Law:

Section:

Section 2(28A), read with sections 194A, 201 and 201 (1A), of the Income-tax Act, 1961 - Interest - Meaning of - Assessment years 1993-94 and 1994-95 - Whether payment made by assessee-company, engaged in retail finance services, corporate advisory services, securities trading and assets securitisation, to persons who had invested in a scheme floated by it under which investor was guaranteed a minimum return of 1.5 per cent per month, was 'interest' within meaning of section 2(28A) - Held, yes - Whether in that case tax under section 194A was to be deducted at source - Held, yes - Whether assessee was liable to consequences under section 201(1) and 201(1A) for failure to deduct or pay tax at source - Held, yes Section 194A of the Income-tax Act, 1961 - Deduction of tax at source - Interest other than interest on securities - Assessment years 1993-94 and 1994-95 - Whether in view of finding under heading 'Interest-Meaning of' assessee was liable to deduct tax at source on payments made to investors and was also liable to consequences under section 201(1) and (1A) for failure to deduct or pay tax at source - Held, yes FACTS The assessee-company was engaged in retail finance services, corpo- rate advisory services, securities trading and assets securitisation to the persons who had invested in a scheme floated by it under which the investor was guaranteed a minimum return of 1.5 per cent per month. The investors' moneys were not made part of the funds of the assessee-company's accounts, but were kept in a separate account termed 'Viswapriya Funds Management Account-Bank Guaranteed Investments' A firm of chartered accountants had been appointed to function as fiduciary and custodian of the scheme and the accounts of that fund were also separately audited. The assessee was only the fund manager which received a management fee at 6 per cent per annum from all the funds invested on behalf of the investors and it had agreed to forgo a part of that management fee if the return on the investment was less than the minimum guaranteed return for the investors. If the return on investments was in excess of amount of management fee and the minimum guaran-teed return, the…

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