06 August 2010
Its a capital receipt and not subject to Income Tax.
In many cases forfeiture of share application/call money is held as a capital reciept. The Mumbai bench of ITAT in deptt appeal in Deputy Commissioner of Income-tax Vs. Deepak Fertilizers and Petrochemicals Corporation Ltd (304ITR AT 367) held that the amounts forfeited due to non-payment of call money could not be charged to tax.
However in the proposed direct tax code such forfeiture sums may get taxed as income from other sources (residuary head)even if they have capital character.