Accepting cash of Rs 2 lakh and more is offence now
|Source: The Hitavada Date: 13 Apr 2017 09:28:22|
By CA Naresh Jakhotia,
In India, the quantum of domestic black money is huge which adversely affects the revenue of the Government creating a resource crunch for its various welfare programmes. Black money is generally transacted in cash and large amount of unaccounted wealth is store and used in form of cash.
With above observation in the explanatory memorandum to the Finance Bill – 2017, section 269ST is incorporated in the Income Tax Act -1961 which reads as: ‘269ST- No person will receive an amount of Rs 2 lakh 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: Provided that the provisions of this section will not apply to
(i) any receipt by
(b) any banking company, post office savings bank or co-operative bank;
(ii) transactions of the nature referred to in section 269SS;
(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.
Though the wording of the new law is simple, the outcome would be draconian. A step to promote less cash economy, section 269ST places restriction on cash acceptance. Restriction is on the recipient (and not on payer), be it businessmen, salaried, trust, company, HUF etc. The nature and character of receipt is irrelevant i.e., exempt income or taxable income etc.
Let us try to understand the new law. First part (in aggregate from a person in a day): If Mr X has sold to Mr Y goods of Rs 1.50 lakh on March 1, Rs 1.50 lakh on March 2 and so on, he cannot receive Rs 2 lakh or more against outstanding bills in any single day even though each bill is below Rs 2 lakh. In short, Rs 2 lakh or more per person per day is not allowed even though payer may be paying for various transactions which are individually below Rs 2 lakh.
Second part (in respect of a single transaction): The focus here is on a single transaction. If Mr X is purchasing a used car from Mr Y for Rs 5 lakh, at any point of time (in the current or subsequent financial year), Y cannot accept Rs 2 lakh or more in cash from Mr X. Buying the used car here is a single transaction. Y can receive less than Rs 2 lakh in cash and balance amount has to be in digital mode. Even gift from donor of an amount of Rs 2 lakh or more cannot be accepted by the donee. This part prohibits the splitting of payments over period. Marriage, holiday sale etc could be an example of ‘a single transaction.’
Third part (in respect of transactions relating to one event or occasion from a person): It is the most controversial part that that would result in highest litigation in section 269ST. It places bars on receipt in respect of one event or occasion. It has to be looked in to from the angel of recipient.
The third limb does not have restriction of days because “per day” or “per transaction” which has relevance in the 1st & 2nd limbs only and nothing like is there in the 3rd limbs. Effectively, per day amount received may be less than Rs 2 lakh, still it could be hit by 269ST. It may sounds illogical but law and logic may not always co-exit. Even though gift received on occasion of marriage is tax free u/s 56(2)(vii), it could be penalised due to violation of section 269ST.
Section 269ST is not applicable to Government/bank/post office & in respect of transactions of the nature referred in Section 269SS (Mode of taking or accepting certain loans, deposits and specified sum like advance against property). The limit of acceptance u/s 269SS is only Rs. 20,000/- which is much lower than Rs. 2 Lakh u/s 269ST. Contravention of section 269ST would result in levy of penalty under section 271DA which could be of an equivalent amount.
Few other transactions hit by section 269ST could be:
1. Hospital receiving cash of Rs 2 lakh or more from the patients.
2. Marriage hall, lawn, hotel receiving Rs 2 lakh or more against any booking of an event.
3. Event manager receiving against any event of Rs 2 lakh or more.
4. Businessmen dealing in luxury items like cars, jewellery, furniture, consumer appliances etc., to single person by single bill aggregating to Rs 2 lakh or more in a day.
5. Though bank withdrawals are excluded by recent notifications, more genuine exemptions are needed failing which the following transactions would tantamount to violation of section 269ST: a) Introduction / withdrawals by the partners of the firm.b) Gift in between husband, wife, father, son etc., in cash.
c) Cash inheritance of Rs 2 lakh or more by the legal heir.
d) Cash transactions between principal and agent.