The Tax Publishers2020 TaxPub(DT) 4231 (Ctk-Trib)


Section 4

Income - Capital or revenue receipt - Interest received by public limited company on fixed deposits during construction period - Questions raised regarding use of share application money and nature of fixed deposits, etc., remained unanswered

Assessee-company was incorporated in order to execute the project of construction of new railway line on Built-On-Operate and Transfer Mode (BOOT). Question arose for consideration was whether interest received by the assessee on fixed deposit during construction period was income from other sources or capital receipt. AO treated it as an income from other sources, whereas assessee claimed it as a capital receipt and not offered for taxation. Held: Assessee company was a public limited company and share application money was kept pending for allotment for a long time. In this regard, specifically asked questions were: Date of receipt of share application money and allotment to shareholders, Whether the company has followed the relevant rules/provisions of the Companies Act in this regard. If shares had not been allotted within 60 days from the date of receipts then the discloser policy in the balance sheet, whether it should be treated as current liability or otherwise and treatment in the books of account of the company, Use of share application money during pendency for allotment, Applicability of company deposit rules and its classification in the balance sheet and utilization of interest on interest on such deposit and taxability as per the Income Tax Act, 1961 and the fixed deposit was a short-term fixed deposit or long-term fixed deposit and/or auto-renewal system in the bank and after maturity the utilization of interest. Assessee could reply only the date of allotment of shares as per balance sheet note and the rest of questions remained unanswered. Therefore, matter was remanded back to AO for fresh adjudication in the light of above questions and taxability of interest income as per IT Act, 1961.


FAVOUR : Matter remanded.

A.Y. : 2014-15