IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5384 OF 2006 COMMISSIONER OF INCOME TAX ... Appellant VERSUS M/S. HENKEL SPIC INDIA LTD. ... Respondent O R D E R respondent-assessee opened public issue of shares on 29.01.1992. date of closure of this issue was 03.02.1992. Proceeds which were received from applicants to share capital were deposited in Bank in 46 days as per requirement under law. shares were ultimately allotted in June, 1992. Those who were not allotted shares, their application money was refunded along with interest. As mentioned above, proceeds which were collected from intending subscribers were kept in Bank for 46 days and on this assessee earned interest of Rs.1,83,31,363/-. Assessing Officer wanted to tax aforesaid interest income in Assessment Year 1992-1993 as money was received between 29.01.1992 and 03.02.1992 and interest earned thereupon in said Financial Year. On other hand, assessee maintained that since shares Signature Not Verified Digitally signed by Gulshan Kumar Arora Date: 2015.09.17 17:53:14 IST Reason: were allotted only in June, 1992, i.e., during Financial Year 1993-1994, and as per Section 73 of Companies Act, C.A. No. 5384/2006 1 assessee was required to keep money in Bank account, interest has accrued to assessee only on allotment of shares as before that amount was kept in trust by assessee which belonged to applicants who wanted to subscribe for shares. It was further submitted that after certain amount was refunded, which included interest to those whose application money was returned, actual amount which was left became income and, therefore, this income accrued only in year 1993-1994. aforesaid contention of assessee has been accepted by High Court in following manner: - 17. company is not, under section 73, required to keep money in bank account which yields interest. There is, however, no prohibition in sub-section (3) or (3A) of section 73 against money being kept in bank account which yields interest. interest so earned, however, cannot be regarded as amount which is fully available to company for its own use from time interest accrued, as that interest is amount which accrues on fund which itself is held in trust until allotment is completed and moneys are returned to those to whom shares are not allotted. No part of this fund, either principal or interest accrued thereon, can be utilized by company until allotment process is completed and money repayable to those entitled to repayment has been repaid in full together with such interest as may be prescribed having regard to length of period of delay in return of money to them. 18. It is only after allotment process if completed and all moneys payable to those to whom moneys are refundable are refunded together with interest wherever interest becomes payable, balance remaining from and out of interest earned on application money can be regarded as belonging to company. application money as also interest earned thereon will remain within trust in favour of general body of applicants until process outlined above is completed in all respects. C.A. No. 5384/2006 2 prohibition contained in sub-section (3A) of Section 73 against moneys standing to credit in separate bank account being utilized for purposes other than those mentioned in that sub-section, is absolute and interest earned on amounts in such separate bank account will remain part of that separate bank account and cannot be transferred to any other account. 19. As amount of interest earned on application money to extent to which it is not required for being paid to applicants to whom moneys have become refundable by reason of delay in making refund will belong to company, only when trust terminates and it is only at that point of time, it can be stated that amount has accrued to company as its income. It is not in dispute that in year 1993-1994, assessee had shown income on account of interest received in income tax returns and paid tax thereupon. We, thus, do not find any error in order passed by High Court holding that interest income has accrued only in Assessment Year 1993-1994 and was taxable in that year only and not in Assessment Year 1992-1993. appeal is, accordingly, dismissed. ........................, J. [ A.K. SIKRI ] ........................, J. [ ROHINTON FALI NARIMAN ] New Delhi; September 04, 2015. C.A. No. 5384/2006 3 ITEM NO.111 COURT NO.14 SECTION IIIA S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Civil Appeal No. 5384/2006 COMMNR. OF INCOME TAX Appellant(s) VERSUS M/S. HENKEL SPIC INDIA LTD. Respondent(s) Date : 04/09/2015 This appeal was called on for hearing today. CORAM : HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Appellant(s) Mr. Jaideep Gupta, Sr. Adv. Mr. T. M. Singh, Adv. Ms. Sadhana Sandhu, Adv. Ms. Anil Katiyar, Adv. Mr. B. V. Balaram Das, Adv. For Respondent(s) Mr. Pratap Venugopal, Adv. Ms. Surekha Raman, Adv. Mr. Gaurav Nair, Adv. Ms. Niharika, Adv. M/s. K. J. John & Co. UPON hearing counsel Court made following O R D E R appeal is dismissed in terms of signed order. (Nidhi Ahuja) (Renu Diwan) COURT MASTER COURT MASTER [Signed order is placed on file.] C.A. No. 5384/2006 4 Commissioner of Income Tax v. M/s. Henkel Spic India Ltd