TaxTMI 
TaxTMI 
2012 (9) TMI 557
X X X X Extracts X X X X
X X X X Extracts X X X X
....natory of the application having been mentioned in the said application. Considering the nature of issue and findings of the ld. CIT(A), the Bench proceeded to dispose of the appeal after hearing the ld. DR. 3. Facts, in brief, as per relevant orders are that during the course of assessment proceedings, the ITO Ward-17(4),New Delhi noticed that the assessee received the following amounts of share application money in cash: S.No. Name of Director Cash recd in the form of share application money [ In Rs.] Cash recd in the form of share capital [ In Rs.] Share capital returned in cash [ In Rs.] Share allotted during the year The company has allotted 10000 shares to each director against authorized share capital of Rs.5 lacs 1 Sh. Manu Sridhar 865975 65000 nil nil As above 2 Sh. Dinesh Bhardwaj 341233 129000 nil nil As above 3 Sh. Arun Chakarvorti Nil 80000 31000 nil As above 4 Total 1207208 274000 31000 nil Since no shares were allotted during the year to the directors nor the assessee company increased its authorized share capital of Rs.5 lacs, relying upon the decisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irectors of the appellant company in the F.Y.2006-07 relevant for the A.Y.2007-08. The Addl. CIT, Range-17, New Delhi in the impugned order observed that share-application money/share capital of Rs.14,81 ,208 received in cash is in contravention of provisions of S. 269-SS and levied penalty u/s 271D by relying on the decision in the case of Bhalotia Engineering Works (P) Ltd vs. CIT 275 ITR 399 (Jharkhand). 6.2 It is seen from the order that the appellant company vide reply dated 10.08.2010 (which was reproduced in the impugned order) stated that provisions of S.269SS are not applicable to share application money/share capital received in cash. 6.3 In the course of these proceedings, the AR stated that in the case of CIT vs. Rugmini Ram Ragav Spinners (P) Ltd. (2008) 304 ITR 417 (Mad) it was held that contribution towards' share application does not amount to loans or deposits and as such are not covered u/s 269-SS of the Act. The AR has further drawn my attention to the following decisions: * Jagvijay Auto Finance (P) Ltd. vs. ACIT 52 ITD 504 (Jaipur) * VL8 Foods (P) Ltd. vs. Addl. CIT 128 TTJ (DeL) (UO) 1 * ITO vs. M/s Avadh Rubber Ltd. (2010) 8 Taxmann.com 57 (Kol....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 6. We have heard the ld. DR and gone through the facts of the case. Before proceeding further, we may have a look at the relevant provisions of sec. 269SS of the Act, which read as under: " No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if, - (a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: ................................................................................................... ................................................. Explanation: For the purpose of this sect ion, (iii ) 'Loan ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....important distinction is in relation to the obligation to return the amount so received. In the case of a deposit which is payable on demand, the deposit would become payable when a demand is made. In the case of a loan, however, the obligation to repay the amount arises immediately on receipt of the loan. It is possible that in case of deposits which are for a fixed period or loans which are for a fixed period, the point of repayment may arise in a different manner. But by and large, the transaction of a loan and the transaction of making a deposit are not always considered identical." 6.1.1 In the light of aforesaid distinction between loan and deposit, especially when there is nothing to suggest in the case under consideration that the aforesaid transaction is in the nature of deposit, we are of the opinion that provisions of sec. 269SS are not attracted in this case. 6.2 We find that the AO and Addl. CIT relied upon decision in M/s Bhalotia Engineering Works Pvt. Ltd. (supra) wherein it was held that receipt of share application monies in cash, in violation of provisions of section 269SS of the Act should be treated as "deposit" with the consequence that the assessee woul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eposit is that there must be a liability to return it to the party by whom or on whose behalf it has been made, on fulfillment of certain conditions. In CIT vs. Sunil Chopra, Hon'ble jurisdictional High Court in their decision dated 27.4.2010 in ITA no.106 of 2011 held that share application money could not be construed as loan or advance within the meaning of sec. 2(22)(e) of the Act. In CIT vs. I.P. India Pvt. Ltd., Hon'ble jurisdictional High Court in their decision dated 21.11.2011 in ITA no. 1192/2011 concluded that the receipt of share application monies for allotment of shares in the assessee-company could not be treated as receipt of loan or deposit. In the light of view taken by the Hon'ble jurisdictional High Court in the aforesaid decisions, especially when the ld. CIT(A) found as a fact that the amount of Rs.14,81,208/- was indeed received by the assessee from the aforesaid two directors as share application money, we are not inclined to interfere with the findings of the ld. CIT(A). 6.3. We may point out that the provisions of section 269SS were brought in the statute book to counter the evasion of tax in certain cases, as clearly stated in the heading of Chapter XX....