Interest credited to the a/c of the payer :: payee's duty.

Last updated: 25 January 2008

Court :
SC

Brief :
The material expression in section 194A(1) is “at the time of credit of such income to the account of the payee”. When interest is debited to ‘Interest Account’, the debit is for a specific amount calculated with reference to the liability of the deductor to a particular creditor in accordance with the terms and conditions of the loan. Therefore, whenever interest is credited to the account of the payee, the payer has to deduct the TDS. The crux of the matter is that the debit is for a specific amount calculated with reference to the deductor’s liability to a particular creditor in accordance with the terms and conditions of the loan. In the instant case, the lender had advanced the loan to the assessee. Debit was made by the assessee to the ‘Interest Account’ for a specific amount calculated with reference to the deductor’s liability to a creditor. There was no resolution of the assessee-company placed placed before the Assessing Officer whereby it had agreed to act as a medium for routing the borrowings and repayments. In the circumstances, it could not be said that the assessee was incharge of disbursing the repayments made by directors in their individual capacities. [Para 7]

Citation :
Commissioner of Income-tax, Bangalore v. Century Building Industries (P.) Ltd. CIVIL APPEAL NOS. 6820 TO 6834 OF 2005 DECIDED ON 10-8 2007.