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    Section 269SS & 269T

    Section 269SS - Mode of taking or accepting certain loans, deposits and specified sum: 

    Applicability: 

    This section applies to all the persons i.e. individual, HUF, Company, Partnership firm, AOP/BOI, Local authority, Co-operative society, Trust, AJP. 

    Provision: 

    No person shall take or accept from any other person, any loan or deposit or any specified sum1 , otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if 

    • the amount of such loan or deposit2 or specified sum or the aggregate of the loan or deposit or specified sum is twenty thousand rupees or more or
    • On the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not) is Rs.20,000/- or more or
    • The aggregate amount of loan or deposit or sum specified along with the amount loan or deposit or sum specified taken earlier which is outstanding on the date on which loan or deposit is to be taken is Rs. 20,000/- or more.  

    Exemption from Sec 269SS: Provisions of this section are not applicable if loan or deposit or sum specified is taken from or taken by: 

    • Government
    • any banking company, post office savings bank or cooperative bank;
    • any corporation established by a Central, State or Provincial Act;
    • any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013)
    • such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette: 

    Also, provisions of this section are not applicable in case if both the parties i.e. acceptor and depositor are having agricultural income and neither of them has any income chargeable to tax under Income tax act, 1961.  

    Penalty for failure to comply with section 269SS: 

    As per Section 271D of the Income tax act, 1961 if a person fails to comply with Section 269SS then the Joint Commissioner shall charge a sum by way of penalty equal to the amount of the loan or deposit or specified sumso taken or accepted. 

    Examples: 

    1. Let Mr. X had borrowed a loan of Rs. 12,000 from Mr. A and Rs. 18,000 from Mr. B in cash as on 20/09/2016 for the first time. Whether there is any contravention to section 269SS? 

    Ans: There is no contravention for Sec 269SS as both Mr. A and Mr. B are different and aggregate amount need to be checked in individual capacity. 

    1. Let Mr. X had borrowed a loan of Rs. 12,000 from Mr. A and Rs. 18,000 as Deposit in cash as on 20/09/2016 for the first time. Whether there is any contravention to section 269SS? 

    Ans: As per Section 269SS (a), no person should accept loan or deposit or any other specified sum in cash if such amount in exceeds Rs 20,000/- As in the instant case, amount is exceeding Rs 20,000/- (i.e. 18,000 + 12,000 = 30,000/-) there is a contravention. 

    1. Let Mr. X had borrowed a loan of Rs. 12,000 from Mr. A as on 01/07/2014 in form of account payee cheque and the same is still payable as on 20/09/2016 amounting to Rs 15,000 (Including interest). Also he has borrowed Rs. 6,000 as Deposit in cash as on 20/09/2016, whether there is any contravention to section 269SS? 

    Ans: As per Section 269SS (b), as on the date of taking or accepting loan or deposit or specified sum, if there is any loan or deposit or specified sum accepted earlier is remaining unpaid then the same should be considered for Rs 20,000/- limit. In the instant case, as the amount exceeds 20,000/- (12,000 + 15,000 = 27,000/-) there is a contravention. 

    Section 269T - Mode of repayment of certain loans or deposits: 

    Applicability: 

    This section applies to all the persons i.e. individual, HUF, Company (including branch of the banking company), Partnership firm, AOP/BOI, Local authority, Co-operative society, Trust, AJP. 

    Provision: 

    The repayment, by any person, of any loan or deposit3 or specified advance 4, made with it, should not be done in any mode apart from account payee cheque or account payee bank draft drawn in the name of the person or by use of electronic clearing system through a bank account who has made the loan or deposit, if: 

    1. The amount of loan or deposit or specified advance along with any interest, if any payable on such loans or deposit is Rs. 20,000 or more or  
    1. As on the date of repayment, if there exists any other loan or deposits held by the person either in his own name or jointly with any other person, the aggregate amount of such loans or deposit together with interest, if any payable on such loans or depositis Rs. 20,000 or more or
    2. In case of specified advances received by such person either in his own name or jointly with any other person, the aggregate of such specified advances along with any interest payable on such specified advances is Rs. 20,000 or more

     

    The repayment made by a branch of a banking company or co-operative bank, of such loan / deposit, can also be made by crediting the amount to the savings bank account or to the current bank account held with the branch. 

    Cases where the above provisions do not apply: 

    The provisions of this section does not apply to in case the loan / deposit has been taken / made by the following persons: 

    • Government; 
    • any banking company, post office savings bank or cooperative bank;
    • any corporation established by a Central, State or Provincial Act;
    • any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ;
    • such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. 

    Penalty for failure to comply with section 269T:

    As per Section 271E of the Income tax act, 1961 if a person fails to comply with Section 269T then the Joint Commissioner shall charge a sum by way of penalty equal to the amount of the loan or deposit or specified sum so repaid. 

    Example: 

    Mr. A holds the following accounts with ABC Ltd, a banking company: 

    Account 1:          FD of Rs. 10,000; interest payable Rs. 1,250 

    Account 2:          FD of Rs. 8,750 interest payable Rs. 1,120 

    ABC Ltd repays the amount of FD along with the applicable interest payable on such FD to Mr. A, in a mode other than account payee cheque or account payee bank draft. Will there be any contravention of the provisions of section 269T? 

    On a plain understanding of the section, one would assume that since only Rs. 11,250 is being paid to Mr. A,

    "What we think, we become" - Buddha

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