Section 269SS of Income Tax Act 1961, explain about mode of taking or accepting certain loans, deposits and specified sum.
Section 269SS:
No person shall take or accept from any other person (herein referred to as 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 [or through such other electronic mode as may be prescribed], 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 any specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment was fallen due or not), the amount or the aggregate amount remaining un paid; or
(c) the amount of 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 provision of this section will 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 from, or any loan or deposit or specified sum taken or accepted by,-
(a) the Government
(b) any banking company, post office saving bank or co- operative bank ;
(c) any corporation established by a Central, State or Provincial Act;
(d) any Government company as define 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 recorder 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 purpose 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 Section51 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.]
According to section 269SS, it is very much clear that any assessee cannot take loan or deposit from any person of Rs. 20,000 or more in cash, in other word it is to be received by account payee cheque or account payee bank draft or any electronic mode. It has also been clarified that at the time of taking loan or deposit or making payment of loan or deposit, if any amount is outstanding in his account, this is to be considered.
Illustration: In the books of account of asessee Rs. 12,000 is credited in the name of Mr. A, on 1st April, 2022. Now if an assessee wants to take Rs. 5,000 in cash, on 1st September, 2022, he can, because total amount is less than Rs. 20,000. Thereafter on 1st November, 2022 assessee wants to take Rs. 4,000 in cash he cannot, because after adding Rs. 4,000 in the account of Mr. A it cross the limit of Rs.20,000.
This section will not apply to Government, Bank, Post Office Saving Bank account, Co-Operative Bank, Government Company or any institution approved by the Government. This section is applicable to Individual, Hindu Undivided Family, Firms, and Companies.
Transections through ESC is valid:
We all know that now a days Internet Banking System is accepted by majority of people, therefore from Asst. Yr. 2015-16 any loan or deposit accepted by Electronic Clearing System (ECS) is out of preview of Section 269SS.
Can an Adjustment entry is default of this section?
We know that many person are passing adjustment entries in their books of account, without doing transections of money. Will this amount to default of this section? Mr. A has given Rs. 1,00,000 loan to Mr. B, by cheque. Mr. B has given loan of Rs. 1,00,000 to Mr. C by Cheque. C has given loan of Rs. 1,00,000 to A. by cheque.
Now A passed an entry in his books of account crediting Rs. 1,00,000 to account of B, and debiting Rs. 1,00,000 to account of C. In this transections neither cash has been transfer nor cheques only book entries are passed. Whether section 269SS will come in the way. In such type of matter, Ahmedabad Tribunal in the case of Bombay Conductors and electricals Limited Vs. Deputy Commissioner of Income Tax 56 ITJ 580(Ahd) and Poona Tribunals in the case of Sunflowers Builders Pvt. Ltd. Vs. Deputy Commissioner of Income Tax 61 ITD 227(Pune) has given their views in favor of assesse by saying that No cash transections has been made in this case, hence section 269SS is not applicable. The arguments of department that there is a transections of more than Rs. 20,000 is not applicable to books entries, it should be in cash only.
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