Case Law Details
CIT Vs M/s. Shree Rama Multi Tech Ltd (Supreme Court of India)
If the share application money received is deposited in the bank in view 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
Very recently, in CIT vs. Shree Rama Multi Tech. Ltd. [Civil Appeal No. 6391 of 2013 with Civil Appeal No. 8336 of 2013, decided on 24.04.2018], briefly, the Respondent company had come out with initial public issue during the year under consideration and the amount of share application money received was deposited with the banks on which interest of Rs. 1,71,30,202 was earned which was shown in the return of income originally filed as income from other sources which was also referred to in Col. 13(d) of the tax audit report filed under section 44AB of the IT Act, 1961. 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 assessment. The verification of the said Annexure revealed that the Respondent had earned the interest income on FDRs placed with the bank, however, the period for which such FDRs were placed and the specific period of the interest earned was not found to have been mentioned. Under the circumstances, it was not possible to identify as to what portion of interest earned on FDRs was relating to the period prior to the allotment of shares or after the allotment of shares. Keeping in view the specific guidelines of the Tribunal in this regard and in the absence of specific working of interest for pre allotment and post allotment, the claim of the Respondent was not allowed and added to the total income under the head income from the other sources as was declared in the original return of income filed by the Respondent.
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