SRI BHARATH BAIL ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-11(1), BANGALORE

This appeal is preferred by the assessee against the order of the CIT(A), inter alia, on following grounds:

The facts in brief borne out from the record are that assessee had claimed Rs.20,49,950/- as deduction under section 57 of the Income Tax Act on the ground that being the Managing Director of the Company, he had mobilized funds for the Company through borrowing funds from various parties. Such borrowings were made directly by the said parties into the company on behalf of the appellant and on such borrowings, interest earned was at Rs. 20,49,500/-. The assessee has declared interest of Rs.20,49,500/- and claimed deduction of the same under section 57 also and accordingly reported NIL income under the head income from other sources. The TDS certificate for the interest paid was also issued to the assessee and he claimed the adjustment of the same also. It was contended on behalf of the assessee that interest on borrowings were directly paid by the company to the lender though the borrowings were routed through assessee. The assessee has claimed that since whatever interest was accrued to the assessee, it was directly paid to the lender. The deduction of the same be allowed to the assessee to compute the income from other sources. Being not convinced with the explanations of the assessee, AO has disallowed the claim of deduction of Rs.20,49,500/-.

I have carefully examined the orders of authorities below in the light of rival submissions and I find that assessee himself has declared the interest income of Rs.20,49,500/- on which TDS was deducted by the company for which TDS certificate was issued to the assessee and the assessee has also claimed the benefit of TDS deducted by the company on payment of interest. The contentions of the assessee that he has simply organised the borrowings for the company and it was directly given to the company by the lender and interest was also directly paid to the lender. I am unable to understand as to why TDS certificate deducting the TDS on payment of interest was issued to the assessee. If the assessee has received the borrowings from the lender and further advanced to the company and whenever the company paid the interest to the assessee and it was further paid to the lender, the TDS was also required to be deducted at both the points whenever interest was paid to the lenders. In the instant case, the contention of the assessee is that he has simply organized the borrowings for the company and the borrowing was directly given to the company and the company directly paid the interest to the lenders. In such circumstance where is the need to issue the TDS certificate in favour of the assessee. If the assessee received the TDS certificate on deduction on interest payment and claimed the benefit of the same, then he should have offered the corresponding income accrued on account of deduction of TDS. If the income is accrued to the assessee, the onus is upon the assessee to establish as to how he has made the payment to the lender. In the instant case, all these aspects were not examined by the lower authorities. Under these circumstances, I am of the view that CIT(A) has not properly examined the facts of the case. Therefore, I set aside the order of the CIT(A) and restore the matter to the AO to re-examine the claim in the light of above observations.

In the result, the appeal of the assessee stands allowed for statistical purposes.