Share application money

As per Companies Act 1956 there is no barred on receiving share application money in cash.

But, As per section 269SS of Income tax act company can accept deposit upto Rs.20000 in cash. 

Bhalotia Engineering Works Pvt. Ltd. v. CIT [2005] 275 ITR 399 (Jharkhand)
In the given case it was held that till allotment of shares, share application money can be treated as deposits and attract section 269SS. 
The share application money was treated as deposit, as the amount were liable to be refunded to the applicants if it was decided not to allot shares to them.
Therefore the provisions of section 269SS were violated when the assessee accepted the share application money in cash amounting to Rs.20000 or more

Please correct me if i was wrong

In addition to above reply.

The Companies Act, 1956 is silent about the Dividend, so you can take. But there must be gap between Authorized share capital and Paid up capital.

Originally posted by : Ankur Shah
	But there must be gap between Authorized share capital and Paid up capital.

Ankur Ji,

Paid up capital must be equal to or below than the Authorised Capital.

If paid up capital is equal then how can he accept the share application money???

e.g.

If Authorized share capital is Rs. 1Lac and Paid-up capital is also Rs. 1Lac, then how can he issue new shares???

I was just talking about Authorised and Paid up capital.

If Company wants to accept share application money then it have to increase its Authorised Capital first.

Yes you are right in this case there must be gap between Authorised Capital and Paid up capital.