Dismissing the appeal of the Revenue the Court held that the words “loan or deposit” has been defined in Expln. (iii) to S. 269T which is not an expansive definition. It provides that “loan or deposit” mean any loan or deposit of money which is repayable after notice or repayable after a period and, in case of a person other than a company including loan or deposit of any nature. Share application money is neither repayable after notice nor repayable after a period. It is for participation in the capital of the company. Therefore, neither as per the definition of the words “loan or deposit” as given in the Expln. (iii) to s. 269T nor in ordinary sense, share application money can be said to be a loan or deposit. Once share application money is neither loan nor deposit, then neither S. 269SS nor 269T shall attract. Consequently, no penalty either under s. 271D or under S. 271E could be imposed. (AY-2004-05 to 2007-08)
CIT v. Vamshi Chemicals Ltd. (2024) 339 CTR 577/ 162 taxmann.com 906 (Cal) (HC)
S. 271D : Penalty – Takes or accepts any loan or deposit – Share application money in cash-Looking into the object and purpose of S. 269SS and 269T read with the Explanation defining the words “loan and deposit”, the share application money can neither be said to be loan nor a deposit-Order of Tribunal deleting the penalty is affirmed. [S. 269SS, 269T, 271E, 260A]