share application money

[satbir singhwahi]

whether share application money can be received in cash , amount exceeding Rs.20000. whether  Section 269SS applicable.

[CAGOPALJI AGRAWAL]

To my view, it would not covered under the provisions of section 269SS but Hon,ble Jharkhand HC had given a verdict that section 269SS also covers share application money as depost in Bhalotia Engg. Works case. But this decision through seems errorneous has not been tested by other courts so far. Though penalty u/s 271D has been dropped by Madras High Court and other courts also.

[Rama Krishana]

Can you determine the nature of share application money? In my view it is not a share capital. If a company fails to allot shares in turn of share application money, the same has to be returned to the person making payment. But, I agree with the view of Gopal Ji Agrawal partially since in the matter of Bhalotia Engineering Works Pvt. Ltd [2008 -TMI - 10404 - JHARKHAND High Court] this issue has been decided against the assessee but in the matter of COMMISSIONER OF INCOME-TAX Versus RUGMINI RAM RAGAV SPINNERS P. LTD. [2008 -TMI - 30707 - MADRAS HIGH COURT] the issue has been decided in favor of assessee. It is now your choice to choose appropriate path.

AI Summary

Cash prohibition on share application money under Section 269SS may apply, with conflicting high court rulings affecting compliance. Whether cash receipt of share application money falls within the statutory prohibition on specified cash transactions is disputed. One position treats application money as refundable where allotment has not occurred and outside the prohibition; contrary authority treats such receipts as covered, exposing recipients to penalties under the tax penalty framework. The legal position is unsettled and depends on characterization of the payment and conflicting court rulings.