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2024 Supreme(Cal) 1370
IN THE HIGH COURT AT CALCUTTA
SURYA PRAKASH KESARWANI, RAJARSHI BHARADWAJ, JJ.
Commissioner Of Income Tax, Central-III, Kolkata – Appellant
Versus
M/s. Vamshi Chemicals Ltd. – Respondent
ITA No.68 Of 2012
Decided On : 06-05-2024
For the Appellant : Mr. Om Narayan Rai, Adv., Mr. Prithu Dudheria, Adv.
IMPORTANT POINT
Share application money is not classified as a loan or deposit under the Income Tax Act, thus penalties for violations of related provisions are not applicable.
Headnote:
Penalty - Income Tax - Sections 269SS, 269T, 271D, 271E - The court interpreted the definitions of 'loan' and 'deposit' under the Income Tax Act, concluding that share application money does not fall under these categories, thus penalties under the cited sections were not applicable.
Fact of the Case:
The case involved the assessment of penalties imposed on a company for receiving share application money in violation of provisions regarding loans and deposits under the Income Tax Act.
Finding of the Court:
The court found that share application money is not classified as a loan or deposit, and therefore, the penalties under Sections 271D and 271E were not applicable.
Issues: Whether the receipt and repayment of share application money violated Sections 269SS and 269T of the Income Tax Act, warranting penalties under Sections 271D and 271E.
Ratio Decidendi: The court held that share application money does not constitute a loan or deposit as defined in the Income Tax Act, thus the relevant penalty provisions do not apply.
Result: The appeal was dismissed in favor of the assessee.
JUDGMENT :
1. Heard Sri Om Narayan Rai,, learned senior standing counsel assisted by Sri Prithu Dueheria, learned advocate for the appellant. None appears for the respondent.
2. This appeal was admitted by this Court by order dated 25.6.2012 on the following substantial question of law:
“Whether the Learned Tribunal below committed substantial error of law in holding that the amount received on account of share application money and repayment of the same did not violate the provisions of Sections 269SS and 269T of the Act respectively attacking penalty under Sections 271D and 271E respectively of the Act ?”
3. This appeal arises out the impugned order of the Income Tax Appellate Tribunal, “E” Bench, Kolkata dated 12.01.2012 in ITA No.1940/Kol/2009 (A.Y.2004-05), No.1941/Kol/2009 (A.Y.2005-06), No.1942/Kol/2009 (A.Y.2006-07), No.1943/Kol/2009 (A.Y.2007-08), No.1952/Kol/2009 (A.Y.2004-05), No.1953/Kol/2009 (A.Y.2005-06), No.1954/Kol/2009 (A.Y.2006-07) and No.1955/Kol/2009 (A.Y.2007-08). All the above-noted eight appeals were filed by the assessee involving identical question regarding levy of penalty under Sections 271D or Section 271E of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act, 1961’), which have been decided by the impugned common order of the ITAT.
4. Briefly stated facts of the present case are that during the assessment years in question, the respondent/assessee company received share application money for preference shares amounting to Rs.20,000/- or more from persons otherwise than by an account payee cheque or by account payee bank draft. The assessing officer issued a show cause notice for penalty under Section 271D/271E on the ground that the assessee has violated the provisions of Section 269SS. The Additional Commissioner imposed penalty under Section 271D for assessment years 2005-06, 2006-07 and 2007-08 and also imposed penalty under Section 271E of the Act, 1961 for the assessment years 2004-05, 2005-06, 200607 and 2007-08. Aggrieved with the order of the CIT(A), the assessee filed eight appeals before Income Tax Appellate Tribunal, E Bench, Kolkata which has been allowed by the impugned order. Aggrieved with the impugned order of the ITAT, the revenue has filed the present appeal.
Discussion & Findings :
5. Before we proceed to examine the merits of the case, it would be appropriate to reproduce the relevant provisions of the Act, namely, Sections 269SS, 269T, 271D and 271E of the Act, 1961:
“269SS. No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if-
(a) the amount of such loan or deposit or the aggregate amount of loan and deposit; or
(b) on the date of taking or accepting such loan or deposit, any loan or accepted earlier by taken such person from the deposit is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause
is [twenty] thousand rupees or more:
Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by.-
(a) Government;
(b) any banking company, post office savings bank or co-operative bank;
(c) any corporation established by a Central, State or Provincial Act;
(d) any Government company25 as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(e) such other institution, association or body or class of institutions associations or bodies which the Central Government may, for re sons to be recorded in writing, notify in this behalf in the Official Gazette:
[Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan ?? and the person by whom
