TMI Blog2018 (4) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... is not to make some additional income but to comply with the statutory requirement, and interest accrued on such deposit is merely incidental. In the present case, the Respondent was statutorily required to keep the share application money in the bank till the allotment of shares was complete. In that sense, we are of the view that the High Court was right in holding that the interest accrued to such deposit of money in the bank is liable to be setoff against the public issue expenses that the company has incurred as the interest earned was inextricably linked with requirement of the company to raise share capital and was thus adjustable towards the expenditure involved for the share issue. - Decided against revenue - Civil Appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal dated 16.12.2004, the total income was redetermined at ₹ 17,30,88,691/by the Assessing Officer vide order dated 29.12.2004 but was restricted to 20,00,59,650/in view of proviso to Section 240(b) of Income Tax Act, 1961 (in short the IT Act ). (b) Aggrieved by the aforesaid order, the Respondent went in appeal before learned Commissioner of Income Tax (Appeals). Learned CIT (Appeals), vide order dated 09.01.2006, allowed the appeal filed by the Respondent while directing the Assessing Officer to grant relief by recomputing the income and modifying the tax calculation without applying the proviso to Section 240 of the IT Act. In the meanwhile, reassessment proceedings were initiated in accordance with Section 147 of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2012, the appellant has filed this appeal before this Court. 3) Heard learned counsel for the parties and perused the factual matrix of the case. Point(s) for consideration: 4) Whether in the facts and circumstances of the present case, interest accrued on account of deposit of share application money is taxable income at the hands of the Respondent? Rival contentions: 5) Learned counsel appearing on behalf of the Appellant contended that the impugned final order passed by the High Court is against law and facts of the present case. He further contended that the High Court grossly erred in relying on its earlier order dated 26.07.2011 passed in Tax Appeal No. 315 of 2010 titled Assistant Commissioner of Income Tax vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it report filed under Section 44AB of the IT Act. Even though initially the income from the interest was shown as income from other sources in the return of income, however, the Respondent had raised an additional ground before the Tribunal to allow the set off of such interest against the public issue expenses. The issue was examined by the Tribunal and was set aside for fresh adjudication by the Assessing Officer. During the course of fresh proceedings, an opportunity was given to the Respondent to file the details of interest on share application money. The Respondent stated that the details of interest income on share application money was already furnished at Annexure No. 7 of their letter dated 11.03.2003 at the time of original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and therefore, the entire share application money would not ultimately be appropriated by the Company, insofar as present case is concerned, we do not see how this factor would make any significant difference. Interest earned from share application money statutorily required to be kept in separate account was being adjusted towards the cost of raising share capital. In that view of the matter, we are of the opinion that the High Court was right in allowing such deduction. 10) In light of the above developments in the case, the question of law has been decided by this Court in case in Bokaro Steel Ltd. (supra), wherein the company was set up to produce steel. When the construction of plant was yet not completed, company earned interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income is not liable to be assessed and is eligible to be claimed as deduction. Putting the above rationale in terms of the present case, if the share application money that is received is deposited in the bank in light of the statutory mandatory requirement then the accrued interest is not liable to be taxed and is eligible for deduction against the public issue expenses. The issue of share relates to capital structure of the company and hence expenses incurred in connection with the issue of shares are to be capitalized because the purpose of such deposit is not to make some additional income but to comply with the statutory requirement, and interest accrued on such deposit is merely incidental. In the present case, the Respondent was st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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