09 November 2009
A person start a business of share broker with Rs. 10 Lacs and he collected this amount by taking loan of Rs. 2 Lacs from 5 persons. He invest out of Rs. 10 lacs , Rs. 1 lac of each person cmprising Rs. 5 lacs in IPO in their names. Will it be treated as repayment of loan u/s 269 T as the application of IPO in the respective persons' name. Consider the word 'Account Payee D/D or Cheque' u/s 269T.
09 November 2009
Repayment of loan cannot be done by adjustment entries like this u/s 269T. You have to pay by a/c payee cheque only. Only banking companies are permitted to repay by crediting the account of FD holder with them.
11 November 2009
The section itself reads as other than by payee's account cheque or draft. For only Banking Company as per banking Regulation Act it is specified that they can credit the account maintained by them of the Payee. Therefore every other payee will have to use only payee's account cheque or draft to repay the loan and they cannot repay by debit and credit adjustments. If a broker is doing business with the person and during course of business the advance has been given by the person to Purchase Shares on their behalf in IPO then it is not a loan and amount invested in IPO is not a repayment. However parties must transact by modes outlined in Rule 6DD / Section 40(A) for such amounts.
Therefore as opined by the expert Rajnish, your purchasing the shares in IPO will not be treated as a repayment if your loan is still outstanding and the person is a debtor to the broker on current account. You must complete repayment of all loan transactions by A/C payee cheques or D/Ds only.
CAclubindia
