9911796707
TMI Blog2003 (12) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary 29, 1992, and the issue was closed on February 3, 1992. The application money received by the company was deposited with collecting banks or the bankers of the company, to which the amounts were transferred, for 46 days. The interest earned on such deposits was sought to be taxed by the Assessing Officer as income for the assessment year 1992-93. The assessee's contention was that the application money which had been received from the applicants for the allotment of shares was required to be and was kept in a separate bank account as required by section 73(3) of the Companies Act and that the interest earned on those moneys could not have been treated as income accrued to the company even before the allotment process was completed. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange. Sub-section (2) thereof provides that where the permission has not been applied for under sub-section (1) or such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to in sub-section (3) shall not be utilised for any purpose other than the following purposes, (a) adjustment against allotment of shares where the shares have been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus; or (b) repayment of moneys received from applicants in pursuance of prospectus, where shares have not been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus, as the case may be, or, where the company is for any other reason unable to make the allotment of shares". Sub-section (4) of section 73 provides that any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the stock exchanges, but has issued prospectus and collected application money, the company would be liable to repay the application money immediately after receipt of the same, as application for listing is required to be made under section 73(1) before the issue of prospectus. In cases where such permission has been applied for, but is not granted within the time prescribed in sub-section (1A) of section 73 being a period of ten weeks from the date of closing of the subscription lists, the company would become liable to repay the application money to the applicants. If such repayment is not made within eight days after the company has become liable to repay the application money, it is required to pay interest at the prescribed rate. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company as a trustee for the benefit of those who had paid those sums. It is permissible for the company to adjust the application money against the shares actually allotted and refund the balance to those who had applied for and to whom shares are not allotted. The company is not, under section 73, required to keep the money in a bank account which yields interest. There is, however, no prohibition in subsection (3) or (3A) of section 73 against the money being kept in a bank account which yields interest. The interest so earned; however, cannot be regarded as an amount which is fully available to the company for its own use from the time the interest accrued, as that interest is an amount which accrues on a fund which itself is held in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by reason of delay in making the refund will belong to the company, only when the trust terminates it is only at that point of time, it can be stated that that amount has accrued to the company as its income.
The Tribunal was, therefore, right in taking the view as it did that the allotment process in this case was not completed in the assessment year 1992-93, but was completed only in the subsequent assessment year. It is only after that allotment process was completed in all respects, interest that had accrued on the application money kept in a separate bank account was capable of being regarded as belonging to the assessee.
The question referred to us is, therefore, answered in favour of the assessee and against the Revenue. X X X X Extracts X X X X X X X X Extracts X X X X
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