The Kolkata Income Tax Appellate Tribunal ( ITAT ) has recently held that accepting of share application money was not loan under section 269SS of the Income Tax Act 1961, no penalty could be levied by the assessing officer.
Section 269SS of Income Tax Act 1961 states that taxpayers shall not receive or accept any loan or deposit or any specific amount any person other than by an account payee bank draft or account payee cheque or another electronic clearing system.
Assessee Sunplant Construction Limited,Public Limited Company engaged in the business of executing civil contracts. During the Assessment year 2010-11 the assessee company with a view to broadbase its business activities, raised the capital by issuing 1, 01, 85,760 number of preference shares of Rs. 10 each, collected Rs.10,18,57,600/- as preference shares application money from various share applicants.
During the penalty proceedings, the assessing officer sought details of share application money which were submitted before him. He issued a notice to shareholders. In response to the notice several shareholders complied section 133(6) Income Tax Act 1961 notices and admitted to have given money against share application money and obtained preference share certificates from the company against their subscription. Nevertheless, assessing officer treated the receipt of share application money as deemed deposits and considered it as violation of section 269SS and accordingly imposed penalty under section 271D Income Tax Act 1961.
Against this order assesee filed an appeal before the Commissioner of Income Tax Appeal CIT( A).
After considering the contentions of the both parties the CIT (A) did find any cogent reason to treat share application money received by the appellant company as loan and deposits. Hence they delete the penalty levied by the assessing officer under section 271D of the Income Tax Act 1961.
Aggrieved revenue preferred appeal before the ITAT.
The written submission filed by the assessee submits that provision of Section 271D Income Tax Act 1961 did not apply in case of Share application money.
Section 271D Income Tax Act 1961 states that if any person accepts or receives any loan or deposit from any other person, contravention of the provision of the section 269SS of Income Tax Act 1961 he shall be liable to pay an amount by way of penalty.
Subhrajyoti Bhattacharjee,counsel for the revenue, confirmed the decision of the lower authorities.
After considering the contentions of the both parties the division bench of Rajpal Yadav, (Vice-President )and Manish Borad,( Accountant Member)dismiss the appeal filed by the revenue and observed that ,
Penalty under section 271D Income Tax Act 1961 can be imposed upon the assessee if the assessee has accepted any loan or deposit otherwise than by an account payee cheque or an account payee Bank Draft. But in the case of assessee this section did not apply because it was in the nature of share application money. Thus share application money received by the assessee company has no loan and deposits.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
