TaxTMI 
TaxTMI 
2003 (2) TMI 59
X X X X Extracts X X X X
X X X X Extracts X X X X
....in respect of public issue of Rs. 2,04,80,212. The petitioner claimed expenditure to the tune of Rs. 1,50,79,666. The net surplus of Rs. 54,00,546 was treated as capital reserve by the petitioner-company. The respondents initiated action against the petitioner under section 132 of the Income-tax Act. The petitioner thereafter filed an application under section 245C of the Act before the first respondent. The petitioner offered Rs. 54,00,546 being the excess of interest over expenses relatable to the excess share application money. The first respondent directed that interest earned on the excess share application money relating to the public issue of Rs. 2,04,80,212 has to be brought to tax as income from other sources for the assessment year 1993-94 and the expenses to the tune of Rs. 1,50,79,666 is to be amortised over a period of ten years under section 35D of the Act. In so far as the assessment year 1994-95 is concerned, it was held that the gross interest income of Rs. 19,44,425 should be assessed as under the head "Income from other sources" and the same was amortised in accordance with section 35D of the Act. Annexure A is the order. The petitioner has challenged the same on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,88,35,861.02 and the income-tax on the interest income amounting to Rs. 1,64,86,570 has to be provided. The Assessing Officer for the assessment year 1993-94 observed that the share issue expenses could not be adjusted against the interest earned on share application money, which should be assessed only as income from other sources and not as business income. He opined that the share issue expenses could not be written of over a period of ten years or in the alternative, the share issue expenses could be adjusted against the income admitted by the applicant and the balance alone could be exempt under section 108. According to the petitioner, the interest on the share application money resulting from public issue is capital in nature as the share application money has the character of money held on trust by the bankers on behalf of the share applicants. This argument was repelled by the Settlement Commission by holding that in terms of the judgment of the Supreme Court in Tuticorin Alkali Chemicals and Fertilisers Ltd. v. CIT [1997] 227 ITR 172, the Supreme Court has approved the decision of the Madras High Court in CIT v. Seshasayee Paper and Boards Ltd. [1985] 156 ITR 542 which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... are specific rules of deduction and allowances under each head. No deduction or adjustment on account of any expenditure can be made except as provided by the Act. The Supreme Court further noticed as under : "The basic proposition that has to be borne in mind in this case is that it is possible for a company to have six different sources of income, each one of which will be chargeable to income-tax. Profits and gains of business or profession is only one of the heads under which the company's income is liable to be assessed to tax. If a company has not commenced business there cannot be any question of assessment of its profits and gains of business. That does not mean that until and unless the company commences its business, its income from any other source will not be taxed. If the company, even before it commences business, invests the surplus funds in its hands for purchase of land or house property and later sells it at profit, the gain made by the company will be assessable under the head 'Capital gains'. Similarly, if it company purchases a rented house and gets rent, such rent will be assessable to tax under section 22 as income from house property. Likewise, a company....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the interest received on deposit of share money could be assessed as "income from other sources". This finding cannot be said to be a legal error as contended by learned counsel for the petitioner. The petitioner relies on CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC), that was a case in which the Government company did not start any business and it provided to the contractor and his workmen the quarters for which it charged the contractor for the use of quarters. There were also subsequently agreements with regard to certain advances made by the company to the contractor. Those advances earned interest. Similarly, plant and machinery were provided to the contractor. The question before the Supreme Court was as to whether the various amounts received by the assessee can be treated as income of the assessee for the relevant assessment year. The said case stands on a different footing than Tuticorin Alkali Chemicals and Fertilisers's case [1997] 227 ITR 172 (SC). In the subsequent judgment in CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 the Supreme Court noticed as under : "During these assessment years, the respondent-assessment had invested the amounts borrowed by it ....