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Margadarsi Chit Fund Private Limited and others Versus Dy. Commissioner of Income Tax and others

2015 (6) TMI 387 - ITAT HYDERABAD

TDS u/s 194H or 194C - nature of payment - outstanding liability at the end - Disallowance u/s 40(1)(ia) - non deduction of taxes on payments made to M/s. Usha Kiron Movies Ltd - Held that:- . If any payment is made towards purchase of articles on which VAT is leviable, then section 194C will not apply for the same. Even if it is assumed that the entire tax is to be taken as a single one and the purchases on which VAT was paid should not be segregated, even then the assessee has paid TDS of S .....

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ipping & Transports vs. Additional CIT (A) (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ), we hold that the disallowance u/s 40(a)(ia) cannot be made in respect of the amount which has also been paid during the year. In view of the above discussion, we delete the disallowance of ₹ 38,66,773 u/s 40(a)(ia) for non deduction of TDS and allow the appeal of the assessee. - Decided against revenue.

Disallowance of dividend/interest paid on subscription paid to the subscribers without deduct .....

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the other group companies should be proportionately disallowed in that year. The CIT (A) disallowed an expenditure of ₹ 2.00 lakhs on the ground that very little expenditure were deployed for collection of subscription from other group companies. Thus collection was done as minor additional work along with regular employment. In this view of the matter, the disallowance of ₹ 2.00 lakhs was confirmed by the Tribunal. Thus no hesitation in accepting the disallowance of ₹ 3.00 lak .....

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are that the assessee company is engaged in the business of running chit fund business, entertainment, food processing and farm maintenance. For A.Y 2011-12, assessee company filed its return of income on 29.09.2011 admitting total income of ₹ 88,24,87,208 and later filed a revised return of income on 15.3.2013 admitting gross total income of ₹ 88,10,55,036. The AO completed the assessment u/s 143(3) of the Act determining the total income of the assessee company at ₹ 540,53,59 .....

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has made a payment of ₹ 1,27,66,093 to Usha Kiron Movies on which no tax was deducted at source on an amount of ₹ 38,66,773. In this connection assessee company was asked to explain why these payments should not be disallowed as these payments are made towards composite contract entered into with M/s Usha Kiron Movies Ltd. In response to this, assessee company replied that these payments were made to M/s Usha Kiron Movies amounting to ₹ 38,66,773 will not attract TDS as most of .....

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M/s Margadarsi Chit Fund Pvt. Ltd has to reimburse all the charges/costs for utilizing infrastructural facilities. This clearly shows that all the payments made by M/s Margadarsi Chit Fund Pvt Ltd to M/s Usha Kiron Movies Ltd is as per this MOU. Out of these payments, some are subjected to TDS, whereas some are not subjected to TDS in the pretext of purchases. This is not acceptable. Because all the payments are made in connection with a composite contract with M/s Usha Kiron Movies Ltd in conne .....

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contract of which it is a part. The consideration for each condition in a case like this is the consideration for the contract taken as a while. It is not split up into several considerations apportioned between each term separately . In view of the above it is very clear that the assessee company defaulted in deducting tax on payments of ₹ 38,66,773 made to M/s. Usha Kiron Movies Ltd. Hence the same is disallowed u/s 40(a)(ia) and added to the income returned . 5. Aggrieved, assessee pref .....

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shall be no disallowance on the same. 6. The CIT (A) held that he had already decided the issue in his order for A.Y 2010-11 and for the same reasons the AO is justified in making the addition of ₹ 38,66,773. Thus, the CIT (A) confirmed the order of the AO. 7. Aggrieved, the assessee preferred appeal before and raised the following effective grounds: 2(a) The CIT (A) grossly erred in sustaining the disallowance of ₹ 38,66,773 u/s 40(a)(ia) for nondeduction of TDS on payments made to .....

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he above, the appellant submits that since tax was deducted on payments made to Usha Kiron Movies, though at lower rate, no disallowance is warranted u/s 40(a)(ia) . 8. Further, the assessee raised the following additional grounds: 1. The CIT (A)-V Hyderabad (hereinafter referred to as the ld CIT (A) ) erred in confirming the disallowance of ₹ 38,66,773 made by the ld.AO u/s 40(a)(ia) of the Act without appreciating the fact that the Appellant has paid ₹ 1,27,66,093 against the compo .....

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mpugned A.Y. Hence the disallowance of ₹ 38,66,773 u/s 40(a)((ia) is not at all justified and the same may be deleted . 9. The ld DR relied on the decision of SA Builders (289 ITR 26) and objected for the additional grounds to be admitted. The DR also relied on the decision in the case of CIT vs.Southern Group Industries Ltd (300 ITR 113) (Chennai) and the ITAT Hyderabad B Bench decision in IT(SS)A No.26/Hyd/2009 in the case of Jawaharlal vs. DCIT dated 3.9.2004. 10. The ld Counsel for the .....

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383 (S.C) and the decision of the Hon'ble Bombay High Court in the case of Ahmedabad Electric Company Ltd vs. CIT (199 ITR 351), we admit the additional grounds of appeal. 12. We are of the opinion that the contention of the assessee is to be accepted. If any payment is made towards purchase of articles on which VAT is leviable, then section 194C will not apply for the same. Even if it is assumed that the entire tax is to be taken as a single one and the purchases on which VAT was paid shoul .....

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ying the decision of the Special Bench in the case of Merilyn Shipping & Transports vs. Additional CIT (A) (16 ITR Trib-1 Visaka SB), we hold that the disallowance u/s 40(a)(ia) cannot be made in respect of the amount which has also been paid during the year. In view of the above discussion, we delete the disallowance of ₹ 38,66,773 u/s 40(a)(ia) for non deduction of TDS and allow the appeal of the assessee. 13. In the result appeal in ITA No.1700/Hyd/2014 is allowed. ITA No.1718/Hyd/2 .....

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been decided in favour of the assessee by the jurisdictional High Court for the A.Y 2008-09 in assessee s own case, wherein the appeal filed by the Department was dismissed by the Hon'ble High Court and the Hon'ble Supreme Court upheld the judgment of the Hon'ble High Court of Andhra Pradesh dismissing the SLP filed by the Revenue in SLP No.9454/2014. In this view of the matter, respectfully following the decision of the jurisdictional High Court, whose decision was upheld by the Hon .....

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