2005 (2) TMI 67

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....t in law in holding that the share application money of Rs. 3,05,000 received, but pending allotment on the first day of the computation period, i.e., May 13, 1979, is not to be treated as part of the capital for the purposes of computation of capital employed under section 80J?" The assessee is a limited company. It invited applications for raising its authorised capital in response to which certain persons made applications for allotment of shares and a sum of Rs. 3,05,000 was received towards the application money. However, the shares were not allotted to these persons before the end of the financial year relevant to the assessment year 1980-81, and the application money remained with the assessee-company as such. The assessee claimed....

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.... the balance-sheet as such. If the shares are not allotted to the applicants, the same has to be refunded to the applicants in accordance with the provisions contained in the Companies Act, 1956. The money, therefore, till the shares are allotted, remained in trust with the assessee-company. It cannot be considered as its capital for purposes of section 80J...." Mr. D.S. Patwalia, learned counsel for the Revenue, pointed that the decision of the Kerala High Court in Travancore Titanium Products Ltd.'s case [1978] 114 ITR 626 had been rendered in the context of the Companies (Profits) Surtax Act, 1964, and was of no help to the assessee. He further pointed that although the High Court has held that the amount received towards allotment of....

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....s, the issue involved in the said case was totally different. The issue raised in the question referred to in the present reference came up for consideration before the Karnataka High Court in Addl. CIT v. Bangalore Soft Drinks (P.) Ltd. [1980] 126 ITR 38 and it was held that the application money for allotment of shares was not a debt owed by the assessee-company for computation of capital employed for the purposes of section 80J of the Act. At page 41, the High Court has observed as under: "Rule 19A(3) provides that the aggregate of the amounts, as on the first day of the computation period, of borrowed moneys and debts owed by the assessee shall be deducted from the aggregate of the amounts as ascertained under sub-rule (2). The am....