In Brief
A manufacturing company received share application money during a public share issue and deposited it in a bank account as required by law, earning interest of Rs 1.71 crore. The Revenue treated this interest as taxable income, but the company claimed it could be set off against share issue expenses. The Supreme Court held that since the deposit was made purely to comply with a statutory requirement and the interest earned was incidental to capital-raising, it was not taxable income. Interest earned on such mandated deposits must be adjusted as a deduction against public issue expenses, not assessed as revenue income from other sources."
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