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2013 (11) TMI 1270 - AT - Income TaxDifferential Plans of Charging of Interest - Because of the differential plans of charging of interest, the assessee trusts are generating surplus in their hands - Sarvodaya Mutual Benefit Trust (SMBT) providing loans to Self-Help-Groups (SHGs) - Whether treating 95 per cent of the surplus distributed to the member SHGs, as income liable for taxation or not - Held that:- The Commissioner of Income-tax (Appeals) is justified in coming to the conclusion that the assessee trusts and the SHGs are inter-related and they are all concerns governed by the principles of mutuality - The 95 per cent surplus distributed by the assessee trusts to the various SHGs working under them is nothing but the income of those SHGs themselves - It is not something that those groups are getting from outside by way of income - It is the fruit of their efforts - After finalising the accounts and computing the surplus, the profits are divided among those members, whose shares are determinate and whose roles are well defined. All the SHGs working under the assessee trusts are concerns governed by the principles of mutuality and accordingly the 95 per cent of surplus distributed among them are not in the nature of income - The Commissioner of Income-tax (Appeals) has rightly held that 95 per cent of the surplus distributed by the assessee trusts cannot be brought to tax. Tax Deducted at Source and Applicability of u/s 40(a)(ia) – Held that:- The Commissioner of Income-tax (Appeals) is justified in holding that the assessees are not bound by the law stated in section 194A - there is no need of deducting any tax at source while making the interest payments to SNBFCL - the order of the Commissioner of Income-tax (Appeals) was upheld in deleting the additions made by the assessing authorities under section 40(a)(ia) of the Income-tax Act, 1961 - interest expenditure is directly covered by section 28 – thus section 40(a)(ia) will not apply for the reason that the section applies only to those expenses covered by sections 30 to 38 – The individuals, not being liable for audit under section 44AB, the provisions of section 194A are not applicable to them - What is not applicable to the members, will not apply to representative assesses - Decided partly in favour of Revenue.
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