NAMO government – Acche din nahih aaye un-necessary harassment and litigation continues:

[CA DEV KUMAR KOTHARI]

NAMO government - Acche din nahih aaye un-necessary harassment and litigation continues:

Receipt or payment by way of RTGS. NEFT and online transfer in registered account must be considered as by A/c payee cheque- amendment in S. 269SS, 269 T must be retrospective and S. 269TT must be amended.

Brief of suggestions for NAMO government - Finance Bill 2015:

a. Amendments in S. 269SS and 269TT made by the first budget of NAMO government to cover payment by electronic banking transactions should be made retrospective. This will avoid unnecessary wastage of time of  Assessing Officers and his senior JCIT in relation to initiation of enalty proceedings for alleged violation of S. 269SS and 269TT merely because payment is made by RTGS/ NEFT or electronic bank transfers.

b. S. 269TT relating to Special Bearer Bonds should also be amended.

c. Proposed substitution of S. 269SS and 269T must be with higher limits and in these sections any advance for any transactions, for trade and commerce should also be covered. However, limit should be Rs. Two  lakh for immovable property transactions and Rs. One lakh for any other loan, advance , deposit, trade advance etc.

Fund remittance by RTGS, NEFT and  online transfers are to specifically registered accounts:

For making payment by these modes one has to register the a/c of payee. The registration has to be confirmed by respective banks. The registration is  for specific name and specific account.

For example , suppose I want to make an online  payment to Mr. Payee, then I need to provide information for exact name of payee, the bank and branch in which he maintain his account and want funds to be transferred  his bank account number, and exact name in which account has been maintained. Even spelling must be correct.

Therefore, in case of electronic transfers not only name but also the bank and branch are to be specific.

Suppose account no. xxxxxxxx  1111 is registered for SBI,  Main Branch Kolkata,  in name of PAYEE, then funds will be transferred in the account of PAYEE, only with the  SBI,  Main Branch Kolkata.

Now if PAYEE want to transfer funds in another account with SBI same branch ,or with any other branch of SBI, or some other bank, his another  account will also have to be registered, registration has to be accepted by respective banks and then only funds can be transferred to another account.

Payment made are to the particular a/c of payees:

Therefore, the payment made by these or other electronic means are not only to the Account of payee but also to the specific account of payee.

A/c payee cheque vis a vis Electronic transfer:

In case of A/c payee cheque the holder can deposit it in any bank and any branch in which he maintains account, this is general rule for A/c payee cheque. Only if an account number and bank is mentioned for the payee then it will have to be deposited in such specified a/c.

Whereas, in case of electronic transfer, the payment is to be credited in specific account of payee only.

Electronic transfer are more effective to check tax evasion:

As discussed earlier, in case of A/c payee cheque it can be deposited in any account with any bank or branch. Therefore, one can deposit it in an account which is not disclosed and it will be difficult to trace the same.

 Whereas, in case of electronic transfer the payment is not only to the payee but it is also to his specifically registered bank account.

Reporting of electronic transactions and use fo such information is also very easy in comparison to A/c payee cheques.

Amendment in S. 269SS and 269T w.e.f. 01.04.2015:

In these sections  in sub-section 1  words “”or use of electronic clearing system through a bank account” have been inserted by the THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of April, 2015.

These amendments in section 269SS and  269TT are to  keep the law in tune with information technology developments, and to remove difficulties.

As noted earlier electronic mode of transfer is more safe and secure and specific to particular account. Therefore, these amendments must be considered as curative, explanatory and retrospective amendment.

These amendment must be applied retrospectively and any penalty proceedings should not be initiated in respect of transaction effected through these methods.

NAMO government is expected to remove undue hardships:

The government of India is presently headed by  honourable Shri Narendra Modi, as Prime Minister (popularly called NAMO government). The THE FINANCE (No. 2) ACT, 2014 was also passed during NAMO Government.

NAMO government is expected to provide better working conditions for public at large and also for business community. THE FINANCE (No. 2) ACT, 2014 was result of budget presented by the NAMO government per honourable  Shri Arun Jaiteily The learned  Finance Minister in NAMO government. The FM is a brilliant lawyer by profession and is expected to be well verged  about banking transactions through A/c payee cheques and electronic transfers.

Therefore, it seems that there is a drafting mistake by which amendment has been specified w.e.f. 01.04.2015  instead of having retrospective effect.

Request to make these amendments retrospective while passing Finance Bill 2015:

Vide the Finance Bill 2015 S. 269SS and 269T are proposed to be substituted. The main feature of change through the substituted sections are that any advance  or other payment for transactions relating to immovable property  will also be covered by these sections. The new restrictions will be for the following new category:

(iv) “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.’

Limit should also be increased:

The limit of ₹ 20000/- was increased long ago w.e.f. 01.04.1989  that is more than 26 years ago.  Even in proposed substituted sections, the same amount is kept unchanged.  During last 26 years  the value of money has gone down very much. Keeping in mind the inflation, increase in prices, increase in capacity of people doing relevant transactions , considering increasing number of people  from general public doing  such transactions the limit should be revised to at least Rs. One lakh for any loan and deposit and Rs. Two lakh for  immovable property transactions.

In this regard it is worth to mention that while amending provisions relation to certain presumptive computation of income, honourable FM mentioned that I limit should be raised in view of inflation whereas while considering provisions like S. 40A (3), 269SS, 269T, 269TT etc.  inflation over a much longer duration is ignored altogether.

This clearly shows that NAMO government is not serious about ACCHE DIN for the public.

Notices are being issued for penalty:

Notices are being issued by Assessing officers to impose penalty due to receipt or payment by banking channels - electronic transfers instead of by A/c payee cheque or draft. This will involve un-necessary litigation and harassment. Therefore the amendment made should be made retrospective to have effect since RTGS/ NEFT/ Banking online transfers came into vogue.

Meanwhile CBDT is also requested to issue instructions in this regard for not initiating penalty proceedings.

Section 269 TT relating to mode of payment of Special Bearer Bonds should also be amended.

The sections and new proposed sections are reproduced with highlights for related issues:

Income-tax Act, 1961

¹[CHAPTER XX-B

REQUIREMENT AS TO MODE OF ²[ACCEPTANCE, PAYMENT OR] REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX

³[Mode of taking or accepting certain loans and deposits.

269SS.   No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft ⁷[or use of electronic clearing system through a bank account] if,-

(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or

(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid ; or

(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b),  is ⁴[twenty] thousand rupees or more :

Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,-

(a) Government ;

(b) any banking company, post office savings bank or co-operative bank ;

(c) any corporation established by a Central, State or Provincial Act ;

(d) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ;

(e) 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, notifyin this behalf in the Official Gazette :

⁵[Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.]

Explanation.-For the purposes of this section,-

⁶[(i) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in section 51 of that Act ;]

(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 loan or deposit of money.]

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Notes :-

1. Chapter XX-B inserted by the Income-tax (Second Amendment) Act, 1981, w.e.f. 11-7-1981.

2. Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.

3. Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.

4. Substituted for "ten" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

5. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

6. Substituted by the Finance Act, 1985, w.e.f. 1-4-1986.

7. Inserted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of April, 2015.

Income-tax Act, 1961

¹[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 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 ³[or by use of electronic clearing system through a bank account] if-

(a) the amount of the loan or deposit 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, 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 :

²[Provided further that nothing contained in this section shall 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 companyas 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 section 269SS;

(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.]

 Notes :-

1. Substituted by the Finance Act, 2002, w.e.f. 1-6-2002. Prior to its substitution, section 269T was inserted by the Income-tax (Second Amendment) Act, 1981, w.e.f. 11-7-1981 and later on amended by the Finance Act, 1984, w.e.f. 1-4-1984, Finance Act, 1985, w.e.f. 1-4-1986 and Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

2. Inserted by the Finance Act, 2003, w.r.e.f. 1-6-2002.

3. Inserted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of April, 2015.

¹[Mode of repayment of Special Bearer Bonds, 1991.

269TT. Notwithstanding anything contained in any other law for the time being in force, the amount payable on redemption of Special Bearer Bonds, 1991, shall be paid only by an account payee cheque or account payee bank draft drawn in the name of the person to whom such payment is to be made.] 

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Notes :-

1. Inserted by the Income-tax (Second Amendment) Act, 1981, w.e.f. 19-9-1981.

Statutory Provisions

THE FINANCE BILL, 2015

Substitution of new section for section 269SS.

66. For section 269SS of the Income-tax Act, the following section shall be substituted with effect from the 1st day of June, 2015, namely:-

Mode of taking or accepting certain loans, deposits and specified sum.

‘269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,-

(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or

(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or

(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:

Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,-

(a) the Government;

(b) any banking company, post office savings bank or co-operative bank;

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013; (18 of 2013)

(e) 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:

Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.

Explanation.- For the purposes of this section,-

(i) “banking company” means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949)applies and includes any bank or banking institution referred to in section 51 of that Act;

(ii) “co-operative bank” shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949;( 10 of 1949)

(iii) “loan or deposit” means loan or deposit of money;

(iv) “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.’.

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Notes on Clauses:

Clause 66 of the Bill seeks to substitute section 269SS of the Income-tax Act relating to mode of taking or accepting certain loans and deposits.

The existing provision contained in section 269SS provides 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.

It is proposed to substitute the said section so as to provide that no person shall take from any person, any loan or deposit or specified sum, 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 or specified sum is twenty thousand rupees or more.

It is also proposed to define “specified sum” as any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property whether or not the transfer materialises.

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

Amendment of section 269T

67. In section 269T of the Income-tax Act, with effect from the 1st day of June, 2015,-

(A) in the opening portion-

(a) after the words “repay any loan or deposit made with it”, the words “or any specified advance received by it” shall be inserted;

(b) after the words “made the loan or deposit”, the words “or paid the specified advance,” shall be inserted;

(B) in clause (a), after the words “loan or deposit”, the words “or specified advance” shall be inserted;

(C) in clause (b), the word “or” shall be inserted at the end;

(D) after clause (b) and before the long line, the following clause shall be inserted, namely:-

“(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,”;

(E) in the second proviso, after the words “any loan or deposit”, the words “or specified advance” shall be inserted;

(F) in the Explanation, after clause (iii), the following clause shall be inserted, namely:-

‘(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.

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Notes on Clauses:

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.