Queries u/s.269T of the I.T.Act

[NARENDRA KUMAR SHARMA]

QUERIES SECTION

Under section 269T of the IT Act  repayment of account payee cheque or account payee bank darft drawn in the name of persion who has made the loan. But if the repayment is by way of transfer of goods or through sale of goods. Is it violation of section 269T or not.

Kindly clearify the position with citation of case laws.

[Khushwant Singh]

Section 269 T attracts only when the money changes hand. Since there is no money transaction in your case, it would not attract 269 T. a citation can be given as follows:

Acceptence or repayment through Journal Entry would not come within the ambit of the words ‘loans or deposits’-section 269SS applies only where money passes from one person to another by way of ‘loan or deposit’[CIT v. Noida Toll Bridge Co. Ltd. 262 ITR 260 (Del.)]

[DEV KUMAR KOTHARI]

When an accounting adjustment is made for goods sold or goods purchased, there is no payment or receipt of money. In case of sale there is creation of receivables and such receivables can be adjusted from any amount payable to the concerned party.

 

The party  should be  the same- from whom loan was taken and goods are sold. In such a situation, usually understanding is revised that the loan be treated as advance for supply of goods. This can be confirmed by the party.

Similarly in case of stock transfer ( presumably to agent) the amount received from agent is in nature of advance or securiity deposit against consignment and not loan. Even if initially it was loan, on understanding of stock transfer the loan assumed character of advance or security deposit agaisnt stock transfer. Necessary document for confirmation can be exchanged between parties.

AI Summary

Non-cash repayment: adjusting obligations by goods or accounting entries does not trigger the prohibition on cash-mode repayments. Repayment by transfer or sale of goods does not fall within section 269T where no money changes hands; accounting adjustments, journal entries, receivables set-offs, stock transfers and recharacterisation of a loan as an advance or security are treated as non-monetary settlements, and parties should document the revised understanding to confirm characterisation.