Impact of Section 269ST on cash withdrawals of more than Rs. 200000 from a single bank in a single day.
India continues to be driven by the use of cash: India uses too much cash for transactions. The ratio of cash to gross domestic product is one of the highest in the world—12.42% in 2014, compared with 9.47% in China or 4% in Brazil. Less than 5% of all payments happen electronically. Easy availability of cash leads to corruption, which has become one of the reasons to increase in black money.
Vowing to carry forward the war against corruption and black money post-demonetisation, the finance act 2017 has brought a new section 269ST, In order to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money
The Section provides that:
‘No person shall receive an amount of two lakh rupees or more (earlier three lakh rupees):-
(a) In aggregate from a person in a day;
(b) In respect of a single transaction; or
(c) In respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.
It is further proposed to provide that the said restriction shall not apply
- to Government,
- any banking company,
- Post office savings bank or co-operative bank.
- Further, it is proposed that such other persons or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply.
- Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section
A thought is running everywhere, that a bar on withdrawal of Rs. 2 lakh or more from a single bank in a single day is imposed by section 269ST. We asked this question to no of professionals to really understand the underlying meaning of the provision and all gave us this interpretation that yes a bar on withdrawal is also imposed by this section.
But our opinion doesn’t go with all other professionals. We would like show a different interpretation which is as under:
First: Withdrawals from own bank accounts is a contra entry. The money has already been received at our end & lying with the bank. It can’t be termed as a receipt again.
Second: Although the section restricts receipts, by any person of Rs. 2 lakh or more from any other person otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, in a day, in respect of single transaction or in respect of transactions relating to one event/occasion from a person.
Yet the section have some exceptions and one them is:
“Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section” and section 269SS allows to accept loans & deposit in cash from bank. Let’s read the provision once again:
“No person shall take or accept from any other person (hereinreferred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,—
(a) The amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or
(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or
(c) The amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:
Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,—
(a) the Government;
(b) any banking company, post office savings bank or co-operative bank;
(c) any corporation established by a Central, State or Provincial Act;
(d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013);
(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:
It is worth noting that section 269SS has not been transported in section 269ST, only the nature of transactions has been transported. The nature of the transactions referred to in section 269SS are loan or deposit. Therefore transaction of the nature of loan or deposit are not covered by section 269ST. logically also that seems to be correct position, because transactions of loans would be dealt by 269SS. There can’t be two sections dealing with transaction of similar nature. Section 269SS allows withdrawals of cash from bank of Rs. Two lakh or more
The exclusion has been given by writing the words “transactions of nature referred to in U/s 269SS”. Which means that transaction of nature referred u/s 269SS are to be dealt with section 269SS only. For instance, if any assesse has make a default against the provisions of section 269SS, then penalty should also be levied as per section 269SS & not as per section 269ST & if defaults of section 269SS are excluded from the purview of section 269ST, then transactions allowed by section 269SS are also to be excluded from the purview of this section. There should be no contradiction of the provisions as the earlier is allowing to accept/receive any sum from Bank in cash & the later restricts it & imposes penalty up to 100 % on the same.
Now the question arises that exclusion is only allowed in respect of Loans/CC/OD facilities. What about withdrawal from Deposit facilities like current/saving a/c’s
In our view again this section doesn’t apply on withdrawal from deposit a/c’s as like we said earlier withdrawing money from deposit a/c’s is not a receipt it’s a contra entry, moreover withdrawing own money from own bank account is not any transaction. It is just like holding your money with a trustee or in other hand. As Finance act 2017 has not defined the meaning of transaction for the purpose of section 269ST, so we take the meaning of transaction in general which is “An instance of buying and selling”. Nothing has been bought/sold from/to the bank, so this isn’t a transaction at all.
Thus the above explanations holds a clear view that money can be withdrawn even in excess of Rs. 2 lakh in a single day from a single bank.
CAclubindia
