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TMI Blog2007 (8) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ting tax deductible at source (TDS) on interest paid by it for loans availed of by the assessee and repaid by it with interest on the ground that the loans were meant for the directors of the assessee-company and not for the assessee-company and after recording a finding that the directors had misused the name of the company to avail of the loan. 2 The facts giving rise to these civil appeals are as follows 3 The assessee (sole respondent in all the civil appeals) is a company incorporated under the Companies Act, 1956 engaged in the business of real estate and construction. A survey was conducted under section 133A of the Act when cheque receipt registers and cheque payment registers were found in the business premises of the company. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired under section 194A(1) of the Act and, therefore, the Assessing Officer applied the provisions of section 201(1) of the Act by declaring the assessee-company an assessee-in default and also applied section 201 (1A) of the Act imposing interest for not deducting TDS at source. The order passed by the Assessing Officer was confirmed by the appellate authority. Before the Tribunal the assessee contended that the borrowings were routed through the company; that the company was merely a medium through which the borrowings and repayments were routed; that the loans were taken by the directors and not by the company which loans and interest thereon were not reflected in the company's books of account and that the company was merely disbursing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in substance the loans were in fact given to the directors of the company. One more aspect needs to be mentioned, even according to the impugned decision of the Tribunal the directors had misused the name of the company to avail of the loans and even with this finding the Tribunal has held that there was no obligation on the part of the assessee to comply with the statutory requirements of section 194A of the Act by deducting TDS on the interest paid by the assessee to the creditors. The first question which arises for determination in these civil appeals is: whether it is open to the directors of the assessee-company to contend before the Assessing Officer, after search and survey operations, that the transactions entered into by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation.—For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called 'Interest payable account' or 'Suspense account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (2) [Omitted by the Finance Act, 1992, with effect from June 1, 1992.] (3) The provisions of sub-section (1) shall not apply— (1) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or (f) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette; (iv) to such income credited or paid by a firm to a partner of the firm; (v) to such income credited or paid by a co-operative society to a member thereof or to any other co-operative society ; (vi) to such income credited or paid in respect of deposits under any scheme framed by the Central Government and notified by it in this behalf in the Official Gazette, (vii) to such income cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable by an infrastructure capital company or infrastructure capital fund or a public sector company in relation to a zero coupon bond issued on or after the 1st day of June, 2005 by such company or fund or public sector company. Explanation 1.—For the purposes of clauses (i), (vii) and (viia), 'time deposits' means deposits (excluding recurring deposits) repay able on the expiry of fixed periods. Explanation. 2.—Omitted. (4) The person responsible for making the payment referred to in sub-section (1) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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