Share application money and business interest expense: documentary proof shifts the burden and supports allowance under tax law.

Share application money is not to be treated as unexplained cash credit under section 68 where the assessee produces primary documentary evidence such as PAN details, income-tax returns, bank statements, ROC filings, board resolutions and shareholding particulars to establish identity, creditworthiness and genuineness. If no adverse material is brought and no effective enquiry is made by the Revenue, the initial burden stands discharged and the onus shifts to the Revenue. Interest expenditure under section 36(1)(iii) is not disallowable where the borrowings are shown to relate to business-linked work-in-progress for plant and machinery and no contrary factual basis is established.

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Issues: (i) Whether the addition of share application money as unexplained cash credit under section 68 was sustainable. (ii) Whether the disallowance of interest expenditure under section 36(1)(iii) was justified.

Issue (i): Whether the addition of share application money as unexplained cash credit under section 68 was sustainable.

Analysis: The assessee furnished PAN details, income-tax returns, bank statements, ROC filings, board resolutions and the shareholding particulars to establish identity, creditworthiness and genuineness. No adverse material was brought to dislodge those documents, and no further enquiry was made by issuing summons or calling for confirmations. Once the assessee discharged the initial burden, the onus shifted to the Revenue.

Conclusion: The addition under section 68 was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the disallowance of interest expenditure under section 36(1)(iii) was justified.

Analysis: The record showed that the borrowings were linked to work-in-progress for plant and machinery and were treated by the assessment order itself as business-related funds. In the absence of a contrary factual basis, the corresponding interest could not be disallowed as not incurred for business purposes.

Conclusion: The disallowance of interest expenditure was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The assessee succeeded on both disputed additions, resulting in complete relief in the appeal.

Ratio Decidendi: Once an assessee substantiates the identity, creditworthiness and genuineness of share applicants with primary documentary evidence, the burden shifts to the Revenue to rebut it with contrary material or further enquiry.

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