1277. Clarification regarding applicability of section 269T to amounts kept by agriculturists out of sale proceeds with commission agents
1. 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 case of a person other than a company, includes deposit of any nature”.
(The italicised 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 payment 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 agriculturists with the ‘Kachcha Arhatiya’. Further, whether 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.
Circular: No. 556, dated 23-2-1990.
JUDICIAL ANALYSIS
n The above circular was relied upon in Harpal Singh Jaswant Singh v. ITO [1995] 126 Taxation 12 (Trib.), and it was held that the provisions of sections 269SS and 269T were not attracted to the facts of the case. (pp. 20-21)
