Background-:
1. Section 269ST as being proposed in the budget 2017, makes acceptance of Rs. 3,00,000/- in cash as an offence. There are no caveats like it is applicable only for business receipt etc.
2. Before I elaborate the section, I want to highlight that, there are restrictions on making payment otherwise than by cash – say for dis-allowance of expenditure [section 40A(3)] or loan transactions referred in [Section 269SS / 269T.]
Take away points
3. Section 269ST as being proposed in the budget 2017 to curb transactions in cash, the way the section has been drafted, it appears to be too stringent.
4. Though the object is noble, the manner in which it is drafted and having regard to the situation is absolutely draconian.
5. I will be happy if I go wrong in my interpretation if the objective of curbing black money is achieved without troubling honest tax payers’.
269ST. Mode of undertaking transactions
‘269ST. No person shall receive an amount of three 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:
Comments
6. It is on receipt side. The section is unfettered. The character of receipt is irrelevant i.e. exempt income / taxable income etc. There is no exemption even for sale of agricultural produce.
Refer clause (a)
7. so one person one day – above 3 lacs – not allowed even though he may be paying for various transactions which individually are below 3 lacs.
Refer clause (b)
8. in respect of single transaction e.g. the transaction is for 5 lacs you can-not pay above 3 lacs.
Refer clause (c )
9. One event / occasion – marriage is one occasion and the most important thing being the occasion has to be interpreted occasion for recipient.
10. For example, gift in marriage is tax free. But marriage is one occasion and a person can not receive on his / her marriage even say Rs. 100 from 3000 people as it will amount to Rs. 3,00,000/- [100 X 3000]. in the example you can change any combination of figures the multiplication of which comes to Rs. 3,00,000/-. Also it does not have restriction of days because the per day is linked to per person.
11. It extends to transactions, events and even covers occasion. The word used is “Amount” and not “sum”. In other sections, the word “sum” has been used. The word “Sum” means “sum of money”. The word “Amount” includes cash and kind. Also it has nothing to with whether that exchange of money is chargeable to tax or not.
12. On a literal meaning it may mean that, if I borrow a car from my friend of Rs. Say 15 lacs, the violation is already done. The fact that I duly return the car in the same condition to my friend does not / can not undo the violation.
13. Thus it may cover following items
- cash withdrawal from Bank by any personal
- gift in cash or in kind.
- Gift at the time of marriage
- amount to be paid to hospital
- any barter exchange the value of which exceeds Rs. 3,00,000/-
- Sale proceeds – Imagine it is a violation even for an honest / bonafide tax-payer who otherwise is maintaining correct books of account and paying correct taxes.
Refer the penalty clause i.e. proposed section 271DA
14. It requires penalty of 100% of amount of transaction. The exception requires a “good and sufficient reason”. The proviso reads as follows
Provided that no penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention.
15. Normally the criteria used in penalty provisions is “reasonable reason”
16. Also this penalty section does not have cover of section 273B which reads states that, in case the assessee is able to show a “reasonable cause” for the said failure, there will be no penalty.
17. There is a significant difference between the words “reasonable cause” vis-a-vis “ good and sufficient reasons”
18. It is possible that a particular cause may very well be a reasonable cause but not a “good and sufficient reasons”
19. Consider an example where it may fulfill the criteria of “good and sufficient reasons”
- An assessee living with his better half, both of whom are above 75.
- Both are suffering from Alzheimer. The level of alzheimer may be differing.
- They are making payment in cash to a hospital when either of them is admitted on a SOS [ save our sole] or medical emergency basis.
- In this case, the hospital may be able to prove that it has good and sufficient reasons to accept the cash.
- At the cost of repetition, I would like to highlight that the onus will be on hospital to prove the merits and not the old couple.
Some academic points-:
20. If you carefully read the section, it does not have guard of rule 6DD which is there for section 40A(3) i.e. payment for expenditure for Rs. 20,000/- [ revised 10,000] and above.
21. If one decides to make a literal interpretation, anything otherwise than below will get attracted for violation
a) by an account payee cheque or
b) an account payee bank draft or
c) use of electronic clearing system through a bank account:
22. A digital payment e.g. payment by various e-wallets or say payTM which is popular now a days is also hit by this section because these e-wallets / pay-TM are not banks where a clearing system is there as mentioned above.
23. Various payment schemes authorised by RBI whereby other person does not have a bank account and is able to get money with his identity being validated by say – AADHAR with mobile etc. Will also not be covered by the term “use of electronic clearing system through a bank account”
24. Technically even a payment by credit card / debit card . Rupay-card may not amount to clearing system through Bank account.[very very literal interpretation]
Text of Proposed Section
269ST. Mode of undertaking transactions
‘269ST. No person shall receive an amount of three 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:
Provided that the provisions of this section shall not apply to—
(i) any receipt by—
(a) Government;
(b) any banking company, post office savings bank or co-operative bank;
(ii) transactions of the nature referred to in section 269SS;
(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.
Explanation.—For the purposes of this section,—
(a) “banking company” shall have the same meaning as assigned to it in clause (i) of the Explanation to section 269SS;
(b) “co-operative bank” shall have the same meaning as assigned to it in clause (ii) of the Explanation to section 269SS.’.
Penalty for violation of section 269ST
271DA – Penalty for failiure to comply with provisions of section 269ST.
“271DA. (1) If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty, a sum equal to the amount of such receipt:
Provided that no penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention.
Memorandum to Finance Bill, 2017
Restriction on cash transactions
In India, the quantum of domestic black money is huge which adversely affects the revenue of the Government creating a resource crunch for its various welfare programmes. Black money is generally transacted in cash and large amount of unaccounted wealth is stored and used in form of cash.
In order to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money, it is proposed to insert section 269ST in the Act to provide that no person shall receive an amount of three lakh rupees or more,—
(a) in aggregate from a person in a day;
(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 account payee bank draft or use of electronic clearing system through a bank account.
It is further proposed to provide that the said restriction shall not apply to Government, any banking company, post office savings bank or co-operative bank. Further, it is proposed that such other persons or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply. Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section.
It is also proposed to insert new section 271DA in the Act to provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner.
It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees.
These amendments will take effect from 1st April, 2017.
[Clauses 71, 83 & 84]
(Author CA. Yogesh S. Limaye can be reached at [email protected])
Author Bio
Is there any contravention of sec269st when a firm receives amount more than rs. 200000 from partner as addition in capital?
Limit of 2 lac transaction in cash sale is of single day or of per year?
NIDHI COMPANY CASH RECEIVED MORE THAN 2 LAKHS A PERSON
If I received 6 lakhs from 6 different persons then can I deposit the same amount directly to the bank.
If so then what will be the procedure for it…?
REF; SEC.269ST readwith PENALTY SEC.271DA,of I.TAX ACT,enacted w.e.f.1.4.2017.mentioning some genuine,facts,GRIEVANCES,regarding the Imposing of 100% Penalty,only dueto Cash Receipt by aPerson,only after facing certain unabnormal conditions.Exceptions,to this Penal action,statute requires “Good & Sufficient Reasons”…In this connection,it is stated that ,this type of Penalty imposed,on RECEIPT of certain CASH Transactions,only. In this connections,Transactions ,though in CASH MONEY ,Handling are of different types,nature(In,Business,Cash,sales,collection of Credit sales,Bad debts,Cheque BounceMatters,etc.Loan Recoveries,depends on Vaious Genuine Circumstances,GENUINE DIFFICULTIES,,inREALISE series of payment,,Depend on various MODES,which can be really EXCEPTIONAL &UNAVOIDABLE.(CBDT,circular no.220(F.No.206/17/76-IT(A-II)dt.31.05.1977, with respect to Rule 6DD(j),readwith Sec.40A(3) on Cash Expenditure upto Rs.20000/-now Rs.10,000/-)may be viewed alongwith Judicial Analyses..of various HC/Tribunal /SC cases. I certainly hope,Govt. must illustrate Genuine Circumstances,in this matter,while considering Exceptions, Enamolities,while issuing Notification in this reagrds.Thanks lot.(R.K>Makharia,Raipur ,CG),Dt.7.4.2017..
Sir please i was to know that withdrawl from bank more than 2 lakhs is liable for penalty or not ?
It is also applicable for the Business correspondent? who are collecting the cash from the customers and send to their bank account with the Provided system by bank?
A veru lucid interpretation Limaye Sir, the way you brought amount and sum to the notice of lawmakers is
laudable
A good attempt has been made to present a comprehensive article but the interpretation given by author, with my humble respect, is not correct at several places.
Today the Finance Bill, 2017 was passed by Lok-sabha with revised limit of section 269ST being Rs. 2 lacs. It has not addressed various un-intended effects as been represented to the parliament.
I think interpretation is not correct.
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Sec 269ST– Cash receipt– danger ahead
admin| Income Tax 12 Feb 2017 66,564 Views 16 comments Print Friendly and PDF
Background-:
1. Section 269ST as being proposed in the budget 2017, makes acceptance of Rs. 3,00,000/- in cash as an offence. There are no caveats like it is applicable only for business receipt etc.
2. Before I elaborate the section, I want to highlight that, there are restrictions on making payment otherwise than by cash – say for dis-allowance of expenditure [section 40A(3)] or loan transactions referred in [Section 269SS / 269T.]
Take away points
3. Section 269ST as being proposed in the budget 2017 to curb transactions in cash, the way the section has been drafted, it appears to be too stringent.
4. Though the object is noble, the manner in which it is drafted and having regard to the situation is absolutely draconian.
5. I will be happy if I go wrong in my interpretation if the objective of curbing black money is achieved without troubling honest tax payers’.
269ST. Mode of undertaking transactions
‘269ST. No person shall receive an amount of three 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 syst
em f
Clause a) says ….from a person…mean from one person
B)in respect of one transaction…..
C)or in respect of transactions relating to one event…by one person
….
With regards to 269ST (c) text is
“in respect of transactions relating to one event or occasion from “a” person,”
I would interpret it as cash receipt from a single person. I feel it bars a person to receive gifts of Rs.3 lacs from a single person on an event. Section is not barring a person to receive amount agreegating more than Rs.3 lacs from more more than one person.
Refer this link – instead – appforms.icai.org/taxproposals/index.html
Probably this is my last comment in this regard. I hope that Legislature comes out with explanation in this area. Requesting everybody to post their comments at resource.cdn.icai.org/44577dtc010217.pdf being official portal of ICAI.
Today is the last date.
Regarding the meaning of words “reasonable cause” vis-a-vis “sufficient cause” It will be relevant to refer to para 23 of Bombay high Court Judgement in the case of Triumph International Finance (I.) Ltd. [2012] 345 ITR 270 (Bom.) JUNE 12, 2012
Para 23 reads as follows
23. The expression ‘reasonable cause’ used in Section 273B is not defined under the Act. Unlike the expression ‘sufficient cause’ used in Section 249(3), 253(5) and 260A(2A) of the Act, the legislature has used the expression ‘reasonable cause’ in Section 273B of the Act. A cause which is reasonable may not be a sufficient cause. Thus, the expression ‘reasonable cause’ would have wider connotation than the expression ‘sufficient cause’. Therefore, the expression ‘reasonable cause’ in Section 273B for non-imposition of penalty under Section 271E would have to be construed liberally depending upon the facts of each case.
Regarding my example of marriage, apparently, in view of the words, “from a person” the section will not him when one receives 100 from 3000 persons. But I would like to raise a flag by re-producing definition under the general clauses act
Section 13 of General Clauses Act, 1897
13 Gender and number.
In all 22 [Central Acts] and Regulations, unless there is anything repugnant in the subject or context,
(1) words importing the masculine gender shall be taken to include females; and
(2) words in the singular shall include the plural, and vice versa.
Also a passing reference was made to inheritance in my comment on
February 13, 2017 at 3:45 pm.
In case of inheritance, there is no receipt because the person whose property is received is no more so he can not give. But this is not the situation for others like cash withdrawn from Bank or even Gift from relatives defined u/s 56.
good article. given a comprehensive and all the probable (may not be practical) instances are produced by the author. Need clarification from the CBDT (i.e. again a FAQ ) …..
On a lighter note, I think Sandipji can solve this problem by simply making a personal call to our finance minister Mr. Arun Jaitely ji 🙂
For purpose of brevity, I propose to respond to various remarks, observations, queries, issues which have been raised on this forum and those raised by way of email to me without mentioning name of the reader.
Refer para 19 – the phrase [ save our sole] may please be read as [ save our soul]. The typo error is regretted.
Regarding retrospective effect-:
I don’t think so because it is an action to be taken against a transaction / event / occurrence. Also it is not a provision that it will be treated as income which necessitates relevance of Financial year / assessment year.
The Finance Bill simply says that it will come into effect from 1-April-2017.
Thus in my opinion, it is not a retrospective amendment as it does not require any Financial year / assessment year.
Regarding applicability to agricultural income.
The section does not talk about income at all. It does not make any differentiation regarding nature of receipt.
The section reads as “No person [un-fettered – covering everybody] shall [mandatory enforcement] receive an amount [does not use the word sum, thus includes even receipt in kind] of three lakh rupees or more
One may raise a point about constitutional restriction that Central Govt has no right to tax agricultural income. But if that is so, there are many more such items like inheritance.
Rather some of the counsel has raised doubt about whether Legislature is right or rather in their limits in bringing this section.
If one refers to long title of the Income Tax Act, 1961 [43 OF 1961], it reads as “An Act to consolidate and amend the law relating to income-tax and super-tax”
If you read section 4 with section 5 and 9, income tax is a tax on total income.
But as the section stands as of today, a joint commissioner is empowered to take an action.
Regarding the issue of my example of “marriage’. Give me some time to articulate explanation to my example.
If on second thought, I think that it will not apply, I will post my thought accordingly. No issues.
in case of marriage section says receipt from “A PERSON” so probebly receipt of more than 3 lac from multiple persons will not attract section 269ST
If a person shows that he has received rent in excess of 25000/- pm, does this amended section will attract. Normally salaried employees submit rent slip for HRA for higher amount.
It will be applicable from F Y 2017-18 as the date mentioned is w.e.f. 01.04.2017. Moreover penalty provisions cannot be applied retrospectively as the same is also barred under Article 20 of our Constitution
One draconian fact is missed out in the article is that the provision has been made applicable retrospectively with effect from Assessment year 2017-18. What will happen to those transactions which already took place in financial year 2016-17 till date or 01.02.2017; when the law was not present in the statute?
This even covers receipt on sale of agricultural products income from which is otherwise exempt.
In section 269 ST, the word “a” is used for the payer. Therefore, how marriage will be covered?
What prevents a person from accepting a cheque in all instances cited?
In marriage receipt of rs100 from 3000 is not prohibited as it is not receipt from. One person.
Purely an acadamic oriented article, no one will pay/receive cash of 3 lacs in one day. even in cine field they pay by property/ car/ valuables or 2.5 lacs in different days
The issue is penalty for the ‘receiver of the cash’ and not to the ‘payer’. Till now ‘receiver’ used to insist on cash payment, even if we are ready to pay thru checks. My opinion is that Govt has done correctly. Now ‘receiver’ has to explain if he insists on cash payments. In my opinion Rs3 Lakh is very high. This should have been reduced to Rs 1Lakh. The examples given- marriage, gift, old people with Alzheimer etc- all these are very hypothetical / rare. Even in these examples – Alzheimer better pay by check, as they cannot recognize/ remember they may make mistakes while counting Rs3lakh and above!.
First of all, I thank the readers and taxguru.in for taking interest in my article. I thought it prudent it write here than to reply to all individual emails received by me. Needless to say, your queries are welcome only.
Consider posting the queries at this platform so that everybody can read and apply his / her mind.
Refer para 4 of my article, I am of opinion that the object is laudable but the methodology is not.
Consider another example, I am an honest tax payer. A person comes to me to buy goods / services offering consideration in cash above Rs. 3 lakhs. Look accepting cash is not a sin. It is a perfectly legal tender. but what are the consequences ? am I expected to say no to selling goods or rendering services with a threat that the customer may never come back ? and also having a potential impact on my other potential customers ?
for recipient – equal amount of penalty besides tax on that income.
for payer – the amount will be dis-allowed but it will not have any impact if it is for personal use or capital use
secondly onerous burden
for recipient – to demonstrate Good and sufficient cause
for payer – only to demonstrate reasonable cause plus exceptions available in Rule 6DD
Refer para 19 for difference in good and sufficient vis-a-vis reasonable cause
one can imagine the gravity if the recipient receiving consideration for agricultural produce.
Proposal what legislature should do-:
Prohibit payments above 3 lacs and apply all the checks and balances mutalis mutandis.
Give a small window to recipient to deposit the money into bank within say 3 working days.
clarify the position with respect to
1. credit / debit cards, e-wallets [which do not go through banks]
2. barter exchange or consieration paid otherwise than by money.
From which acoounting year it will be applicable