2015 (5) TMI 743

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....dend paid by the assessee company to various chit members was not in the character of the interest payment and therefore, the provisions of section 194 of the Act was not applicable to the assessee. He held that no liability was found on the part of the assessee to deduct chit fund dividend and consequently applicability of section 40(a)(ia) of the Act is incorrect. The Department has agitated this issue in Ground Nos. 2, 3 and 4 which are as follows: "2. The ld CIT (A) erred in deleting the addition made towards dividend/interest paid in subscription falls within the ambit of section 194H whether paid directly or indirectly and failure to deduct tax at source calls for disallowance u/s 40(a)(ia) of the Act. 3. The ld CIT (A) erred in directing to delete the addition made towards dividend/interest as subscribers pay the subscription amount as per the highest bidder. The profit is earned by others at the cost of highest bidder i.e. the bidder pays the interest as he needs the money most and other subscribers enjoy interest through the assessee company. 4. The ld CIT (A) erred in deleting the addition made towards dividend/interest paid in subscription when the assessee is t....

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....ssue. 6. The next issue is with respect to proportional disallowance of expenses amounting to Rs. 18,87,903. The following reasons were given by the A.O: "5.1 On going through information submitted by assessee company, it is observed that different offices of assessee company have made collections on behalf of its subsidiary companies. In this connection the assessee company was asked to explain why proportionate expenses should not be disallowed as the expenditure is not incurred in connection with assessee's business. In response to this assessee submitted that these collections are very meager and it is only a mutual help amongst holding and subsidiary companies in furthering their business. IN this connection the assessee company relied on decision of Hon'ble Supreme Court in the case of SA Builders Ltd v. CIT (2007) 288 ITR 1. On going through the decision it is observed that the decision is in the context of allowance of interest whereas facts of the present case are different and hence not considered and proportionate expenditure of net collections made by assessee company is worked out as under:  Net subscriptions collected by M/s  Margadarsi Chit ....

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.... for collection of subscription from other group companies. Collection was done as minor additional work along with their regular employment. We confirm the order of the CIT (A) on this issue. 11.1 In the result, the Revenue appeal is dismissed. ITA No.1564/Hyd/2013 - Assessee's Appeal 12. The assessee has come up on appeal on the disallowance made by the AO u/s 40(a)(ia) for non deduction of taxes on the payment made by the assessee to M/s Ushakiron Movies Ltd of Rs. 52,12,366. AO made the addition by giving the following reasons: "4.1 Non deduction of taxes on payments made to M/s Usha Kiron Movies Ltd. During the course of assessment proceedings, it is observed that the assessee company has made different payments to M/s Ushakiron Movies Ltd. Out of these payments, TDS is made on some of the payments whereas TDS is not made on some other payments. During financial year 2008-09, it is observed that the assessee company has made a payment of Rs. 1,36,88,882 to M/s Ushakiron Movies Ltd on which no tax is deducted at source. In this connection, the assessee company asked to explain why these payments should not be disallowed as these payments are made towards composite c....

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....actors with respect to any comprehensive contract are subjected to TDS. In this regard the AO has rightly observed that there is memorandum of understanding (MOU) between the appellant and M/s Ushakiron Movies. As per this MOU, the appellant obtains marketing services from M/s Usha Kiron Movies for the purpose of commercial exploitation of various facilities created in film city. AO has investigated the issue and has categorically observed that all payments made are on account of this contract or MOU. The CIT (A) agreed with the AO that the appellant makes all payments as a part and parcel of this comprehensive contract. Therefore, it can choose to make one comprehensive payment or breakup the marketing services into various parts and then make the payment. The essence and nature of the contract or payment does not change. For example, the appellant has made a payment of Rs. 32,81,230 on water charges for gardens. On this payment, TDS has not been deducted as the appellant claims that this was a purchase of water. The appellant's explanation is not the correct interpretation because M/s Usha Kiron Movies is neither is a seller or reseller of water. The MOU is comprehensive in that ....