Applicability of sec.269ss and 269t

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hitesh (Querist)
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29 June 2013 Dear fellow brothers/sisters,
A firm has taken over a proprietorship business including debtors, creditors, secured and unsecured loans (exceeding Rs.20000) and other assets and liabilities. The firm has not "accepted" any loans form lenders of ex-proprietorship business, directly.It has only "acknowledged" the loan liability and provided / paid interest to them. The firm has passed journal entry crediting lenders a/c and debiting proprietor a/c. (being loan liability of proprietor taken over)
1) Whether this transaction is hit by sec.269ss? 2) Is it necessary to report the details of lenders in 3cd clause 24. if yes how?- if we report these loans as accepted otherwise than a/c payee chq/dd, penalty u/s 271e and other litigation would follow, though u/s 273b penalty may not be sustained 3)reporting in 3cd clause 24,is not required as it is not accepted but only acknowledged? please give your valued suggestions to avoid appeals, if possible with case laws, Thanks.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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30 June 2013 In my view there is not much difference in acknowledgement and acceptance. However, the intention behind inserting these provisions into law remains to curb the practice of cash loans acceptance or repayments.
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Acceptence or repayment through Journal Entry would not come within the ambit of the words ‘loans or deposits’-section 269SS applies only where money passes from one person to another by way of ‘loan or deposit’
[CIT v. Noida Toll Bridge Co. Ltd. 262 ITR 260 (Del.)]

Read the article on this topic

http://taxguru.in/income-tax/provisions-of-section-269ss-and-269t-under-income-tax-act.html

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hitesh

hitesh (Querist)
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19 September 2013 Sir,
my query regarding how to report in 3cd is unanswered,in view of e filing of 3cd form, where there is no space for any notes.For, in 3cd clause 24, we have to select yes/no. It is irrelevant whether such acceptance are hit by 269ss/269t. I would like to draw your attention to "Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 (Revised 2013)"

Para 51.2 For the purposes of section 269SS "loan or deposit" means loan or deposit of money.
Para 51.9 (viii) Loans and deposits taken or accepted by means of transfer entries constitute acceptance of deposits or loans otherwise than by account payee cheques. Hence, such entries have to be reported under this clause. The entries that relate to transactions with a supplier and customer on account of purchase or sale of goods /services will not be treated as loans or deposits accepted.

hitesh

hitesh (Querist)
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20 September 2013 Sir,
my query regarding how to report in 3cd is unanswered,in view of e filing of 3cd form, where there is no space for any notes.For, in 3cd clause 24, we have to select yes/no. It is irrelevant whether such acceptance are hit by 269ss/269t. I would like to draw your attention to "Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 (Revised 2013)"

Para 51.2 For the purposes of section 269SS "loan or deposit" means loan or deposit of money.
Para 51.9 (viii) Loans and deposits taken or accepted by means of transfer entries constitute acceptance of deposits or loans otherwise than by account payee cheques. Hence, such entries have to be reported under this clause. The entries that relate to transactions with a supplier and customer on account of purchase or sale of goods /services will not be treated as loans or deposits accepted.

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