9911796707
TMI Blog1975 (6) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... orated under the Companies Act, 1956, on February 12, 1961. The company issued a prospectus dated November 16, 1961, offering for public subscription 1,18,100 equity shares of Rs. 10 each at par (out of the present issue of 3,50,000 equity shares) together with 10,000-9.3 % (taxable) redeemable cumulative preference shares of Rs. 100 each. An application money of Rs. 2.50 per share was to be paid for each equity share. The subscription list was to open on the 4th day of December, 1961, and to close on the 9th December, 1961, but could be closed earlier at the discretion of the directors but not before the 6th day of December, 1961. An underwriters' commission was to be paid at 2.5% in respect of these shares. As it happened, the issue was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited to the profit and loss account of the company for the said accounting year was income liable to tax. The assessee's contention before the Income-tax Officer was that the receipt being of casual and non-recurring nature arising in the special circumstances of the case, namely, the issue of shares being over-subscribed beyond even the wildest expectation of the company, it was exempt from tax under section 10(3) of the Act. The Income-tax Officer rejected the contention of the assessee observing that the interest income earned by the issue of shares was not casual receipt but was clearly income which was taxable. Thus holding, the Income-tax Officer allowed on estimate an expenditure of Rs. 7,000, having been incurred for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit of such monies subsequently had nothing casual and non-recurring about it, and, therefore, the interest is not exempt from tax under section 10(3) of the Act. The Tribunal set aside the order of the Appellate Assistant Commissioner but at the same time, directed him to hear the appeal afresh on the question as to whether and what amount of expenditure was allowable as having been incurred for the purpose of earning such income on interest, which was liable to tax. In its judgment the Tribunal held : "(1) The over-subscription of the share capital issued had nothing to do with the actual earning of the income by way of interest. (2) The deposit of the amount received by way of application money, though in excess, was the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank as required under sub-section (4) of section 69 of the Companies Act. Sub-sections (4) and (5) of section 69 of the Companies Act read as follows : 69. (4) All moneys received from applicants for shares shall be deposited and kept deposited in a scheduled bank- (a) until the certificate to commence business is obtained under section 149 ; or (b) where such certificate has already been obtained, until the entire amount payable on applications for shares in respect of the minimum subscription has been received by the company, and where such amount has not been received by the company within the time on the expiry of which the moneys received from the applicants for shares are required to be repaid without interest under sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be repaid to the applicants without interest. So the application money received by the company has to be deposited in a scheduled bank in its name in any account it chooses. In the instant case the company decided to deposit the application money in call deposit account in which interest accrues. The amount received in excess of the amount due on shares was refunded in due course to the applicants in terms of the conditions of the prospectus and the provisions of section 73 of the Companies Act within the stipulated period. The interest that has been earned by the deposit of the application money in the call deposit account cannot be said to be casual. In Chambers' Twentieth Century Dictionary the meaning of the word "casual" has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n interest carrying account. Whenever money is kept deposited in an interest carrying account interest will accrue according to rules governing the particular account in a regular way without leaving anything to chance. Thus, we find that the income by way of interest in the instant case is neither casual nor non-recurring as contemplated under section 10(3) of the Income-tax Act. The Tribunal has correctly observed that the excess receipt of application money due to over-subscription may be casual or unforeseen. But we are to deal not with the receipt of the excess amount but we are to consider the interest that has accrued on the excess amount that has been deposited in call deposit account in terms of the provisions of the Companies A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
