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Tax Publishers
DCIT v. Morarjee Realities Ltd. [I.T.A. No.
2343/Mum/2009, dt. 15-12-2020] : 2020 TaxPub(DT) 5388 (Mum-Trib)
Share application money is it a capital asset?
Conclusion: Share
application money pending allotment is a capital asset.
Assessee as part of a group corporate restructuring
exercise had to transfer certain equity, preference shares and rights to apply
for shares, i.e., share application money to other group entities. Capital
losses both long and short term arose in this respect, the set-off of which was
not allowed by the assessing officer on share application money. On appeal
Commissioner (Appeals) allowed the same. On higher appeal by the revenue, the
ITAT held that the losses on the transfer of the shares were allowable losses
but the losses which arose on the share application money paid could not be
allowed as the same was not a capital asset under section 2(14). Assessee moved
a miscellaneous application to the ITAT on this order citing that vide CIT
v. Siemens Nixdorf Information Systems Gmbh (ITA No. 1366 of 2017, dated
26-8-2019) : 2019 TaxPub(DT) 5881 (Bom-HC) where in the jurisdictional
Mumbai High Court has held that loan given by a foreign company to its
subsidiary is also a capital asset under section 2(14) and the transfer of this
debt to someone else which brought forward certain losses are also allowable.
Arising out of ITAT recalling the original ITAT due to dismissal of cross
objections bereft the said MA, the case again has come up for re-adjudication
in the case of the assessee.
Held against the revenue that the assessee was entitled to
claim losses on the share application money which was paid by them and
transferred to their group company on the corporate restructuring exercise.
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