeals together for convenience.

2. Assessee's Submission and AO's Findings:
The assessee, engaged in chit fund business, argued that the dividends paid were not subject to TDS under section 194A. The AO disagreed, holding that the chit dividends were akin to interest under section 2(28A) of the Act, leading to a substantial tax demand and interest under sections 201(1) and 201(1A).

3. CIT (A) Decision and ITAT's Consistent View:
The CIT (A) relied on its previous order, upheld by ITAT, Hyderabad, which stated that chit dividends did not qualify as interest for TDS purposes. The ITAT, following its own precedents, emphasized that chit fund dividends do not fall under section 194A, leading to the dismissal of the department's appeals.

4. Tribunal's Rationale and Upholding of CIT (A) Order:
The Tribunal, citing the necessity of uniform conclusions on the same matter, reiterated that chit dividends do not constitute interest under the Act. It emphasized the importance of institutional integrity in maintaining consistent decisions. The Tribunal upheld the CIT (A) order, dismissing the department's appeals due to the lack of persuasive arguments to deviate from the established view.

5. Final Decision and Dismissal of Appeals:
Based on the consistent rulings and lack of compelling counterarguments, the Tribunal dismissed all appeals filed by the department, affirming the non-applicability of TDS on chit fund dividends. The order was pronounced on 28-09-2012, bringing closure to the contentious issue across multiple assessment years.