9911796707
TMI Blog2003 (12) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess 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 – Thus, Tribunal was right in law in holding that the interest earned did not accrue to the assessee during the AY 1992-93 - TAX CASE NO. 115 OF 2000 - - - Dated:- 16-12-2003 - Judge(s) : R. JAYASIMHA BABU., S. R. SINGHARAVELU. JUDGMENT The judgment of the court was delivered by R. JAYASIMHA BABU J.- The question referred to us is "whether the Tribunal was right in law in holding that the interest earned on short-term deposits of share application money by the assessee did not accrue to the assessee during the assessment year 1992-93?" The assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had not commenced business in that year. On appeal, the Commissioner of Income-tax (Appeals) concurred with the view of the Assessing Officer and held that the interest that had accrued on the application money which had been kept in short-term deposits belonged to the assessee and was liable to be taxed in the hands of the assessee on the basis of accrual. The Tribunal, on further appeal by the assessee, upheld the assessee's view and set aside the orders of the Commissioner as also the Assessing Officer. Section 73 of the Companies Act, 1956, deals with allotment of shares and debentures to be dealt with on the stock exchange. Sub-section (1) thereof provides that every company intending to offer shares or debentures to the publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Sub-section (3) of section 73 reads thus: "All moneys received as aforesaid shall be kept in a separate bank account maintained with a scheduled bank until the permission has been granted, or where an appeal has been preferred against the refusal to grant such permission, until the disposal of the appeal, and the money standing in such separate account shall, where the permission has not been applied for as aforesaid or has not been granted, be repaid within the time and in the manner specified in sub-section (2); and if default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees." Sub-section (3A) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in the prospectus permits the company to deal with its shares on that stock exchange. In cases where the company has failed to apply for permission, or such permission having been applied for has not been granted by the stock exchange, as also in cases where the company is, for any other reason, unable to make allotment of shares, the company shall repay to the applicants the moneys paid by them from and out of the bank account in which such moneys had been kept. The application money becomes refundable not only under the circumstances referred to in sub-section (2), but also for other reasons which have been referred to in an omnibus manner in section 73(3A)(b) as "any other reason for which the company is unable to make allotment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred, the company is liable to pay interest at the prescribed rate which under the rule 40 is 15 per cent. Thus, a company which receives application money will be liable to repay the money to the applicants in all cases where shares are not allotted. If the non-allotment is for the reasons referred to in sub-section (2) or (2A) or (3), the company will have the grace period of eight days for repayment without interest. Those days are computed from the date on which the liability for repayment is incurred. In cases where the liability is incurred for any other reason, there is no grace period available to the company. Application money has to be kept in a separate bank account and that money is not available to the company for being u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and out of the interest earned on the application money can be regarded as belonging to the company. The application money as also interest earned thereon will remain within a trust in favour of the general body of applicants until the process outlined above is completed in all respects. The prohibition contained in sub-section (3A) of section 73 against the moneys standing to the credit in a separate bank account being utilised for purposes other than those mentioned in that sub-section, is absolute and the interest earned on the amounts in such separate bank account will remain a part of that separate bank account and cannot be transferred to any other account. As the amount of interest earned on the application money to the extent to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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