Bharath Bail Vs DCIT (ITAT Bangalore)
The assessee arranged borrowings of ₹1.77 crore for a company, where funds were directly advanced by lenders to the company and interest was also paid directly by the company to the lenders. However, TDS on interest (₹2.04 lakh) was deducted in the assessee’s name, and he offered the gross interest income (₹20.49 lakh) to tax while claiming equal deduction under Section 57. The AO disallowed the deduction due to lack of proof of actual interest payment by the assessee, which was upheld by the CIT(A).
The ITAT observed that the assessee merely acted as a facilitator and did not actually receive or pay the interest—hence the real income belonged to the lenders, and the gross interest could not be taxed in his hands. However, since the assessee claimed TDS credit in his name, the burden was on him to prove that such TDS benefit was passed on to the actual lenders.
In absence of evidence showing transfer or adjustment of the TDS component, the Tribunal held that only the TDS amount of ₹2.04 lakh remained taxable in the assessee’s hands, while the balance addition was deleted.
Accordingly, the appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
