No repayment of Loans or deposits or advance in cash >Rs 20000

By | May 22, 2016

Repayment of Loans or deposits or advance in cash

Section 269T of Income Tax Act after amendment by Finance Act 2015

repayment of Loans or deposits or advanceSalient Features of Section 269T on Repayment of Loans or deposits or advance

  • No person shall repay any
    • loans or
    • deposits made with it or
    • any specified advance received by it i.e any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.

otherwise than by an

– account payee cheque or

– account payee bank draft or

-by electronic clearing system through a bank account,

if the amount or the aggregate amount of loan or deposits or specified advances is Rs 20000 or more

  • Section 271E to penalty for failure to comply with the amended provisions of section 269T i.e  person shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so repaid.
  • Following shall be included in computing the limit of Rs. 20,000
    • the amount of the loan or deposit or specified advance together with the interest, if any, payable thereon, or
    • 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, or
    • the aggregate amount of the specified advances received by such 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 specified advances.
  • The provisions of section 269T are attracted to specified advances repaid on or after 1-6-2015 even if they were received prior to 1-6-2015.
  • Provision is applicable even if specified advances received by such 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 specified advances,
  • This section shall not apply to repayment of any loan or deposit taken or accepted from
    • (i) Government;
      (ii) any banking company, post office savings bank or co-operative bank;
      (iii) any corporation established by a Central, State or Provincial Act;
      (iv) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
      (v) 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.]
  • Earnest Money is not a loan or deposit; its repayment in cash does not violate section 269T provisions ( HIGH COURT OF GUJARAT, Commissioner of Income-tax -VI v.Madhav Enterprise (P.)  TAX APPEAL NO. 561 OF 2013 JULY  3, 2013 )
  • Where loan/deposit has been repaid by debiting the account through journal entries, it must be held that the assessee has contravened the provisions of Section 269T of the Act. ( HIGH COURT OF BOMBAY ,Commissioner of Income-tax, Central-IV v. Triumph International Finance (I) Ltd, IT APPEAL NO. 5746 OF 2010,JUNE 12, 2012)
  • Merely because loan is assigned by the assessee to his wife by way of journal entry, it cannot be said that there is a repayment of loan, otherwise, than by account payee cheque or account payee bank draft, so as to penalise the assessee under section 271E. So far as creditors, is concerned, it has not received any amount and since the creditors has not received any amount, it cannot be said that there is a repayment of loan. Section 269 would come into play only when there is actual repayment of loan ( IN THE ITAT DELHI BENCH ‘B’ ,Income-tax Officer v. Dinesh Jain  IT APPEAL NO. 3794 (DELHI) OF 2013, [ASSESSMENT YEAR 2009-10] MAY  16, 2014

Section 269T on Repayment of Loans or deposits or advance

[Mode of repayment of certain loans or deposits]

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 or any specified advance received by 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 or paid the specified advance,or by use of electronic clearing system through a bank account  if—

(a) the amount of the loan or deposit or specified advance 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, or
 (c) the aggregate amount of the specified advances received by such 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 specified advances,

is twenty thousand rupees or more:

Provided that where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account (if any) with such branch of the person to whom such loan or deposit has to be repaid :

[Provided further that nothing contained in this section shall apply to repayment of any loan or deposit [or specified advance] taken or accepted from—

(i) Government;
(ii) any banking company, post office savings bank or co-operative bank;
(iii) any corporation established by a Central, State or Provincial Act;
(iv) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(v) 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.]

Explanation.—For the purposes of this section,—

(i) “banking company” shall have the meaning assigned to it in clause (i) of the Explanation to section269SS;
(ii) “co-operative bank” shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);
(iii) “loan or deposit” means any loan or deposit of money which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes loan or deposit of any nature;]]
 (iv) “specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not the transfer takes place.

Budget Speech of Shri Arun Jaitley, Union Finance Minister, dated 28-2-2015 on Finance Bill 2015

3. A. Measures to curb black money

3.1 With a view to curbing the generation of black money in real estate, it is proposed to amend the provisions of section 269SS and 269T of the Income-tax Act so as to prohibit acceptance or re-payment of advance in cash of Rs. 20,000 or more for any transaction in immovable property. It is also proposed to provide a penalty of an equal amount in case of contravention of such provisions.

Clauses of Finance Act 2015 on Repayment of Loans or deposits or advance in cash

Clause 67

Clause 67 of the Bill seeks to amend section 269T of the Income-tax Act relating to mode of repayment of certain loans and deposits.

The existing provision contained in section 269T provides that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the said section, if the amount of such loan or deposit is twenty thousand rupees or more.

It is proposed to amend the said section so as to provide that any loan or deposit or specified advance shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the person specified in the said section, if the amount of such loan or deposit or specified advance is twenty thousand rupees or more.

It is further proposed to define “specified advance” as any sum of money received, as an advance or otherwise, in relation to transfer of an immovable property and becomes repayable if the negotiations do not result in transfer of such immovable property.

These amendments will take effect from 1st June, 2015.

Clause 70

Clause 70 of the Bill seeks to amend section 271E of the Income-tax relating to penalty for failure to comply with the provisions of section 269T.

The existing provision contained in section 271E of the Income-tax Act provides that if a person repays any loan or deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so repaid.

It is proposed to amend section 271E of the Income-tax Act to provide that if a person repays any loan or deposit or specified advance referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified advance so repaid.

This amendment will take effect from 1st June, 2015.

Memorandum of Finance Bill 2015  on Repayment of Loans or deposits or advance in cash

         [Clauses 66, 67, 69 & 70]

B. MEASURES TO CURB BLACK MONEY

Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances

The existing provisions contained in section 269SS of the Income-tax Act provide that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more. However, certain exceptions have been provided in the section. Similarly, the existing provisions contained in section 269T of the Income-tax Act provide that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the section if the amount of loan or deposit is twenty thousand rupees or more.

In order to curb generation of black money by way of dealings in cash in immovable property transactions it is proposed to amend section 269SS, of the Income-tax Act so as to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more.

It is also proposed to amend section 269T of the Income-tax Act so as to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.

It is further proposed to make consequential amendments in section 271D and section 271E to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively.

These amendments will take effect from 1st day of June, 2015.

Circular No. 19/2015, dated 27-11-2015  on Finance Act, 2015 regarding Repayment of Loans or deposits or advance in cash

54. Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances

54.1 Provisions contained in section 269SS of the Income-tax Act, before amendment by the Act, provided that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more. However, certain exceptions were provided in the section.

54.2 Similarly, the provisions contained in section 269T of the Income-tax Act, before amendment by the Act, provided that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the section if the amount of loan or deposit is twenty thousand rupees or more.

54.3 In order to curb generation of black money by way of dealings in cash in immovable property transactions, section 269SS of the Income-tax Act has been amended to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property(specified sum) otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more.

54.4 Section 269T of the Income-tax Act has also been amended to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.

54.5 Consequential amendments in section 271D and section 271E, to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively, have also been made.

54.6 Applicability – These amendments have taken effect from 1st day of June, 2015.

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