TMI Blog2022 (9) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of earning interest income which resulted into accrual of some additional income, then such income is not liable to be assessed; eligible to be claimed as deduction. Applying the above ratio, Supreme Court Shree Rama Multi Tech Ltd. [ 2018 (4) TMI 1374 - SUPREME COURT] held that if the share application money received is deposited in the bank in the light of statutory mandatory requirement then the accrued interest is not liable to be taxed and would be eligible for deduction against public issue expenses. On the above basis, Supreme Court held that interest income earned out of the share application money is liable to be set off against the public issue expenses. On thorough consideration of all aspects of the matter, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er), whereas I.T.A.No.1262/Hyd/97 arises out of the assessment order passed under Section 143(3) of the Act. However, issue raised in the appeals is one and the same. 5. I.T.T.A.No.138 of 2004 was admitted by this Court on 20.12.2004 on question No.1 as proposed by the appellant. The said question is extracted hereunder: Whether on the facts and in the circumstances of the case Tribunal was correct in law in holding that expenditure incurred by the appellant in connection with the public issue of share application was not to be deducted from the interest received on the share application monies from the banks? 6. I.T.T.A.No.9 of 2005 was admitted by this Court on 06.06.2005. 7. The aforesaid question arises on the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l money prior to commencement of business was liable to income tax. Therefore, the aforesaid interest income earned was added to the income of the appellant. 8. Aggrieved by the aforesaid order appeal was preferred by the appellant before the Commissioner of Income Tax (Appeals). First appellate authority confirmed the order of the assessing officer holding that expenditure claimed by the appellant was not for the purpose of making or earning interest income. As such that was not allowed. 9. Thereafter matter came up before the Tribunal. Tribunal agreed with the view expressed by the assessing officer as affirmed by the Commissioner of Income Tax (Appeals) further noting that the issue stood covered in favour of the revenue by a decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was allowed by the first appellate authority by directing the assessing officer to grant certain reliefs. In the meanwhile, reassessment proceedings were initiated under Section 147 of the Act on the ground that assessing officer had reason to believe that income chargeable to tax for the said assessment year had escaped assessment. On reassessment, assessing officer passed an order on 21.03.2006 determining the total income of the respondent/assessee at a much higher figure. This order dated 21.03.2006 came to be challenged before the Commissioner of Income Tax (Appeals). One of the grounds urged was that in the order dated 21.03.2006, the interest accrued on public issue of share applications was not allowed to be set off. Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 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 set-off 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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