Receipt of share application money is neither loan nor deposit

It was held by the Hon’ble Madras High Court in the case of CIT Vs. Rugmini Ram Ragav Spinners (P.) Ltd. [2008] 220 CTR (Mad.) 520 that receipt of share application money is neither loan nor deposit. Once we hold and accept that receipt of share application money is neither loan nor deposit, the provisions of ss. 269SS and 271D are not applicable because the provisions of s. 269SS are in connection with acceptance of the loan and deposit and the provisions of s. 271D are in connection with violation of s. 269SS.

We, therefore, hold that since in the present case, the alleged amount of Rs. 8.55 lakhs was received by the assessee in cash on account of share application money, penalty under s. 271D cannot be levied because the receipt of share application money is neither loan nor deposit and hence the impugned receipt of Rs. 8.55 lakhs is not governed by s. 269SS of the Act. We therefore, delete the penalty.

ITAT DELHI BENCH ‘I’

VLS Foods (P.) Ltd.

vs.

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