Loan under Section 269SS

To me, It's a debatable issue:-

1) Logically :- It should NOT ATTRACT Sec 269 SS

2) Legally :- It will ATTRACT Sec 269 SS

Originally posted by : Amir
	To me, It's a debatable issue:- 1) Logically :- It should NOT ATTRACT Sec 269 SS 2) Legally :- It will ATTRACT Sec 269 SS

Ya Amir is Rite.

well Logically Should be Followed from My View.

Bank account transfer is equivalant to account payee cheque or account payee draft so it should not attract 269SS.

The time when the section was made at that moment of time net banking was not there. So the intention of the lawmaker is to get the transaction in the eyes of taxing authority and to ensure that the said person receive the payment. Bank account transfer covers both.

Dear Umesh

I have mentioned the judgements which may help you.

This clearly shows that this section can be applied only where money passes from one person to another by way of 'loan or deposit'. This provision cannot therefore, be applied where the money does not pass from one person to another but the debt is acknowledged by passing entry in the books of account, depending upon the facts of the case. If the contention of the learned departmental representative is accepted, then, it may result in absurdity. For example, a person may give the money to a vendor by way of advance against the supply of goods. Such transaction at the time of giving money would not come within the ambit of the words 'deposit or loan'. But on subsequent date the contract for supply of goods may be cancelled due to unforeseen circumstances and the parties may agree to treat the advance of money as loan. In such a situation, if the provisions of section 269SS are applied then the assessee cannot be penalised for no fault of his. Similarly, in the case of dissolution of the firm, the parties may agree that the amount standing to the credit of retiring partner may be treated as loan with the continuing partners. In such a situation also, only journal entries are made and no cash is transferred from one person to another. The application of section 269SS to such situation would create anomaly and absurdity. In our opinion, there cannot be the intention of the Legislature to penalise the innocent assessees. Therefore, we are of the opinion that the provisions of section 269SS cannot be applied where the assessee merely acknowledges the debt incurred earlier and there is no transfer of money from one person to another. The same view has been taken by the Tribunal, Ahmedabad Bench in the case of Bombay Conductors & Electricals Ltd. wherein it has been held that deposit/loan must be made through money and constructive loan or deposit could not come within the mischief of provisions of section 269SS. In that case, the assessee had purchased goods worth Rs. 23.00 lakhs from its subsidiary company and since it was not in a position to pay the said amount immediately, the holding company agreed to treat the amount as loan. The respective entries were made by the assessee in this regard. On these facts, the Tribunal held that the provisions of section 269SS could not be applied. 

Regards

j.k.shahi

nice work J.K.Shahi ji. i was also looking upon to see the cases on the above query, thanks sir. Would look upon such answers on ca club in future too.

very nice j.k Shahi sir

BUT if online repayment say like SAT is paid online of that person from whom loan is taken , then would it attract penalty u/s271E