Acceptance of payment through prescribed electronic modes section 269SU- Can you accept payment thru account payee cheque

Note on Acceptance of payment from customers thru Account Payee Cheque after introduction of Section 269SU & Rule 119AA

Facts of the Matter:

With the amendment in the Finance Act section 269SU was introduced effective 01.11.2019 which reads as follows:

Acceptance of payment through prescribed electronic modes.

The said section was Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-11-2019

After section 269ST of the Income-tax Act, the following section shall be inserted with effect from the 1st day of November, 2019, namely:-

Acceptance of payment through prescribed electronic modes.

“269SU. Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year.”

It is important to note that Section 269ST which prescribes mode of undertaking transactions reads as follows:

Mode of undertaking transactions.

269ST. No person shall receive an amount of two 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 ⁶⁹[or through such other electronic mode as may be prescribed]:

…..

The amendment has been made effective by notification 105/2019 dated 30.12.2019 from 01.01.2020. The text of notification is as follows:

G.S.R. 960(E).-In exercise of the powers conferred by section 269SU read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend Income-tax Rules, 1962, namely:-

1. Short title and commencement.-

(1) These rules may be called the Income-tax (16th Amendment) Rules, 2019.

(2) They shall come into force from 1st day of January, 2020.

2. In the Income-tax Rules, 1962, after rule 119A, the following rule shall be inserted, namely:-

“119AA. Modes of payment for the purpose of section 269SU.- Every person, carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year shall provide facility for accepting payment through following electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, namely:-

(i) Debit Card powered by RuPay;

(ii) Unified Payments Interface (UPI) (BHIM-UPI); and

(iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”.

QUESTION :

The doubts has been raised whether class of persons prescribed under the said rules can accept payments from customer thru cheque after the insertion of the section 269SU and rule 119AA ?

Discussion & Conclusion:

Please note that the insertion of section has been made in chapter XX-B which reads as “ Requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax”. It is very important to note that the said section 269SU has been inserted after Section 269ST- Mode of undertaking transactions which permits amount for more than 2 lacs can be received thru account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account ⁶⁹[or through such other electronic mode as may be prescribed]. This clearly mean that facility of electronic payments thru use of Rupay Debit Card, UPI,UPI-QR as prescribed in rule 119AA read with section 269SU is in addition to the already existing mode of undertaking transactions and in no way restricts acceptance of payment from customers or any other person thru account payee cheque.

It must also be noted that the section 269SU mandates the availability of the facility for the customers and don’t mandates the said acceptance by the seller. The customer can opt to pay or not to pay through prescribed mode. If customer  opts, the seller is duty bound to accept it in electronic mode as prescribed in 269SU read with rule 119AA.

Therefore it can safely be concluded that there is no restriction on acceptance of payment thru account payee cheque or account payee bank drafts after introduction of section 269SU read with rule 119AA

(Sushil Singh)

Chartered Accountant

Note: The fine of ₹ 5000 per day will be effective from 1st February 2020 and would be initiated through the rules as informed in Section 271DB. Therefore the companies has time to put the facility prescribed under rule 119AA by 31^st January 2020.

Disclaimer:

Any tax advice in this communication is not intended or written by us to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed by any governmental taxing authority or agency. The user may consult their tax advisors before taking any action in this regard