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Repayment of loan received in cash

UMA SHANKER SHARDA (SERVICE) (407 Points)

04 October 2009

Dear Freinds!

One of Limited company engaged financing activities and holding NBFC registration wants to advance a sum of Rs.1.00 Lac by cheque to some borrower. Now the company wants to recover the instalments in cash and the borrower is also ready to pay. Now question is as under:

1. Although the borrower is an individual, not filing ITR, can make the payment in cash, will it be voilation of sec. 269T?.

2. Is there any voilation under Income Tax Act by the company receiving cash?

Urgent reply is solicited.

Thanks in advance.

CS Uma Shanker Sharda

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3 Replies

CA SUDHAKAR (CHARTERED ACCOUNTANT) (189 Points)
Replied 04 October 2009

Sections 269SS and 269T are applicable only to Borrower of a loan or acceptor of deposit and not appliable to the lender or the depositor. In your case the penalty provisions are applicable only to the individual borrower, who has agreed to repay loan by cash. But, if he is not an assessee, said provision of Section 269T is also not applicable to him.

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UMA SHANKER SHARDA (SERVICE) (407 Points)
Replied 04 October 2009

Dear Mr. Sudhakar,

Thanks for your prompt response. But few questions are still in my mind i.e.

1. Where it has been mentioned that if borrower is not assessee, than provision of sec. 269T shall not be applicable. As sec. 269T includes company, firm or all other person.

2. If Assessing officer of lender makes a reference to the Assessing officer having jurisdiction over the locality where borrower resides and later one calls him for submission of return and to penalise him U/s 269T, is it possible?

Pls guide.

Thanks & regards,

CS Uma Shanker Sharda

Rajeev (www.rkmco.com) (985 Points)
Replied 04 October 2009

Section 269SS prohibits acceptance of loan or deposit exceeding Rs 20,000 by any mode other than account payee cheque or draft . Section 269T prohibits repayment of loan exceeding Rs 20,000 by any mode other than account payee cheque or draft.

I dont think you are in any contravention of 269SS or 269T, Since you are advancing in cheque and receiving in cash . - 269SS/T not applicable to you according to me .

However the repayer of the loan is in contravention of 269T , so first its not yr headache . second the AO may not be well within his powers to assume jurisdiction over the repayers locality . Also since the repayer is not filing his returns , its assumed his income is below the taxable limit . It will be too much of a stretch to imagine , that your AO asking your repayer to file his return (outside his jurisdiction) , so that he can levy a penalty u/s 269T