Share application money in cash

This query is : Resolved 

Querist : Anonymous (Querist) 19 July 2012


My client is a Pvt. Ltd. company, can company accept share capital money by cash ?? Pl. reply.

Thanks in advance

CS Divya Sorayan (Expert)
19 July 2012

Provisions of section 269SS does not apply to share application money accepted in cash and consequently no penalty under section 271D was leviable where share application money was accepted in cash.- Vide Commissioner of Income Tax v. I.P. India (P) Ltd. (2012) 43 (I) ITCL 194 (Del-HC)

CMA. CS. Sanjay Gupta (Expert)

19 July 2012

Yes. Sec 269SS is not applicable and hence share application money can be accepted in cash. But it is always advisable to accept the same in cheque for the purpose of income tax scrutiny and verification. If accepted in cash maintain proper documents.

Share application money is neither a loan nor a deposit as duly held by the Hon'ble Delhi High Court in the Case of CIT Delhi IV Vs. I P India Pvt. Ltd. 2011-TIOL-811-HC-DEL-IT observing that “the receipt of share application monies from the three private limited companies for allotment of shares in the assessee-company cannot be treated as receipt of loan or deposit. Reliance was placed on the decision of Director of Income Tax (Exemption) vs ACME Educational Society wherein it was held that a loan grants temporary use of money, or temporary accommodation, and that the essence of a deposit is that there must be a liability to return it to the party by whom or on whose behalf it has been made, on fulfillment of certain conditions”

B.Chackrapani Warrier (Expert)
19 July 2012

Contrary view taken in CIT Vs Samora Hotels Pvt Ltd on 23 February, 2012 by Delhi High Court.

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