Applicability of section 269T of the Income-tax Act, 1961, to amounts kept by agriculturists, out of sale proceeds with commission agents--Clarification regarding - Income Tax - 556/1990

Applicability of section 269T of the Income-tax Act, 1961, to amounts kept by agriculturists, out of sale proceeds with commission agents--Clarification regarding Circular No. 556 Dated 23/2/1990 Section 269T of the Income-tax Act provides that no company, co-operative society or firm shall repay to any person any deposit otherwise than by any account payee cheque or account payee bank draft where the amount of deposit and interest thereon, if any, is Rs.10,000 or more. 2. The Direct Tax Laws (Amendment) Act, 1987, has amended the definition of "deposit" for the purpose of section 269T of the Income-tax Act. Under the amended definition, the said term has been defined to mean "any 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 deposit of any nature.]" (The square bracketed portion has been added by the said Amendment Act.) 3. A number of references have been received by the Board seeking clarification whether the sale proceeds of agricultural commodities, left over by the agriculturists with their "Kachcha Arhatiyas", would also come within the ambit of deposit of any nature necessitating its repayment by an account payee cheque as provided under section 269T of the Act. 4. The Board is of opinion that where a "Kachcha Arhatiya" sells goods belonging to an agriculturist, the sale proceeds thereof which remain with him cannot be regarded as a deposit made by the agriculturist with the "Kachcha Arhatiya". Further, where the "Kachcha Arhatiya" remits only a part of the sale proceeds to the agriculturist, the unremitted part of the sale proceeds would also not assume the character of a deposit. Therefore, the repayment of such sale proceeds does not fall within the purview of section 269T of the Act. 5. However, such unremitted sale proceeds would assume the character of a deposit if the amount is retained by the "Kachcha Arhatiya" in pursuance of a direction in this regard by the agriculturist, irrespective of whether the amount is retained in the same account or transferred to different accounts and irrespective of whether the directions are to call it a deposit or just to retain the same for future payment. The repayment in such cases will be covered under section 269T of the Act. (Sd.) Roshan Sahay, Secretary, Central Board of Direct Taxes.