2004 (8) TMI 66

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.... course of the assessment proceedings for the assessment year 1990-91, it was found by the Assessing Officer that the assessee, a private limited company, had accepted the amounts of Rs. 20,000 and more in cash from ten persons as entered in its books. The assessments were completed on that basis. But the order of assessment is not before us. Thus, the receipt by the assessee of sums in cash exceeding Rs. 20,000 (rupees twenty thousand) during the relevant assessment year is not in dispute before us. Holding that the amounts were received in cash in violation of section 269SS of the Income-tax Act, the Assessing Officer initiated a penalty proceeding under section 271D of the Act. Section 271D reads as under: "(1) If a person takes or ac....

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....d subsequently shares were allotted to those persons and, consequently, the amounts received from the ten persons in cash were not loans or deposits. The Commissioner concerned took the view that going by the language of section 269SS of the Act and the Explanation relating to loan or deposit, these sums received as share application money had to be held to be deposits within the meaning of that section and, consequently, the assessee must be held to have violated section 269SS of the Act. Thus, holding, the Commissioner imposed the penalty as contemplated by section 271D of the Act. The assessee challenged the order of the Assessing Officer before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) accepted t....

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....cants once it is decided that shares were not to be allotted to them. In a sense, it is a bailment though not necessarily to return it in specie, and might be returnable in the form of shares. In Md. Akbar Khan v. Attar Singh, AIR 1936 PC 171, the Privy Council held that a deposit of money is not confined to a bailment of specific currency to be returned in specie. As in the case of a deposit with a banker, it does not necessarily involve the creation of a trust, but may involve only the creation of the relation of debtor and creditor, a loan under conditions. A deposit is not for a fixed term, but it does not seem to mean an immediate obligation on the depositee to seek out the depositor and repay him. He is to keep the money till asked....

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....ll happen if shares are ultimately allotted to the applicant? What is the nature of the amount in the hands of the company until the shares are allotted? The amount cannot be a loan. But at the same time, there is an obligation on the company to return the money to the applicant or for allotting the shares applied for. Until either of these happens, the amount cannot be considered to be a loan in the hands of the company. But it appears to us that it will partake of the character of a deposit in the hands of the company attracting the prohibition contained in section 269SS of the Act. The question has to be considered in the context of the purpose sought to be achieved by the insertion of section 269SS in the Act. Obviously, it was done ....