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TMI Blog2024 (5) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... oan or deposit as given in the Explanation-(iii) to Section 269T of the Act, 1961 nor in ordinary sense, share application money can be said to be a loan or deposit. Once share application money is neither loan nor deposit, then neither Section 269SS nor 269T shall attract. Consequently, no penalty either u/s 271D or u/s 271E could be imposed. In case of loan it is ordinarily the duty of the debtor to seek the creditor and to repay the money according to the agreement. A loan grants temporary use of money or temporary accommodation on certain conditions. Thus loan is an act of advancing money by one person to another under an agreement by which the recipient of money agrees to repay the amount on agreed terms. In case of a deposit, it is generally the duty of the depositor to go to the banker or to the depositee, as the case may be, and make a demand for it. The essence of a deposit is that there must be a liability to return it to the party by whom or on whose behalf deposit has been accepted on fulfilment of certain conditions. Share application money is for participation in capital of a company which is neither a loan nor a deposit. Once the share application money is neither a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ITAT. 4. Briefly stated facts of the present case are that during the assessment years in question, the respondent/assessee company received share application money for preference shares amounting to Rs. 20,000/- or more from persons otherwise than by an account payee cheque or by account payee bank draft. The assessing officer issued a show cause notice for penalty under Section 271D/271E on the ground that the assessee has violated the provisions of Section 269SS. The Additional Commissioner imposed penalty under Section 271D for assessment years 2005-06, 2006-07 and 2007-08 and also imposed penalty under Section 271E of the Act, 1961 for the assessment years 2004-05, 2005-06, 2006-07 and 2007-08. Aggrieved with the order of the CIT(A), the assessee filed eight appeals before Income Tax Appellate Tribunal, E Bench, Kolkata which has been allowed by the impugned order. Aggrieved with the impugned order of the ITAT, the revenue has filed the present appeal. Discussion Findings : 5. Before we proceed to examine the merits of the case, it would be appropriate to reproduce the relevant provisions of the Act, namely, Sections 269SS, 269T, 271D and 271E of the Act, 1961: 269SS. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho has made the loan or deposit if- (a) the amount of the loan or deposit together with the interest, if any, payable thereon, or (b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits, is twenty thousand rupees or more: Provided that where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account (if any) with such branch of the person to whom such loan or deposit has to be repaid: Provided further that nothing contained in this section shall apply to repayment of any loan or deposit taken or accepted from- (i) Government; (ii) any banking company, post office savings bank or co-operative bank; (iii) any corporation established by a Central, State or Provincial Act; (iv) any Government company as defined in section 617 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner the legislation should be made. Of course, it should stand the test of constitutional validity. * * * * * * * * * 10. The above dictum applies in full force as regards the present case. The object sought to be achieved was to eradicate the evil practice of making of false entries in the account books and later giving explanation for the same. To a great extent, the problem could be solved by the impugned provision. 7. Section 269SS prohibits any person to take or accept from any other person any loan or deposit otherwise than by an account payee cheque or by account payee bank draft, if the amount or aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b) is twenty thousand rupees or more. If a person violates Section 269SS then he is liable to penalty under Section 271D of the Act. 8. Section 269T provides that no branch of a banking company or a cooperative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or by account payee bank draft drawn in the name of the person who has made the loan or depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s neither repayable after notice nor repayable after a period. It is for participation in the capital of the company. Therefore, neither as per the definition of the words loan or deposit as given in the Explanation-(iii) to Section 269T of the Act, 1961 nor in ordinary sense, share application money can be said to be a loan or deposit. Once share application money is neither loan nor deposit, then neither Section 269SS nor 269T shall attract. Consequently, no penalty either under Section 271D or under Section 271E could be imposed. 13. In case of loan it is ordinarily the duty of the debtor to seek the creditor and to repay the money according to the agreement. In other words, a loan grants temporary use of money or temporary accommodation on certain conditions. Thus loan is an act of advancing money by one person to another under an agreement by which the recipient of money agrees to repay the amount on agreed terms. In case of a deposit, it is generally the duty of the depositor to go to the banker or to the depositee, as the case may be, and make a demand for it. The essence of a deposit is that there must be a liability to return it to the party by whom or on whose behalf depo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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