Section 269SS | 269T | 269ST - Taxation of Cash Receipts and Cash Payments under the Income Tax Act, 1961
About the Author:
Ministry
of Finance with the Income Tax Department has, from time to time, taken various
measures to control the involvement of cash in activities, whether or not
related to the business.
Various
amendments have also been made to the Income Tax Act, 1961 in the past few
years which have intended to only target cash transactions and limit their
involvement. It is without any doubt that the Revenue has fairly been able to
do so, either by imposing restrictions on cash transactions or by providing
incentives for not dealing in cash.
The Finance Act, 2015; 2016; 2017; 2018; 2019 and 2020 as well witnessed numerous amendments whereby either certain restrictions were imposed with consequential penalties and some incentives were also provided by a reduction in tax rates or presumptive income tax rates.
Section 269SS and Section 269T of the Income Tax Act, 1961
To
begin with, Finance Act, 2015 amended the provisions of Section 269SS and 269T
of the Act, 1961.
Section |
269T |
|
Prohibits |
Acceptance of ·
Loan ·
Deposits ·
Advances ·
or any
other specified sums |
Repayment of ·
such
loan, ·
deposit
or ·
specified
sum |
Exceeding |
₹ 20,000/- or more |
₹ 20,000 or more |
Otherwise than through |
·
account
payee cheque, or ·
draft or
·
use of
ECS through a bank account or · through
‘such other electronic modes as may be prescribed’ |
·
account
payee cheque, or ·
draft or
·
use of
ECS through a bank account or · through
‘such other electronic modes as may be prescribed’ |
Means |
A person may take or accept loan, deposit or
specified sums in cash only up to ₹ 19,999/-. |
a person may repay the loans or deposits or
specified sums in cash only up to ₹ 19,999/-. |
Both the sections 269SS and 269T are on similar
footing and the only difference in these two sections is the applicable
transactions. |
Later on, on the basis of recommendations of Special Investigation Team (SIT), New section 269ST was introduced vide Finance Act, 2017 w.e.f 01.04.2017 which imposed a cap on receipt of cash exceeding ₹ 2,00,000/-. The provisions of Section 269ST of the Act and its consequences are discussed later in this article.
Recent Amendment is Finance (No. 2)
Act, 2019
In
recent amendments, Finance (No. 2) Act, 2019 substituted the term ‘bank
account’ with ‘bank account or through such other electronic modes as may be prescribed’. These ‘such other electronic modes’ were notified by Ministry of Finance vide Income Tax (Third Amendment) Rules, 2020 on 29.01.2020 under ‘Rule 6ABBA of Income Tax Rules, 1962’ as the following:
(a) Credit Card;
(b) Debit Card;
(c) Net Banking;
(d) IMPS (Immediate Payment Service);
(e) UPI (Unified Payment Interface);
(f)
RTGS (Real Time Gross Settlement);
(g) NEFT (National Electronic Funds
Transfer); and
(h) BHIM (Bharat Interface for Money)
Aadhar Pay
Thus, although the electronic modes were prescribed on 29.01.2020, they stand applicable retrospectively from the date on which the amendment became effective i.e 01.09.2019.
Analysis of Section 269SS in link with 194-IA | 271D | 271E
The
term ‘Specified sum’ was added by Finance Act, 2015 w.e.f 01.06.2015 by
amending the provisions of section 269SS and 269T of the Act, which means:
any sum of money receivable,
whether as advance or otherwise in relation to transfer of immovable property
irrespective of whether or not the transfer has taken place.
It is without any doubt that the applicability of Section 269SS of the Act is not limited to only cash transactions relating to immovable properties which have been held as capital asset but also to those immovable properties which are not capital asset.
Any person who is found to have received
advance cash of ₹ 20,000 or more in respect of consideration for sale of
property would be liable to penalty under section 271D of the Income Tax Act.
Section | 271D | 271E |
Scope | where any person receives any amount of ·
loan, ·
deposit or ·
advance for sale of immovable property | where any person repay any amount of ·
loan, ·
deposit or ·
advance for sale of immovable property |
in
contravention of | ||
Consequences | Liable for Penalty | Liable for Penalty |
Penalty
Amount | an equal amount of transaction | an equal amount of transaction |
Exemptions from Section 269SS and 269T
These
two sections also come with an exception to provide that where the
loan/deposit/specified advance is accepted from the below stated;
or
where repayment of the loan/deposit/specified advance taken or accepted from
the below stated is made, shall be exempted from the provisions of Section269SS and 269T of the Act:
- Government
- Any
banking company, post office savings bank or co-operative bank
- Any corporation established by a Central or State Provincial Act
- Any government company defined under section 2(45) of Companies Act, 2013
- Such
other institution, association or body or class of institutions, associations
or bodies which the Central Government may notify in this behalf after recording
proper reasons in writing.
The
provisions of section 271D and 271E are explicitly clear and there are no
exceptions to it.
Now
the question that arises here is what constitutes to be a reasonable cause and
what does not and to what extent it can be resorted to, to escape the penal
provisions of Section 271D and 271E of the Income Tax Act.
This
term ‘reasonable cause’ is very enormous and is a controversial term in itself.
Something that may constitute as ‘reasonable cause’ by one person may not be
considered as acceptable on the same footing by another person.
Relevant Case Laws taking divergent
views
M/s. NRK Thangamani
In
a recent judgment, High Court of Madras in the case of M/s. NRK Thangamani
ITA Nos. 1431 and 1432 of 2007 dt. 05.09.2019 also held that imposition of the penalty depends upon the facts and circumstances of each case and if the assessee has put forth a reasonable cause for accepting the deposits in cash,
then such circumstances can be considered by the assessing authority to waive
or reduce the penalty.
Adding
on to it, the stated reasonable cause has to be mandatorily followed by
sufficient pieces of evidence to establish the compelling circumstance under which the assessee could not comply with the said provisions of Section 269SS or 269T of
the Act.
Nitin Mohan Wadikar
High Court of Bombay in the
case of Nitin Mohan Wadikar [2019] 414 ITR 647 (Bom)observed that merely stating
that assessee was forced to accept cash loans as cash credit limit of account got
exhausted and the assessee had to purchase raw materials to execute time-bound
orders were not sufficient as no evidence was furnished in this regard. A plausible explanation has to be established with the respective pieces of evidence.
As
stated above, there has to be some compelling circumstance under the mandate of
Section 273B of the Act to condone the violation of Section 269SS/ 269T.One
cannot raise a plea that cash was received but payment later on made through
cheques do not suggest that there was no attempt to bring black money into
the business.
Ms. Nanda Kumari vs. ITO
In
the case of Ms. Nanda Kumari vs.
ITO ITA No. 968 of 2018 dt. 20.12.2018, penalty u/s 271D was dropped
by the High Court of Madras. In
this case, the appellant had taken cash advance from her maternal uncle to repay
another person the advance earlier received by her for sale of immovable
property as the transaction could not be materialized. The said amount so
repaid was borrowed from her maternal uncle for emergency purposes and the same
was done within close family relatives.
The
Honorable Court observed that there was nothing on record to show that the
transaction within the close-knit of family relatives lacked bona fides or that
the appellant has come forward with a false case.
In
order to impose the penalty, the AO has to show that the case as projected by
the assessee was false or that the cause established was not bonafide. More
particularly, the cause should be supported with necessary pieces of evidence without
which no contention shall sustain in law.
Kum. A.B.Shanti
Hon’ble Apex Court in
the case of Kum. A.B.Shanti 255 ITR
258 also observed that existence of genuine or bona fide transaction
is not sufficient to attract relief under section 273B of the Act and it has to
be established that on account of some bona fide reasons, the assessee could
not get loan/ deposit by account payee cheque or draft or other specified
modes.
Shivaji Ramchandra Panwar HUF vs. JCIT
In
another case in Shivaji Ramchandra
Panwar HUF vs. JCIT ITA No. 145, 154, 171 of 2016 dt. 18.07.2018, High Court of
Bombay held that education
of Karta of the HUF up to 4th Standard cannot itself lead to the presumption that he is ignorant of the law, more particularly when the Karta is
dealing with large amounts of cash and thus, it cannot be taken as a valid plea
to bypass the settled law. Therefore, lack of education or ignorance of the law
cannot be considered as reasonable cause to escape the penalty.
Ever since the restriction was
imposed on cash transactions vide Sections 269SS and 269ST of the Act, there
have been numerous disputes on the applicability of these sections and the consequent the validity of penalty imposed under sections 271D or 271E of the Act.
To escape the clutches of penal provisions of Section 271D and 271E of the Act, the assessee has to establish a proper cause. The burden then, shifts on the AO to establish that the cause is shown is not a reasonable one by examining it and that it lacks bona fire.
When a reasonable cause is put forth, the assessing officer is obligated to discard or disprove the said contention and then only, the penalty could be levied.
The limitation period for imposing the penalty under sections 271D and 271E of the Act
Therefore,
the completion of appellate proceedings arising out of the assessment
proceedings or other proceedings during which the penalty proceedings under
Sections 271D and 271E may have been initiated has no relevance for sustaining
or not sustaining the penalty proceedings.
Clause
(a) to section 275(1) of the Act governs the cases which are integrally related
to the assessment proceedings and are not independent of it.
Since,
the penalty proceedings under section 271D and 271E of the Act are exclusive of
the assessment proceedings, the limitation period as prescribed by Section
275(1)(a) of the Act does not apply.
In
cases like 271D and 271E of the Act, penalty proceedings can be initiated
independent of any proceedings but obviously the penalty proceedings can be
initiated only when the default is brought to the notice of the concerned
authority which may be during the course of any proceedings.
Therefore,
for such type of cases where the penalty proceedings have been initiated in
connection with the defaults for which no statutory mandate is there, a different
period of limitation has been prescribed under clause (c) as a separate
category.
In cases falling under clause (c),
penalty
proceedings are to be completed within 1 year from the end of the financial
year in which the proceedings during which the action for imposition of penalty
is initiated, are completed, or six months from the end of the month in which
action for imposition of penalty is initiated, whichever period expires later.
Thus,
limitation period of six months as prescribed in Section 275(1)(c) of the Income
Tax Act applies to such penalty proceedings.
Whether reopening of assessment under section 147 of the Act could be made for violation of provisions of Section 269SS of the Act?
As
discussed above, the penalty proceedings under section 271D/271E of the Act are
completely independent of the assessment proceedings. However, the assessing
officer cannot come up after 4/6 years with a speculation that assessee might
have dealt in cash transactions which needs to be verified.
The
reasons were recorded stating that the entries of acceptance of loan needs to
be scrutinized in detail. The assessing officer has not recorded any finding
that income chargeable to tax has escaped assessment which is the prime
requirement to reopen the assessment and has rather referred to the imposition
of possible penalty under section 271D.
As
it is held by series of judgments of various courts that reopening of
assessment cannot be made for mere fishing or rowing inquiries on mere
suspicion, the matter was decided in favor of assessee.
The
assessing officer has to have a belief that income chargeable to tax has
escaped assessment, for which there must be some tangible material having a
live link with it.
Although
no specific time period has been provided in the Act for initiating penalty
proceedings under section 271D/271E of the Act, it is possible to say that one
may receive show cause notice for imposing penalty even after the expiration of
6 years of the relevant assessment year in which transaction in violation of
Section 269SS/269T of the Act was carried out.
However, following the decision of Gujarat High Court as above, where the scrutiny of acceptance/repayment of loan/deposit/advance is to be made through the strenuous mode of reopening of assessments under section 147 of the Act, it cannot be done without having an independent reason to believe followed by supporting tangible material that the assessee has contravened the provisions of Section269SS/269T of the Income Tax Act.
Payments or receipts through journal entries
A
plain reading of the Section 269SS of the Act indicates that it applies to a
transaction where a deposit or a loan is accepted by an assessee, otherwise
than by an account payee cheque or an account payee draft.
The
ambit of the Section is clearly restricted to transactions involving acceptance
of money and is not intended to affect cases where a debt or a liability arises
on account of book entries.
The
only object of this section is to prevent transactions in currency. This is
also clearly explicit from clause (iii) of the explanation to Section 269SS of
the Act which defines loan or deposit to mean “loan or deposit of money”.
The
liability recorded in the books of accounts by way of journal entries, i.e.
crediting the account of a party to whom monies are payable or debiting the
account of a party from whom monies are receivable in the books of accounts, is
clearly outside the ambit of the provision of Section 269SS of the Act, because
passing such entries does not involve acceptance of any loan or deposit of
money.
The hon’ble high court had dismissed revenue’s appeal in the case of Lodha group of companies and confirmed the order of tribunal of deleting the penalty levied under section 271D/271E on the acceptance/repayment of loans/advances through journal entries.
Loan or deposit – Sine Qua Non for Section 269SS and 269T
Loan
or deposit is a sine qua non or foundational fact for the applicability of
Section 269SS and 269T of the Act. It cannot be applied to just every cash
transaction.
Essential
attributes of a loan or deposit or advance is the right to claim payment and obligations
to re-pay. If this element is missing, Section 269SS cannot be attracted.
Now
one may wonder whether these sections
would be attracted where a large sum of share application is received in cash
and only meagre amount of shares are allotted in lieu thereof.
Upon these facts, Delhi Tribunal sustained the
penalty under section 271D of the Act as it showed the mala fide intent of the
company in accepting huge sum in cash for which only few numbers of shares were
allotted.
The Tribunal held that the actual intention of the
company for receiving the money in cash has to be considered, which if found
mala fide would be liable for penalty under section 271D of the Income Tax
Act.
It is also noteworthy to take the provisions of
Section 269ST of the Act into consideration as receiving share application
money in cash for an amount exceeding ₹ 2 lakhs would attract the penal
provisions of Section 271DA of the Act due to contravention of Section 269ST of
the Income Tax Act.
Transactions between partner and his
firm
Unlike
companies, partnership firms are not considered to have separate legal entities
as it is formed by two or more persons who decides to carry on business and
share the resultant profits/losses is some agreed ratio.
The
partners are the contributors of capital and provide their own money to the
firm. There is no common seal of a partnership firm.
According
to the honorable court, partnership is a relation between certain persons who
agree to share the profits of the business. In Income Tax Law, a firm is a unit
of assessment by special provisions but is not a full person.
Thus,
if we follow this view point, the partners cannot be considered as separate and
distinct from their firm and any money provided by them to the firm cannot be
taken as an independent transaction of loan under the purview of Section 269SSof the Act.
Despite
the position as laid down by the Supreme Court, the legal status of a
partnership firm vis-Ã -vis its partners have always been under debate and so is
the applicability of Section 269SS or 269T to money advanced by partner to his
firm.
Similar
position applies to the receipt and payment of partner’s capital by partnership
firm as held in the case of ITO vs.
Universal AssociatesITA No. 1349/Ahd/2010 dt. 17.06.2011as partner’s
capital neither constitutes loan nor deposit.
Section 269ST – Mode of undertaking
transactions
With
a view to promote digital economy and create a disincentive against cash transactions,
Section 269ST was inserted by Finance Act, 2017 w.e.f 01.04.2017 on the basis
of recommendations of SIT. This provision has imposed a cap on receiving amount
more than ₹ 2 Lakhs in cash.
The
limit was originally recommended by SIT to ₹ 3 Lakhs which was however was
reduced to ₹ 2 Lakhs while passing of the Finance Act, 2017. Section 269ST of
the Act has the following primary ingredients:
i.
It casts an obligation on
every person (be it individual or HUF or Firm or Company or AOP or BOI or
Artificial Juridical Person etc)
ii.
Section 269ST does not apply
to Government or banking company, post office savings bank or cooperative bank.
iii.
Any person shall not receive
amount of ₹ 2 Lakhs or more otherwise than by account payee cheque, draft or
through electronic clearing system of bank or through such other electronic
modes as prescribed. (Prescribed modes have been mentioned above)
iv. Cap-limit
of ₹ 2 Lakhs applies to every transaction of money received:
- In
aggregate from a person in a day
- In
respect of single transaction
- In
respect of transactions relating to one event or occasion from a person
v.
This section does not apply to
transactions of loan/deposit/ advances for sale of immovable property as
referred to in Section 269SS of the Act. For transactions referred to inSection 269SS of the Act, the limit of ₹ 20,000 would apply.
vi. Except
for the transactions referred to in Section 269SS and other receipts as
exempted by Central Government by notification, Section 269ST of the Act shall
apply to every receipt whether taxable or tax free, whether capital or revenue.
It shall apply regardless of whether money is received in course of business
dealings or non-business dealings, money gifts, sale of old furniture etc.
vii. Section
271DA of the Act was inserted by Finance Act, 2017 which provides for levy of
penalty on a person who receives a sum in contravention of the Section 269ST of
the Act. Penalty of amount equal to the amounts received shall be levied. However,
the said penalty shall not be levied if the person proves that there were good
and sufficient reasons for such non-compliance.
CBDT Circular No. 27/2017 dated
03.11.2017– Applicability of Section 269ST to agricultural income received from
sale of agricultural produce
CBDT
vide Circular No. 27/2017 dated 03.11.2017 clarified that Section 269ST of the Income
Tax Act prohibits receipt of ₹ 2 lakhs or more otherwise than by specified
modes in a day or in respect of a single transaction or in respect of
transactions relating to an event or occasion from a person.
As
no exception has been given for agricultural income, any cash sale of an amount
of ₹ 2 lakh or more by cultivator of agricultural produce is prohibited under
this section. This circular also clarified that cash sale of the agricultural
produce by its cultivator to the trader for an amount less than ₹ 2 lakhs will
not:
- Result
in any disallowance of expenditure under section 40A(3) of the Income Tax
Act in case of trader
- Attract
prohibition under section 269ST of the Act in the case of cultivator
- Require
the cultivator to quote his PAN or furnish Form No. 60.
Circular No. 22/2017 dated
03.07.2017–Repayment of loan by NBFCs and Housing Finance Companies
CBDT
has clarified vide circular no. 22/2017 that, in respect of receipt in the
nature of repayment of loan by NBFCs or Housing Finance Companies, the receipt
of one installment of loan repayment in respect of a loan shall be considered
as ‘single transaction’ and all the installments paid for a loan shall not be
aggregated for the purposes of determining the applicability of Section 269ST
of the Act.
Applicability of Section 269ST to
cash gifts taxable under section 56(2)(x)
Section
56(2)(x) of the Act provides that where, on or after 01.04.2017, an aggregate
sum exceeding ₹ 50,000/- is received from any person during the previous year
without consideration, then the entire sums so received shall be taxed as
‘Income from Other Sources’ in the hands of recipient.
Taxability
under section 56(2)(x) shall arise irrespective of whether sum is received in
cash or non-cash mode. Now let us assume Mr. A has received has received cash
gift of ₹ 3 lakhs and paid due tax thereon as per Section 56(2)(x) of the Act.
So,
the question that arises here is whether Section 269ST of the Act would still
be applicable on this cash gift and would penalty under section 271DA of the
Act would be attracted even if the said amount has already been offered to tax.
Section
56(2)(x) of the Act does provide certain exemptions which does not include
transactions covered under section 269ST of the Act. Thus, it appears that even
if the gift taxable under section 56(2)(x) of the Act has been included in the
return of income and offered to tax, penalty under section 271DA of the Act
would still be leviable for receiving sums exceeding ₹ 2 lakhs in cash.
However,
the position would stand slightly different where the transaction is exempt
from tax under section 56(2)(x) of the Act say, exemption of gift received from
relatives. Section 269SS was brought out to discourage the use of unaccounted
money and thus, transactions between relatives and sister concerns cannot be
the subject of Section 269SS.
In
one case, the assessing officers treated the cash given by father to his son as
unsecured loan and treated this transaction to be covered by Section 269SS in
order to levy penalty under section 271D of the Act.
However,
the assessee maintained the contention that the cash given by his father was a
gift although no formal gift deed was drafted at that time. The controversy
that arose here is whether the delay in preparation of gift deed can cause
prejudice to the assessee by holding those cash transactions is a loan and not
in the nature of gifts.
Once
the donor has agreed that he had given a gift to the assessee, then the same
cannot be denied merely on the ground that the gift deed was not prepared at
the relevant time. Even if the amount was given as a loan and later on the
parties have agreed to treat it as a gift, then the matter comes to an end.
This
is the basic difference between gift and loan/deposit. A gift is never paid
back or returned to the donor while that is not the case of loan/deposit. As
there was nothing to suggest that the assessee has paid back the money to his
father directly or indirectly, the penalty imposed by AO under section 271D was
deleted.
Applicability of Section 269ST to
the share application money received by companies
Section
269ST of the Act shall also apply to the share application money received by
companies if it is received in cash exceeding ₹ 2 lakhs or more in aggregate
from a person in a day, in respect of a single transaction or in respect of
transactions relating to one event or occasion from a person.
Section 42 of the Companies Act,
2013 read with Rule 14(5) of Companies (Prospectus and Allotment of Securities)
Rules, 2014 also provide that the payment for subscription of securities in
private placement offer shall be made from the bank account of the person
subscribing to such securities.
Applicability of Section 269ST on
capital contribution from a partner in cash or drawings by partner
Capital
contribution by a partner is a capital receipt and hence, not taxable. However,
Section 269ST of the Act applies to all the receipts, whether capital or
revenue or whether taxable or exempt.
On
similar grounds, drawings by a partner in cash shall also not be subject to the
limits of Section 269ST of the Act.
Applicability of Section 269ST to
transactions between sister concerns
“….From the copies of
the accounts furnished before us all that can be gathered is that funds have
been transferred from and to the sister concerns as and when required and since
the managing partner is common to the sister concerns,
the decision to
transfer the funds from one concern to another concern or to repay the funds
could be said to have been largely influenced by the same individual. In other
words, the decision to give, and the decision to take rested with either the same group of people or with the same individual.
In such circumstances,
we hold that the transactions inter se between the sister concerns and the
assessee cannot partake of the nature of either ‘deposit’ or ‘loan’….”
Considering
the above, it is possible to take a view that the ratio of above decisions would apply
to the applicability of Section 269ST as well and no penalty would be attracted
under section 271DA of the Act.
However,
as per clause (ii) of the first proviso to Section 269ST, the transactions covered
by Section 269SS shall not be covered under Section 269ST of the Act.
Thus,
it can be inferred that all the transactions to which Section 269SS of the Act
is not applicable would be covered under the provisions of Section 269ST of the
Act.
For
example, sale proceeds collected by the selling agent on behalf of his
principal, advance received against the sale of goods, share application money, etc.
Some Examples to understand the implication of section 269ST
As
discussed above, section 269ST comes into play when any payment is received of ₹
2 lakhs or more in
(a)
aggregate from a person in a day,
(b)
in respect of a single transaction or
(c)
in respect of transactions relating to one event or occasion from a person.
Let us understand the same with the help of certain illustrations:
Sr. No. |
Example |
Whether 269ST attracts? |
i. |
If amount of ₹ 90,000/-, ₹ 1,70,000/- and ₹ 40,000/- is received
in cash on same day against 3 different bills from the same person, then
whether section 269ST would be contravened or not? |
Yes, since the amount received from one person in aggregate
exceeds ₹ 2,00,000/-. But if the said amounts are received on three different dates,
then it will not amount to violation of Section 269ST. |
Ii |
Whether
section 269ST would be violated where various bills of amounts less than ₹
2,00,000/- each are raised and total cash of ₹ 15,00,000/- is received on
different dates. Each time the cash is received, it is less than ₹ 2,00,000. |
In this
case, section 269ST would not be violated as the cash received are towards
different bills and does not pertain to a single transaction. However, let us
assume that different bills raised are for one event say, wedding. Then in
such cases, Section 269ST would be violated in terms of clause (c) 'in
respect of transactions relating to one event or occasion from a person',
since the total amount of cash received from one person relating to a single
occasion exceeds ₹ 2,00,000, Penalty under section 271DA would be attracted. |
Iii |
Whether Section 269ST would be violated where 4 cash gifts of ₹
1,00,000/- each are received on different dates from some relative? |
None of the clauses of Section 269ST are violated here for the
following reasons:- 2. The transactions of 4 cash gifts received on different dates
cannot be construed as single transaction. 3. The cash received is not relating to one event or occasion
from a person. |
iv. |
Whether
Section 269ST would be violated if an old car is sold for ₹ 2,50,000/- and
the consideration is received in cash instalments of ₹ 75,000/- and ₹
1,75,000/- on two different dates? |
Here,
Section 269ST would be violated as cash received is relating to a single
transaction and is exceeding the statutory limit of ₹ 2,00,000/-. More so, it
also tantamount to cash received relating to one event from one person. |
v. |
At the time of selling of immovable property, old furniture,
geyser, AC, fridge etc are also sold to the buyer by way of an agreement
separate from the sale deed. These assets are sold for total consideration of
₹ 2,50,000/- and cash is received. Whether 269ST would be violated? |
Yes, this cash receipt would be in violation of Section 269ST and
penalty under section 271DA would be levied. However, if these items are sold
cumulatively with the sale deed of immovable property and no separate
agreement is made for these items, then in such cases, Section 269SS would
come into play and the limit of ₹ 20,000 would apply as against the limit of ₹
2,00,000/- |
vi. |
Suppose
X, a contractor undertakes a contract for renovation of a house and charges ₹
5,00,000 (₹ 2,00,000 related to civil work and re-modelling, ₹ 2,00,000
related to woodwork, ₹ 50,000 related to plumbing and ₹ 50,000 related to
electrical work). He bills separately for each of these and receives 3 cash
payments of ₹ 1,50,000 each on 02.04.2019, 03.04.2019 and 04.04.2019 and
balance of ₹ 50,000 in cash on 05.04.0219. Will section 269ST be attracted? |
Yes,
section 269ST will be attracted as sum received in cash is ₹ 2,00,000/- or
more "in respect of transactions relating to one event or occasion from
a person." |
vii. |
Whether Section 269ST would be attracted where a partner brings
capital contribution in cash to the partnership firm? |
Section 269ST would be attracted if the amount of capital
contribution exceeds the statutory limit of ₹ 2,00,000/-. The position would
remain the same even if the capital contribution in cash is made on different
dates and is less than ₹ 2,00,000/-. This is due to the operation of clause
(b) and (c) i.e in respect of transactions relating to one event or occasion
from a person and, in respect of a single transaction. |
viii. |
Whether
Section 269ST would be attracted if sole proprietor introduces capital of ₹
3,00,000/- into his proprietary business in cash? |
Here,
Section 269ST would not be violated as the proprietary concern is not a
separate legal entity. Section 269ST would come into play when a transaction
involving cash is done between two separate and distinct persons. |
Other Restrictions or Disincentives under the Income Tax Act for dealing in cash
Encouraging small unorganized businesses to accept digital/cashless payments
Section 44AD:
Section 44AB:
Restrictions on receiving cash donations by political parties [Section 13A]
Mandatory to accept payment through prescribed electronic modes for certain assesses
where the cash withdrawals during the previous year exceed ₹ 20
Lakhs but not exceeding 1 crore: |
TDS
to be deducted at 2% on the amount exceeding ₹ 20 lakhs |
where the cash withdrawals exceed ₹ 1 crore: |
TDS to
be deducted at 5% on the amount exceeding ₹ 20 lakhs |
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