The High Court · 2025

Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to grant an order of interim stay of all further proceedings in pursuance of the impugned assessment order dated 29.12.2008 for the assessment year 2006-07 on the file of the respondent pending disposal of the above writ petition. l.A. NO: 2 OF 2009(WPMP. NO:1158 oF 2009) Petition under Section 15'l CPC praying that in the ci1 umstances stated in the affidavit filed in support of the petition, the High Court mil be pleased to grant an order of interim stay of all further proceedings in pursuit ce of the impugned Notice under sectiorr 156 of the lncome Tax Act, 1961 dated : 9.12.2008 issued by the respondent pending disposal of the above writ petition anc thus render Justice. l.A. NO: 4 OF 2009 (V\IVMP. NO: 1640 OF 2009 ) Between: The Deputy Commissioner Of lncome Tax, Circle 16(2) e hfloor, Ayakar Bhavan, Basheerbagh, Hyderabad AND M/s. ft/argadarsi Chit Fund Ltd., Rep. by its Mart ging Director, Smt. Ch.Sailaja Kiron, W/o. Ch.Kiran 5-10-1 95, Corporate office, Opp Police Controi Room Fatehmaidan Road, Hyderabad-500004 ...PETtTIrl \ERyRESPONDENT ...RESPC I DENT/PETITIONER Petition under Section '1 5'1 CPC praying that in the circ Jmstances stated in the affidavit filed in support of the petition, the High Court may be pleased to vacate the interim order dated 27.4.2009 granted by the l-lr n'ble High Court in WP.tt/PNo. of 2009 in WPNo.9.1 1 of 2009. Counsel for the Petitioner: SRI KAILASH NATH P.S.S REPII :SENTING Counsel for the Respondent: SRI K.SUDHAKAR REDDY, St: {lOR STANDING SRI T.BALAMOHAN REDDY, AD\ OCATE COUNSEL FOR INCOME TA} W.P.NO: 28441 OF 2009 Between: V/..ltlqlSr{qpi Chrt lund Limited, represented by its Managing Director Smt Ch.Shailaja W/o. Sri Ch.Kiran 5-10-195, Corporate Office, O-pp?olice Control Room, Hyderabad. AND ...PET|T|ONER The Additional Commissioner of lncome Tax, Range '16, Ayakar Bhavan, Basheerbagh, Hyderabad. ...RESPONDENT Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue an order or direction or writ more in the nature of Writ of Certiorari calling for the record comprised in the impugned assessment order dated 14.12.2009 for the assessment year 2OO7 -2008 on the file of the Respondent and quash the same. l.A. NO: 1 OF 2009(WPMP. NO: 37009 OF 2009 ) Petition under Section 1 51 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased grant an order of interim stay of all further proceedings in pursuance of the impugned assessment order dated 14.12.2009 for the assessment year 2007-2008 on the file of the respondent, including recovery of tax of Rs.1 27,86,89,098/- as per notice under Section 1 56 of the l.T. Act, 1961 or any other amounts, pending disposal of the above Writ Petition and thus render justice. Counsel for the Petitioner: SRI KAILASH NATH P.S.S REPRESENTTNG Counsel for the Respondent: SRI K.SUDHAKAR REDDY, SENIOR STANDING SRI T.BALAMOHAN REDDY, ADVOCATE COUNSEL FOR INCOME TAX The Court made the following: COMMON ORDER ,; IN THE HIGH COURT FOR THE STATE OF Tli -ANGANA AT HYDERABAD THE HONOTIRABLE SRI.ITJSTICE P.SAM T OSHY AND THE HONOURABLE SRI JUSTICE SUDDALA CHALAPATHI RAO w.P.Nos.9l I & 28441 OF 2009

02.12.2025 Between M/s Margadarsi Chit Find Limited, Rep. by its Manaeing Director, Smt.Ch.Shailaja. Hyderabad. ..Petitioner AND The Deputy (lotnmissioner of Income Tax, Circte l6(2),6''' Floor, Ayakar Bhavan, Basheerbagh, llyderabad. . . Respondent BDEB, @er !{on'ble Sri .Justice P.Sum Koshy) Heard Mr. Kailash Nath P.S.S, leamed counse. r'epresenting Mr. T.Bala Mohan Reddy, learned counsel for the 1 etitioner and Mr. K.Sudhakar Reddy, leamed Senior Standing Cc rnsel for the Income Tax Department for the respondent. Perusec he record- 2

2. Thcsc arc two writ pctitions which have been filed assailing the asscssment order dated 29.12.2008 for the assessment year 2006'2001 and datcd 14.12.2009 for the assessment ycars 2007-

3. Though the Assessing Officer in the course of passing the impugned assessrttent order has decided tbur issues' those are - ( I ) disallowancc of chit d iv idend/interest u/s O(a)(ia), (2) disallorvance of staff cost, (3) disallowance of expenditure u/s l4A and (4) disaltoq'ancc u/s 40(a)(ia) for the failure u/s 194C, the petitioner seems to be primarily aggrieved of the order passed in issue No. I so {-ar as disallowance of chit dividend/interest under Section 10(aXia). 't'he said issue by now has been considered in a batch of writ petitions by this High Court itself and few ol them perlaining to the very same assessee. The same issue has also been decided by the other High Courts as well. In the case of COMMISSIONER OF INCOME TAX VS. SAHIB CHITS (DBLHI) (P) LTD.I decided on 24.07 .2009, the Division Bench of 'ITA No.44 OF 2008 DATED 24.07.2009 ol High Court of l)elhi at New Delhi I I i i I I 3{-*:4 3 thc Delhi High Court dealing with the issue on chit sub cription has held as under: "The above question has already been ar: by the Delhi High Court in Sahib Chits (Delhi) I in l.T.A. No 44 of 2008, on 24.07.2009, at by the learned Tribunal of Bangalore Bencf case of Marga Soochi Chit P\d. Ltd., irt No.995/Bangalore/2008, wherein it was held tl amount disbursed by a chit fund company members from the contribution cannot be tr€ interest. Similar view was taken by the Madra C:ourt in the case of Bilahari lnvestments (P, C;.lT (288 ITR 39 (Mad ) and the decisiott Madras High Court has been affirmed by the ti Court in the case of C.l.T. v. Bilahari lnvestn t Ltd t(2008) 299 ITR 11. Therefore, the learned - has followed the correct proposition of law r€ the Supreme Court decision, and Delhi and High Courts decisions. We do not find any n: interfere with the impugned order'" 2 | )Ltd., in the I,T.A. at the :o the :ed as ; High _td. v. of the nt Pvt. ribunal ing on / adras son to

4. Foltowing the aforesaid judgment ol the Delhi High Court, this High Clourl also in the case of the asse I ee itself in W.P.No.26553 of 2005 allowed the writ petition in temrs of the order passed by the Delhi High Court in the case c Sahib Chits (supra) vide its order dated 29.01.2024. The said jrdgment was subsequently also followed in W.P.No.1562 of 200t which stood decided on26.06.2025. -/t' 4

5. ln the present two writ petitions also, the main issue that was under challenge is this itseif and, therefore, the leamed counsel appearing on either side do not dispute the f-act that the said issue stands decided by the aforesaid judgment of the Delhi High Coutt in the case of Sahib Cftils (supra) and this High Court in W.P.No.26553 of 2005 and W.P.No.1562 of 2008.

6. In view of the satne. we are inclined to allow the writ petitions to the extent so far as issue No. I in respect of chit subscription is concerned holding that disbursement of the chit amount to its members cannot be treated as ititerest or dividend

7. However, as regards the other issues are concemed, those pertaining to disallowance of' staff cost, disallo'uvance of expenditurc undel Section 14(A) and disallowance under Section 40(aXia) fbr the failure under Section I 9a (c) are concemed and lor the assessmgnt year 2006-2007, there two more additional issues, those. are disallowance of short term capital loss on sale of plant and machinery and PF and ESI treated as income r-ls 2Q\@), this Courl in its earlier decision itself in W.P.No.1 562 of 2008 had left it for the Assessing Offi:r to issue fresh notice and e:.: '\- I i I I I I I I I I I I I I E : ! t i I : I t Y-!FB=SF '!?-ry/ ,;,:q ! - ', -. - :.1., -at- "/' 5 decide on merits. However, in tlie instant case, i nce there is already an adjudication by the. Asscssing Officer, thc re issues rve are leaving it open permitting the petitioner to challer'! : the sarne if at all il the petitioner inclined to challenge the sar t I by way of pre f'erring a sLatutory appeal in accot'dance with lar'r,.

8. With the aforesaid observation and direction. .l ese two rvrit petitions stand allowed-in-part. As a consequence, tlr, ordcr of the Assessing Officer so t-ar as the issue pertaining to chi contribution is concemed, is set aside/quashed. -l-here shall be rt ' order as to Consequently, miscellaneous petitions pending , if any, shall stand closed. ./ ?. That Rule Nisi has been made absolute as above' wirness THE HON,BLE THE CHIEF JUSTICE APARESH KIJ ,lAR SINGH, on this iiJiSbAV, irrE SECOND DAY OF DECEMBER TWO THOUSANC AND TWENW FIVE //TRUE COPYII SD/-,I SRINIVASA REDDY 1' J STANT REGISTRAR , SECTION OFFICER (2 ithfloor, Ayakar The Deoutv Commissioner Of lncome Tax, Ci Bhavan', Bisheerbagh, HYderabad. The Additional Commissioner of lncome Tax, Basheerbagh, Hyderabad. 2 e. one cc to"snt T.BALAMOHAN REDDY, Advocate [ol) JC] 4. o;; cc io SnL K.suDHA-KAii n'eooV, 5' SCroniN: fME rAX toPUCl 5. Two CD Copies 1l) Ayakar Bhavan, Ra e To 1 PSK LS \& HIGH COURT DATED:0211212025 COMMON ORDER WP.Nos.911 & 28441 of 2009 ,RTHE S lA ( ) U t * 3 JAII 028 2 -:\ ,, / . <t ,/,, 5itrl,,i \"-.'-2/ PARTLY ALLOWING THE WRIT PETITIoNS WITHOUT COSTS * "oP(nA &r"