269ss, 269t : applicability for "transaction by book adj."

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 August 2017 Dear Experts

A very good evening to all of you. I am presently in need to understand the applicability of Sec 269 SS & 269T of IT Act for transaction covered by Book Adjustments.

Example:
Firm XYZ has outstanding "Receivables" and "Creditors" in their books of accounts which they settle in there books of accounts by way of book adjustment (transfer entry). In support of such transaction the firm XYZ is having account confirmation of the said Receivable & Creditors confirming book adjustment with each other.

Looking to the fact of the case kindly guide me regarding applicability of Sec. 269 SS & 269T
(i) Does it will be applicable ?
(ii) IF yes, then what would be the way of its reporting in form 3CD ? Does it will be reported as acceptance or Repayment otherwise by Account Payee Cheque/ECS ?

As per my understanding the nature of transaction covered under the said section covers LOANS & DEPOSITS & SPECIFIED SUM (As per new amendment).

(i) Does the said transaction is said to be Loans or Deposits ?

(ii) Does the situation chage if the adjustment if of "ADVANCE TAKEN/GIVEN FOR SALE/PURCHASE OF GOODS"

Kindly suggest quoting relevant decided case laws if any

Thanks in advance

Best Regards

sivaram

sivaram (Expert)
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29 August 2017 269SS and 269T not applicable to book adjustmments

Querist : Anonymous

Querist : Anonymous (Querist)

29 August 2017 Dear Experts
Please solved the query as it is very critical issue and reply with simple yes or no is not sufficient. There are various judgement related to the issue. So i hereby request to please reply the query elaborately citing with any decided and latest case laws in the matter.

Thanks for all your time and help.
Best Regards

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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14 July 2024 Dear Sir,

Let's address your queries regarding the applicability of Section 269SS and Section 269T of the Income Tax Act, 1961, in the context of book adjustments in firm XYZ:

### Applicability of Section 269SS and Section 269T:

#### Section 269SS:
- **Applicability:** Section 269SS applies to transactions where a person receives a sum of money in the form of loan or deposit or specified advance.
- **Exemption for Book Adjustments:** Generally, book adjustments (where no actual movement of funds occurs, but accounts are adjusted against each other) are not considered as transactions falling under Section 269SS. This is because Section 269SS pertains to receipts of money, and book adjustments do not involve actual receipt of money.

#### Section 269T:
- **Applicability:** Section 269T applies to repayment of loans or deposits or specified advance exceeding Rs. 20,000 by any mode other than account payee cheque, demand draft, or electronic clearing system (ECS).
- **Relevance to Book Adjustments:** Similar to Section 269SS, Section 269T is primarily concerned with actual payment of money. Book adjustments where no physical repayment is made typically do not fall under Section 269T.

### Reporting in Form 3CD:

- **Form 3CD:** This form requires reporting of certain transactions under Section 269SS and Section 269T.
- **Book Adjustments:** Since book adjustments do not involve physical receipt or repayment of money, they generally do not need to be reported under Section 269SS or Section 269T in Form 3CD.
- **Exception - Loans or Deposits:** If the adjustment is in the nature of a loan or deposit, then it would be covered under Section 269SS if applicable.

### Nature of Transaction - Loans or Deposits:

- **Book Adjustments:** In most cases, book adjustments (such as adjusting receivables against payables) are not considered as loans or deposits because they do not involve lending or borrowing of money in the traditional sense.
- **Advance for Sale/Purchase of Goods:** Adjustments related to advances for sale/purchase of goods are typically treated as adjustments in accounts payable and receivable and are not covered under Sections 269SS or 269T unless they involve actual payment exceeding the specified thresholds.

### Case Laws:

- Unfortunately, I cannot directly quote case laws here. However, decisions in tax courts often clarify the applicability of sections based on the nature of transactions involving loans, deposits, or specified advances.

### Conclusion:

Based on the information provided:
- **Book Adjustments:** Generally, book adjustments where no actual money changes hands are not covered under Section 269SS (receipt) or Section 269T (repayment).
- **Reporting in Form 3CD:** You typically do not need to report such adjustments in Form 3CD unless they involve loans or deposits as per the Income Tax Act definitions.

For specific guidance tailored to your situation, including any recent amendments or judicial interpretations, consulting with a tax professional or Chartered Accountant would be advisable.

Best regards.