Refund of share application money isn’t a loan or advance for sec. 2(22)(e), unless malafide intention is there

Where share application money is returned without any allotment of shares, such refund cannot be classified as loan or advance under section 2(22)(e), unless mala fide intentions of assessee are proved

The Tribunal held as under:

1) The share application money or share application advance is distinct from the 'loan or advance'. Although the share application money is one kind of advance given with the intention to obtain the allotment of shares, yet such advance is innately different from the normal loan or advance specified in 2(22)(e);

2) In the instant case, the refund of the amount was made for commercial reasons and also in the best interests of the prospective share applicants. Further, it was self explanatory that the assessee being a 'beneficial shareholder', derived no benefit whatsoever, when the impugned 'share application money' was finally returned without any allotment of shares for commercial reasons;

3) Therefore, the share application money might have been an advance but it was not advance which was referred to in section 2(22)(e). Such advances, when returned without any allotment or part allotment of shares to the applicants, would not take a nature of the loan merely because the same was repaid or returned or refunded in the same year or later on after keeping the money for some time with the company;

4) As the original intention of payment of share application money was towards the allotment of shares of any kind, the same couldn’t be deemed as 'loan or advance', unless the mala fide intentions were proved by the AO with evidence. Accordingly, the grounds raised by the revenue were to be dismissed - VIKAS OBEROI V. DY. CIT (2013) 37