2014 (2) TMI 985

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....common order is passed for the sake of convenience. 2. The ground raised by revenue in these appeals is common, which is as follows: "The learned CIT(A) erred in holding that the chit dividends paid to the subscribers does not partake the character of interest and consequently the chit fund company is no liable to deduct tax u/s 194A while making payment of dividend to the subscriber." 3. Briefly the facts are that the Assessing Officer held that the dividend paid by the assessee is in the nature of interest paid to the chit subscribers, hence, the same is liable for TDS u/s 194A of the Act. He further held that since no TDS was made by the assessee, the assessee was deemed to be in default and TDS u/s 201(1) and interest u/s 201(1....

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....Delhi) (P) Ltd., before the Delhi High Court in I.T.A. No. 44 of 2008 order dated 24.7.2009 wherein it was held that the amount disbursed by a chit fund company to the members from the contribution cannot be treated as interest. As the payment made/disbursed to the subscribers/members is not interest, the question of deducting any tax at source from it would not arise. In the case of a chit fund, there is no borrowing of money nor any debt is incurred and as such the provisions of section 194A and 2(28A) of the Act are not attracted. 5. Similar view has been taken in the case of Bilahari Investments (P) Ltd., v. CIT, 288 ITR 39 (Mad). The view was confirmed by the Supreme Court in the case of CIT vs. Bilahari Investment Pvt. Ltd. (2008) ....

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....ed above, it has been consistently held by the coordinate 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., Hyderabad, dated 31.10.2011, that the payment to the subscribers of a chit towards dividend does not partake the character of interest. In this view of the matter, we uphold the orders of the CIT(A) impugned in these appeals, in holding that the 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 grounds of the Revenue in both these appeals." 7.1 Similar view....