Q. B is a commission agent and through him A sells goods to C, with the condition that payment will be made within 10 days by C (purchaser) or by B if C fails to pay within 10 days. Many a times, B has to make the payment to A by the A/c Payee cheque/draft and later on C makes the payment to B. Whether provisions of Sec 269 SS are attracted with respect to B? Whether payment by C to A will meet requirements of Sec 40A.
Here B is delcredree commission agent . If as per agreement property in the goods never passes to B , and it remains always with A , before being sold to C , it can not be said that it is a case of purchase by B . Hence section 40A(3) is not applicable to B . Further when B makes payment to A by Account payee cheque , he is in fact making payment on behalf of of the buyer C and he debits the same to C , to be realised at a later date . Now , when he receives repayment in cash from C , he is not receiving any loan or deposit of money and as such the question of attraction of section 269SS does not arise . Further there is no bar in the Income Tax Act to receive repayment in cash , the bar as per section 269T is on the making repayment in cash . Now when C is making payemnt in cash to B , he in fact is making payment against purchases , so section 40(A)(3) will be attracted in his case . :)
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