TMI Blog2011 (7) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... djustable against the other business activity? (2) Whether on the facts and in the circumstances of the case, the tribunal was right in law in directing to allow depreciation of ₹ 7,67,558/on addition to plant Machinery amounting to ₹ 28.18 lacs ignoring the facts that the assets were not put to use during the year under consideration? 2. For the assessment year 19951996, the assessee had earned sum of ₹ 9,81,000/as interest from the bank on share application money. The assessee adjusted said sum against public issue expenses for claiming deduction. The Assessing Officer relying on decision in case of Tuticorin Alkali Chemicals and Fertilizers Limited., Madras v. Commissioner of Income Tax, Madras reported in 227 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used for the purpose of earning income that income will have to be taxed in accordance with law. 5. From the record however, we find that before the authorities the assessee had been contending that the money received on share application issue was to be kept in separate bank account in accordance with provisions of Sections 69 and 73 of the Companies Act till the allotment of shares can be completed. It was contended that issue of shares relates to the capital structure of the company as held by the Apex Court in case of Punjab State Industrial Development Corporation Ltd. v. Commissioner of Incometax reported in (1997) 225 ITR 792 and hence expenses incurred in connection with the issue of shares are to be capitalised. It was therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had deposited certain amount with the bank to open letter of credit for purchase of machinery for setting up plant. On the money so deposited, assessee earned interest. In that background, the Apex Court observed that this is not a case where any surplus share capital money which was lying idle had been deposited in the bank of the purpose of earning interest. The deposit of money is directly linked with the purchase of plant and machinery. The Apex Court therefore, followed the ratio laid down in case of Bokaro Steel Ltd.(supra), and not in case of Tuticorin Alkali Chemicals and Fertilizers Limited., Madras(supra). 9. In case of Bongaigaon Refinary and Petrochemicals Ltd. v. Commissioner of Income Tax reported in (2001) 251 ITR 329, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted towards expenditure for raising share capital. We are therefore, of the opinion that interest earned was inextricably linked with requirement of company to raise share capital and was thus adjustable towards the expenditures involved for the share issue. Line of decisions of Apex Court in case of Bokaro Steel Ltd. (supra), Karnal Cooperative Sugar Mills Ltd.(supra) and Bongaigaon Refinary and Petrochemicals Ltd.(supra), would closely match with the facts of the present case. We do not find that tribunal committed any error in confirming the view of CIT(Appeals). 12.Counsel for the Revenue submitted that part of the share application money would normally have to be returned to unsuccessful applicants. Therefore, entire share applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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