The Finance Act, 2017 has introduced a new section 269ST in the Income Tax Act with effect from 01st April, 2017.
According to this Section “No person shall receive an amount of two lakh rupees or more— (a) in aggregate from a person in a day; or (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.
In the above section, the clause (a) and (b) are almost self explanatory. But the definition / description etc. of the words “event” or “occasion” has not been given in section 269ST. Further, no clarification has been given by the CBDT through any circular etc. Similarly, no direct judicial decisions are presently available which can throw light on the meaning and scope of the above words. Therefore, lot of confusion has got created regarding the meaning and scope of the above two words. In absence of any specific clarification / definition, different interpretations and guess work are being made and different views / opinions are being expressed. Due to this undue hardship is being faced by the concerned peoples.
The dictionary meaning of the word “event” is “something that happens at a given place and time”. Similarly, the dictionary meaning of the word “Occasion” is An occasion is a time when something happens, or a case of it happening. But the same are not sufficient for proper interpretation of clause(c) of Section 269ST.
In this article, an attempt has been made to discuss and analyze the meaning and scope of the above two words “event” and “occasion”.
Before discussing the meaning and scope of the above two words, (in the opinion of the author) it is required to be considered that, for ensuring compliance with the clause (c), three things are required to be identified i.e.,
(i) what is the event / occasion ; and
(ii) what are the transactions related with that event / occasion ; and
(iii) whether the transactions are related to that event / occasion in a manner that – (a) they are easily separable from the event or (b) they are inseparable part of that event / caused due to that event only.
Now let us see that what type of event / occasions may arise in real practical life and what may be the implications of above clause (c) in those cases.
Generally, in common parlance, the words “events” and “occasions” are understood to be social / cultural events / occasions. These may be marriage, birthday, anniversary or similar other social / religious / cultural events or occasions etc. Therefore, it is understood that while receiving amounts in respect of any such event, a consolidated limit of “Rs. 2 lakhs or more” is applicable for all the related transactions.
For Example : Suppose, a person has done work of different nature in a marriage of his customer, say, given garden on rent for marriage reception for consideration of Rs. 1.50 lakhs, given tent house services for consideration of Rs. 1.50 lakhs and has done decoration for consideration of Rs. 1.50 lakhs. Here, marriage is an event. The renting of garden, giving of tent house services and doing decoration are three different transactions which are related with the above event. Now, as per above clause (c), out of total Rs. 4.50 lakhs, only an amount up to “less than Rs. 2 lakhs” can be received in cash etc. restricted mode.
The scope of the above words “event” and “occasion” may not be restricted only to the social etc. above events but may also be applicable to the other events / occasions e.g., financial events. Some of them may be (i) Grant of any agency, distributorship, dealership etc. (ii) entering in to any contract / agreement (iii) entering in to partnership (iv) obtaining any loan ; and (iv) many other similar type of financial etc. events / occasions.
The above restrictions may also be applicable to all those financial etc. events etc. Some of the typical examples of financial transactions are discussed below –
The grant of an agency may be an event. The goods / services supplied under the agency etc. are the transactions. Thus, all the transactions of supply made under the agency throughout the tenure of the agency (not only in the financial year) may be the transactions related with that event of grant of agency. Therefore, only an amount of “less than Rs. 2 lakhs” can be received in cash etc. mode for all the transactions entered throughout the entire tenure of the agency.
(Note-1 :- In cases where there is no agency etc. and the goods are supplied by the wholesaler etc. to the retailers etc. or by retailers to customers etc., many times then in such cases each transaction of sale etc. of goods / services may be a separate transaction and may not be consolidated for the purpose of clause (c) of section 269ST.
Note-2 : Many times, the supplier opens ledger account in his books in the name of customer and enters all transactions of sale, receipt of sale consideration etc. in it. In such cases, merely because of entering of transactions in to one ledger account, logically it may not be practical to say that the different transactions are related to one event etc.
Note-3 : In Section 269ST, there are only three type of limits (i) per day per person (ii) per transaction and (iii) all transactions per event / occasion. There is no limit put on the basis of year i.e.., there is no concept of any yearly limit of Rs. 2 lakhs or more for acceptance of amount in cash etc.)
The entering in to any contract / agreement may be an event. The supply of goods / services under the contract are the transactions. Thus, all the transactions of supply made under the contract throughout the tenure of the contract (not only in the financial year) may be the transactions related with that event of entering in to the contract / agreement etc..
The entering in to partnership is also an event. The contribution of capital / withdrawals made out of capital (including profit share) are transactions. Thus, all the transactions of capital contribution / withdrawals made by the partner from the firm throughout the tenure of the partnership (not only in the financial year) may be the transactions related with that event of entering in to the partnership. Thus, the consolidated limit of only “less than Rs. 2 lakhs” may be available for the purpose of total deposit made throughout the tenure of the partnership (not only in the financial year) and separate consolidated limit of only “less than Rs. 2 lakhs” may be available for the purpose of total withdrawals made throughout the tenure of the partnership (not only in the financial year).
The sanction / grant of a loan / advance may be an event. The recovery of loan in single / multiple installments are transactions. Thus, all the transactions of recovery of loan in installments until recovery of the full loan / advance (not only in the financial year) may be the transactions related with that event of grant of loan / advance. Therefore, only an amount of “less than Rs. 2 lakhs” may be received in cash etc. mode for all the installments recovered throughout the entire tenure of the loan (not only in the financial year).
The CBDT has vide Circular No.22 of 2017 Dated 03rd July, 2017 has clarified that all the installments paid for the loan granted by Non Banking Financial Companies and Housing Finance Companies shall not be aggregated for the purpose of Section 269ST. Here it is mentionable that though the clarification has been issued in respect of only loans granted by NBFCs and HFCs but the same may be claimed to be applicable to the loans etc. granted by the others also. It is so because the CBDT has not exempted these institutions under the specific provisions of Section 269ST but has merely clarified the provisions of Section 269ST. The nature of loans / advances granted by others may also be of the similar nature. Therefore, on the same analogy, the others may also claim that the different installments received by them may also not be aggregated as per clause (c).
While applying the clause (c) to any transactions, it may also have to be seen that whether the transactions are separable or invariably related to any event etc. If they are not separable then clause (c) may be applicable and in cases where they are separable then clause (c) may be applicable.
For example, –
(i) Suppose a car is brought to repairing centre for repairing. The sales department of the centre charges Rs. 1.50 lakhs for parts replaced, the service department of the centre charges Rs. 1 lakhs for repairing. Both issued two separate bills. Here, bringing of car for repair may be an event. The replacement of parts and repairing may be two transactions related to that event. Both the transactions are not separable. Thus, in such case only up to “less than Rs. 2 lakhs” may be received out of the above total Rs. 2.50 lakhs.
(ii) Suppose, at the same time, apart from car repairing, the above customer purchases some other additional item from the above sales department (other than those necessarily required for repairing work), and separate bill is raised by the sales department for the same. In such case the transaction of purchase of that other item may be separable from the repairing of car and separate limit of “less than Rs. 2 lakhs” (complying with per day per person limit, per transaction limit etc.) may be available for that additional item transaction.
(iii) Suppose a customer purchases two different items from the same shop at the same time. The seller raised two separate bills for the different items. Then in such cases also the two transactions are separable from each other and as such may not be treated as related to any one event or occasion.
The author has made strict interpretation of the clause (c) and the words “event” and “occasion”. It is so because if in any assessment / penalty proceedings, the strict interpretation is made by the tax authorities, then in such situation, the assessee / tax payer may not have to face any difficulty / hardship.
However, on the present issue, some other / lenient views are also being expressed by other peoples. The other / lenient view is that the meaning and scope of the words “event” and “occasion” may be restricted to the real life social, religious, cultural events etc. only.
In absence of any specific direction / clarification by the CBDT or Courts etc. the same may not be stretched to the other areas i.e., capital contributions / withdrawals by partner from firm may not be aggregated by treating them as “relating to one event or transaction”. Similarly separate transactions under agency, contract etc. separate loan installments may not be aggregated.
The basis argued in favour of lenient view are :-
(i) Adopting strict view in the initial year itself may cause much hardship.
(ii) The law itself is not clear, there is no specific authorized direction / clarification favoring above strict view, the legal provisions are subject to different interpretation by different persons. Thus, in the assessment / penalty proceedings it can be argued that penalty may not be levied due to genuine and real difference of opinion between the assessing officer and the assessee.
(iii) In the above Circular No. 22, the CBDT has clarified that the different loan installments are not to be aggregated for the purpose of Section 269ST. Therefore, in the Income Tax Department proceedings it can be claimed that the same analogy is also applicable in other cases e.g., partners separate deposit / withdrawals etc. may not be aggregated.
(i) Tax professionals should not suo motto, on their own part, suggest / promote / encourage lenient view to the tax payers / assesses etc.
(ii) In cases of genuine hardship / exceptional circumstances, while adopting the lenient view, the auditor should exercise his judgment properly and should make suitable disclosures etc.
The author has also written other articles related to Section 269ST. The links to view / read the same are :
Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author do not owns any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.