2014 (7) TMI 38 - HC - Income Tax

Interpretation of Income Tax Act on Repayment Mode vs. Amount

Asnew Barrels (P.) Ltd. Versus Commissioner of Income-tax

The court interpreted Section 269T of the Income Tax Act, emphasizing that it applies to the mode of repayment, not just the amount. The appellant's ... Applicability of section 269T of the Act - Mode of repayment of certain loans or deposits – Held that:- CIT(A) as well as the Tribunal found that the explanation of the Assessee was that the loan was repaid in cash as the father of Amrutpal Singh Sandhu was not well and the amount was required for illness - This explanation was found to be lacking in bona fides - the loan has been repaid in cash and which loan is to the extent indicated in Section 269T – The object and purpose of section 269T is to encourage the loans being repaid and of huge amounts by account payee cheque or by bank draft - thus, no substantial question of law arises for consideration – Decided against Assessee. Issues: Interpretation of Section 269T of the Income Tax Act, 1961 regarding repayment of loans or deposits.In this judgment, the primary issue revolves around the interpretation of Section 269T of the Income Tax Act, 1961 concerning the mode of repayment of certain loans or deposits. The appellant argued that Section 269T was not attracted as the repayment was not in the sum of Rs.20,000 or more. However, the court disagreed, emphasizing that the section deals with the mode of repayment, not just the quantum of repayment. It mandates repayment only by account payee cheque or bank draft. The court clarified that the focus should be on the amount of the loan or deposit, not just the repayment amount. The court also highlighted the importance of the clauses (a) and (b) in understanding the applicability of Section 269T.Furthermore, the judgment discussed the significance of Explanation (iii) of Section 269T, which defines 'loan or deposit.' The court concluded that the appellant had repaid part of the loans in cash to the creditors, which exceeded the threshold specified in Section 269T. The court rejected the appellant's explanation that the cash repayment was due to the serious illness of a family member, deeming it unreasonable and lacking bona fides. Consequently, the court held that the appeal did not raise any substantial question of law, and the penalty imposed under Section 269T was justified.Additionally, the judgment referenced a case from the Division Bench of the Gujarat High Court to distinguish between loans and deposits. It highlighted the legislative intent behind Section 269T, introduced to ensure loans are repaid through specified modes like account payee cheques or bank drafts. The court found no legal error or perversity in the decisions of the lower authorities and dismissed the appeal, emphasizing the objective of encouraging repayments through proper banking channels. The judgment concluded by dismissing the appeal without costs.