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TMI Blog2004 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... nd construction. A survey was conducted under section 133A of the Act and certain cheque receipts registers and cheque payment registers were found in the business premises of the company. Examination of those books disclosed that loans were taken by the directors and managing director in their individual capacities from private lenders in the name of the assessee-company. The loan amounts received byway of cheques in the name of the assessee were deposited in the bank account of the assessee and immediately transferred to the accounts of directors/managing director on the same day, by issuing corresponding cheques. When the directors/managing director repaid the loan amount or paid interest, such payments were also routed through the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of sections 201(1) and 201(1A) of the Act were applied. The Assessing Officer passed five orders in regard to the five assessment years under section 201(1) of the Act, deeming the company to be an assessee in default in respect of the tax and claiming the tax from the assessee. Five orders were also passed by the Assessing Officer under section 201 (1A) of the Act making the assessee liable for payment of simple interest as specified (on the ground that tax which ought to have been deducted was not deducted) from the date on which such tax was actually paid. Five orders were also passed by the Assessing Officer under section 271C of the Act levying penalty in a sum equal to the amount of tax which the assessee had failed to deduct w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93-94 201(1A) 32,747 8. 198/02 622/Bang/1996 1994-95 201(1A) 7,130 9. 199/02 624/Bang/1996 1995-96 201(1A) 14,332 10. 200/02 626/Bang/1996 1996-97 201(1A) 4,344 11. 195/02 588/Bang/1996 1992-93 271C 23,134 12. 194/02 589/Bang/l996 1993-94 271C 68,384 13. 193/02 590/Bang/l996 1994-95 271C 19,467 14. 191/02 591/Bang/1996 1995-96 271C 70,071 15. 192/02 592/Bang/1996 1996-97 271C 63,215 6 The questions that can be said to arise for consideration in these appeals are: (i) When the directors of a company route their borrowings through the company and repay the loans also with interest through the company ,without the loans and interest being reflected in the books of account of the company as bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected only in the books of account of the directors/managing director and not in the books of account of the assessee-company. It was also found that interest amount that was received by the assessee-company from it directors/managing director was exactly same as the interest that was paid by the assessee-company to the respective creditors. 8 The Assessing Officer and the appellate authority held that once the interest was paid to the lenders, by cheques issued by the assessee-company, the obligation to deduct income-tax on such interest under section 194A of the Act arose on the part of the assessee irrespective of whether the loans were used by the assessee or its directors and the failure to deduct tax on the interest in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible for paying interest as the borrowing was not by it, nor had the assessee-company paid interest from its funds. It merely acted as an agent of its directors/managing director in receiving the loan amount from the lender and forwarding it to the director/managing director and similarly where the loan was repaid, it received the amount from the director/managing director and paid it to the lender. The amounts repaid by the directors including interest, were not reflected in its books of account as loans or borrowings of the assessee company. It cannot therefore be stated that the company is a person responsible for paying interest to the lenders of the directors. Therefore the Tribunal was justified in its view that the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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