269SS Appliecable to payer ?

Others 1260 views 5 replies

CA Krunal

Deputy Manager -Adani Ent

262 Points Joined March 2007

The plain language of 269SS mentions " no person shall take or accept any loan or deposit otherwise than by crossed account payee cheque or account payee bank draft "

Now my question is if i am giving loan exceeding Rs.20000 by other then a/c payee cheque whether i am violating provision of 269SS.

As per plain language i am not liable but my doubt arises due to

a. The heading of chapter XX-B is " Requirement as to mode of Acceptance, Payment or Repayment in certain cases to counteract evasion of tax "

so in above cases payment word mentioned in headin of chapter which may be caution

b. as per provisio provided in the section "this provision is not applicable to any loan or deposit taken or accepted from or any loan or deposit taken or accepted by various persons (governemnt, bank etc )"

In above case acceptance criteria also exempted

So it seems that even payer is also covered under violation

Kindly guide me in this regard.

Thanks

CA, Krunal Mehta

Replies (5)

Sunil

Trader

2616 Points Joined August 2009

Acceptance is section 269SS. repayment is 269T. They are both under the same chapter. Section is more important as that is specific. Chapter is wide. Go by the section. the proble is for the acceptor while receiving the loan u/s 269SS and while repaying the loan u/s 269T. The instance is of violation of specific section and not of the entire chapter.

Amol Gopal Kabra (CA,CS,DISA)

Practicing CA

8639 Points Joined April 2009

if we go for interpretation, the section content is more important than the chapter heading. in case of Sec. 269SS or Sec. 269T, the restrictions or penalties related to these sections are for accepting the loans and repaying the accepted loans. There is no implication of these sections on the advances given to any party, i.e. to mean on the lender.

Regards,

CA. Amol G. Kabra.

CA Krunal

Deputy Manager -Adani Ent

262 Points Joined March 2007

Hi...Mr Amit thanks....for your response...

However i would like to receive further confirmation in this regard as the word payment in chapter heading is substituted in 1984 after insertion of secion in 1981 - this must be with some specific purpose, again this chapter covers only two section 269SS & 269T and the payment is not applicable to 269T.

Sunil

Trader

2616 Points Joined August 2009

Section 269 SS is for Mode of taking or accepting certain loans and deposits. I have not come across the word payment in this section. It is specifically for acceptance.

Section 269T is for Mode of repayment of certain loans or deposits. Therefor it is applicable to the person making repayment. The word payment in this section is for the interest portion that is being paid. This section is applicable for the repayment of principal as well as the payment of interest. If you receive back the money wht you gave in cash you are not making a payment or repayment.

For you the only problem is to prove having the cash in your cash flow. As a payer, you are in violation of this section 269SS only if you pay application money for shares in an IPO by cheque or by cash IF YOU HAVE taken a loan in cash in violation of this section and then used it for making the application. Ttarget='_blank' rel='nofollow' hrefore when you apply for shares in IPO you see this in the prospectus as well as in your application form. I am not sure in this case if your violation is twice (once for acceptance and second time for payment when applying for IPO by cash). If you are interested, read a prospectus of an IPO thoroughly.

Rajeev

www.rkmco.com

985 Points Joined September 2009

Krunalji ,

I agree with the above views of my learned frnds .

The Chapter was brought on statute to counteract evasion of taxes in certain cases.

I have written a lot of times pre budget to make the provisions of 269SS/T applicable only in search cases because that seems to be the intenion of the legislature but it usually falls on deaf ears .

It creates a hardship when genuine business loans are accepted or repaid .

I believe that the provisions are in violation of Article 14 of the constitution and the penalities so prescribed for the same are even worse.Even the limit of 20000 is the same since the year 1989

Imagine some frnd of mine is in the hospital , needs cash above 20000, i cant give ...why ? cos my frnd will have to pay tax on that ? Dont we need to have more maturity than that :)