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2021 (9) TMI 390 - AT - Income TaxUnsecured loan in the books of investors - Addition in the absence of proper explanation offered by the assessee regarding forfeited - assessee used colourable device to introduce money in its business under the garb of share application money by making private placement and later on forfeiting the money for non-payment of call money - HELD THAT:- On payment of allotment money or call money, the amount already paid will be forfeited and therefore, the assessee company having powers under Article 23 had forfeited the above said money. Now the above said forfeited money is a capital receipt which is not liable to tax as per the provisions of I.T. Act and therefore, was not rightly offered to tax by the assessee company and was rightly credited to reserve and surplus. AO during the assessment proceedings, did not doubt the creditworthiness of investor and his only objection in disallowing the same is that the investors in their books of account had classified investment in the assessee company as unsecured loans. In our opinion, such classification made by the investor company, in their books of account, does not alter the nature of transactions which clearly is share application money as is evident from the copy of share application forms.The explanation of the investor company that since they had not yet received the allotment of shares and therefore, had classified the same as unsecured loans is plausible. - Decided against revenue.
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