NDLI: Deputy Commissioner of Income Tax, Chennai Vs. T. Jayachandran

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Income Tax Act 1961
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Income Tax Act, 1961 (43 of 1961)
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Case Disposed Off
Headnote	Income Tax Act, 1961 – Additional interest – Respondent, an approved broker for Indian Bank – Case of revenue was that Indian Bank raised its funds by way of receiving amount from the PSU and making fixed term deposit on higher rate of interest – In order to pay higher interest to these PSUs, the bank requested the respondent to purchase securities on its behalf – Thereafter, respondent purchased securities at a particular rate quoted by the bank and was paid commission in respect of transactions done on behalf of Indian Bank – Under instructions from Indian Bank, a portion of amount realised from the security transactions carried on behalf of Indian Bank was paid by way of additional interest to certain PSUs on the deposits made with the Indian Bank – Assessing officer made demand from the respondent with regard to the sum payable to the PSUs holding that the respondent did not act as a broker in the transactions carried out for Indian Bank rather as an independent dealer and that there was no overriding title in favour of PSUs with regard to the additional amount earned out of the securities transactions and the said amount is liable to be assessed as the income of the respondent – Held: Whether the alleged interest payable to the PSUs can be assessed as an income of the respondent depends on the determination of true nature of relationship between the Indian Bank and the respondent with regard to the transactions in question and the capacity in which he held the amount – The normal settlement process in Government securities is that during transaction banks make payments and deliver the securities directly to each other – The broker’s only function is to bring the buyer and seller together and help them to negotiate the terms for which he earns a commission from both the parties – He does not handle either cash or securities – The evidence led by bank officials show that the price of securities itself were fixed by the bank authorities and as per their directions the respondent had purchased the securities at the market price and the differential amount was directed to be used for taking demand drafts from the bank itself for paying additional interest to the PSUs which is sufficient to prove the fact that the respondent acted as a broker to the Bank and, hence, the additional interest payable to the PSUs could not be held to be his property or income.
Judge	Hon'ble Mr. Justice R.K. Agrawal
Neutral Citation	2018 INSC 401
Petitioner	Deputy Commissioner Of Income Tax, Chennai
Respondent	T. Jayachandran
SCR	[2018] 5 S.C.R. 619
Judgement Date	2018-04-24
Case Number	4341

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