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Cash limit under income tax

Prem Chandra Gupta (Financial Specialist) (52 Points)

24 October 2011

My company has been given Rs. 45000/- in cash to other company as advance without interest for returm after two month. After Two month other company return the entire amount Rs. 45000/- to my company through cheque.

In this cash any tax liability?

Any disallowed by Income Tax?

Please inform

(P.C.Gupta)

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1 Replies

Hari Wadhwa (CA in Practice) (485 Points)
Replied 24 October 2011

Relevant Provisions of Income Tax Act

1) Section 269SS: -

No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor) any loan or deposit otherwise than by an account payee cheque or account payee bank draft if, -

(a) The amount of such loan or deposit or the aggregate amount of such loan and deposit; or

(b) On the date of taking or accepting such loan or deposit, any loan or deposit 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

2) Further, Section 269T: -

No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit if—

(a) the amount of the loan or deposit together with the interest, if any, payable thereon, or

(b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits,

is twenty thousand rupees or more

3) Conclusion: -

Thus, in view of these two sections, it can be concluded that the above said transaction is NOT in harmony with these provisions (assuming the amt was not returned through A/c Payee cheque) & hence attracts reporting in the Audit Report by the Tax Auditor.