Sunil (Trader) (2611 Points)
12 September 2009With banks agressively promoting NEFT / RTGS / Electronic Transfers, what is the position with relation to accepting loans and repaying by any of the above 3 methods. Do they constitute as account payee instruments under negotiable instruments act?
Say my mother transfers to me more than Rs.20000 by transfer in same bank and I repay it back to her account again in the same mode, is it violating 269SS and 269T. In these section account payee drafts and cheques are written.
Late CA Sampat Jain
(Chartered Accountant)
(4772 Points)
Replied 12 September 2009
RULE 6DD PROVIDES FOR FOLLOWING PAYMENTS AS NOT DISALLOWBLE U/S 40(A)(3)
(c) where the payment is made by—
(i) any letter of credit arrangements through a bank,
(ii) a mail or telegraphic transfer through a bank;
(iii) a book adjustment from any account in a bank to any other account in that or any other bank;
(iv) a bill of exchange made payable only to a bank;
(v) the use of electronic clearing system through a bank account;
(vi) a credit card;
(vii) a debit card.
Explanation.—For the purposes of this clause and clause (g), the term "bank" means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company53g as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India;
YOU MAY PLEAD SAME FOR SECTION 269SS OR 269T
Sunil
(Trader)
(2611 Points)
Replied 13 September 2009
Thanks Sampat.
To the extent of revenue expenditures, at least the modernisation of payment system helps and we can transfer by NEFT.
Now as far as the amount I took from my mother to honor a cheque, due to urgency she transferred it by Funds Transfer or what they call E-cheque. She has told me to consider it as a gift as the gift law does not specify the words other than payee's a/c cheque and the amount is below the taxable gift limit of Rs.50,000. Now as far as returning a gift is concerned, I do not read anything in law that penalises reciprocal gifting. If you get a gift in cash or kind from a person decency demands that you reciprocate the gift in cash or kind on some occassion so as far as gifting is concerned, we are quits. I have the option of giving her a cheque as a gift on her birthday (that is a reciprocal gift) or if she needs money back for buying something like a TV or an AC I can buy the product and let her use it. The product will be used in my house only. As far as such an arrangement is concerned, the only way the executive can cry foul is 'substance over form' that has a very wide scope and is always open to protracted litigation. In the old gift tax act, you have any idea how reciprocating a gift was treated? That maybe would form a basis for such litigations.
Sunil
(Trader)
(2611 Points)
Replied 13 September 2009
Although this case is not applicable to NEFT, RTGS & Electronic Checks, it still makes interesting reading. It is like a pot boiler thriller that ends in an anti climax. I would have been happier reading just the end.
If anyone knows whether this ITAT judgment has been set aside on question of law or any reference to SC by SLP, please let me know.
Sunil
(Trader)
(2611 Points)
Replied 15 September 2009
I only hope there will always be an argument of bonafide belief in considering that Bank Transfers do not violate Section 269SS or 269T. Besides the judgement I attached earlier there also seems to be a judgement on Bank Transfer Vouchers in particular:-
Q21. Whether accepting deposits by transfer voucher of bank violates section 269SS?
In ACIT vs Jag Vijay Auto Finance (P) Ltd (2000) 68 TTJ (jb Tib) 44 it was held that deposits by transfer voucher of bank is not violation of section 269SS .
One has to really test whether Bank Transfers (NEFT, RTGS etc) would qualify to be Bank Transfer Vouchers (I would hope they are because the Bank Generates a voucher online for these modes of transfer). Moreover they are acount to acount and more important is there is no physical money. Therefore maybe best course of action looks like pleading bonafide belief as in the Rule 6DD these modes have been accepted in lieu of AC Payee cheques or drafts.
If anyone has more arguments favourably comparing NEFT / RTGS do share your views.
Anupam Agarwal
(Manager Finance)
(28 Points)
Replied 16 September 2009
Hi All,
Here is a query on the same. Person A paid was paid by a company XYZ ltd Rs 25000 as a security deposit for rented house. Now the same is vaccated and the company receives the security deposit amount of Rs. 25000 but the mode of receipt is in Cash. Now my question is whether the acceptance of repayment of deposit of Rs. 25000 in cash is allowed u/s 269SS or 269 T? Is Company XYZ Ltd will be under the lens of Penalty proceedings.
If the above Company is liable then what are the remedies if any.
SUNIL KUMAR JAIN
(CA IN PRACTICE)
(52 Points)
Replied 11 November 2009
| Originally posted by :Sunil | ||
| " | With banks agressively promoting NEFT / RTGS / Electronic Transfers, what is the position with relation to accepting loans and repaying by any of the above 3 methods. Do they constitute as account payee instruments under negotiable instruments act? Say my mother transfers to me more than Rs.20000 by transfer in same bank and I repay it back to her account again in the same mode, is it violating 269SS and 269T. In these section account payee drafts and cheques are written. |
" |
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