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G. Chowdhury, J. M.

1. Since the issues are common, these appeals are being disposed of by this common order. ITA Nos. 1624 & 1625(Mad)/1995 have been filed by the assessee against the order under s. 201(1) by which the assessee was treated in default, as it did not deduct tax at source. ITA Nos. 1626 & 1627(Mad)/1995 are against the orders under s. 201(1A), by which interest was levied.

2. The brief facts of the case are like these. The assessee-company is a company registered under the Companies Act, hereinafter referred to as the company. The company was set up with the objective of providing a number of financial services to its customers/investors including funds management and asset securitisation. The company started three types of schemes where the funds of the investors were invested, namely, (1) Bank Guaranteed Investments, (2) Viswasamrudhi, and (3) Prime Invest. The different investors, under the terms and conditions of offer memoranda, place the funds with the assessee, against which the assessee issues a certificate of investment, a specimen copy of the same has been annexed by the assessee in the paper book. Thereafter the funds go to the accounts of the scheme, namely Viswapriya Funds Management - A/c Bank Guaranteed Investments. This account will be operated by the fiduciary and custodian and/or their constituted attorneys. In the present case M/s Fraser & Ross, Chartered Accountants and M/s Price Waterhouse Associates, Chartered Accountants are acting as fiduciary and custodian of the assessee-company. These custodians invest the amount of the investors in different schemes so that it may fetch highest amount of profit having considered the security aspects of the investors. According to the assessee the funds are invested in such a way that a monthly return of not less than 1.5% can be paid to the investors. Apart from the aforesaid amount of return, i.e. 1.5% per month, the investors were entitled to the profit accumulated in each scheme. When the money of the investors are deposited in bank the fiduciary company issues a letter to the investors informing them that the investors funds have been deployed on their behalf as per the terms and conditions of the Offer Memorandum. So far as the assessee is concerned it is entitled to only management fees. All the aforesaid items and conditions are incorporated in the Offer Memorandum issued by the company, which are accepted by the investors. Copies of the Offer Memoranda finds place in the paper book. It is important to mention here that cl. XVI of the Offer Memoranda provides that the funds received from he investors are proposed to be invested in areas where the returns as per present laws are not subject to tax deduction at source. However, in the event of TDS being applicable the same will be deducted. The case of the assessee is that the assessee-company is a fund manager and is entitled to management fee for offering its services under the fund management contract. Accordingly there is no relationship of creditor and debtor between the investor and the assessee. According to the assessee the relationship between the investor and the assessee-company may be termed as a principal and agent. Therefore, in the absence of debtor and creditor relationship the amount which is paid to the investors cannot be termed as interest within the meaning of s. 2(28A) of the IT Act, 1961. Accordingly the assessee is not supposed to deduct tax at source under s. 194A of the Act.