The Finance Act, 2015 amended Section 269SS and Section 269T to include transactions in immovable property in order to curb black money circulation. However, the term “Immovable property” has not been defined in the amendment for the purpose of the Income Tax Act.
The meaning assigned to the term “immovable property” in section 269UA(d) is restricted for the purpose of Chapter XX-C only while the provisions of Section 269SS and 269T are contained in Chapter XX-B. Now whether recourse is taken to the said section 269UA(d) or to the General Clauses Act, 1897, Transfer of Property Act, 1882 or to the Registration Act, 1908, or not can’t be commented upon. But in any case, the term immovable property would certainly include land, building and may include rights in land or building.
Section 269SS:
subject to specified exceptions, a person shall not take or accept loan/deposit from other person otherwise than by the prescribed banking channels i.e. A/c payee cheque or account payee bank draft or by use of electronic clearing system so that the aggregate from such person is Rs.20000/- or more.
In layman terms, cash loan or deposit from same person of Rs.20000/- or more is not allowable for the purpose of Section 269SS.
On Contraventions penalty U/s 271D is attracted which is 100% of the amount received.
Amendment:
Section amended by adding the sums received for transfer of immovable property (advance/ otherwise) whether or not ultimately the contemplated transfer takes place. Therefore, the seller of the immovable property will be liable to pay penalty on the amount accepted or taken in cash and not the buyer.
Implications:
Harsh penalty under section 271D to the transferor of immovable property being the recipient of money.
The provision of Section 269SS is not applicable to:
1) Government;
2) Any Banking Company;
3) Government Company and;
4) Any other person as notified by the Central Government.
5) To persons from whom the loan or deposit is taken or accepted and if the person by whom the loan or deposit is taken or accepted are both having Agricultural Income and neither of them has any Income chargeable to Tax.
6) Any corporation established by a Central, State or Provincial Act
Section 269T:
loan or deposit shall not be repaid, otherwise than by an Account payee cheque or bank draft or online transfer, if the amount of loan or deposit is Rs. 20,000 or more.
Amendment:
No repayment of any advance received in relation to a transfer of immovable property would be made except by the said prescribed banking channels if aggregate is Rs. 20000/- or more. Whether the transfer takes place or not is irrelevant.
Implications:
On Contraventions penalty U/s 271E is attracted which is 100% of the amount repaid.
The following amendments u/s 269SS & 269T has come into force from 1st of June, 2015.
Further Analysis:
While 269SS has introduced the key words “advance or otherwise” in relation to transfer whereas section 269T has introduced the words “advance by whatever name called”.
Therefore, if the sum being repaid is not in the nature of advance then the provisions of section 269T will not be attracted.
Thus question of fact and circumstances of the case plays important role.
Short Comings :
Although the amendments are made in order to curb generation of black money in immovable property transactions, in reality the cash portion of the transaction is not accounted at all and therefore to that extent the amendment will not have the desired effect.
Our Comments :
The amendments will certainly deter the use of back dated transactions. Hitherto for purchase of immovable property as an asset any quantum of cash could be paid and repayment of advance for immovable property could be paid in cash without attracting any penal provisions under the income tax law. Now, for cash consideration or repayment in cash the penal provisions will get attracted. At the same time cash consideration or repayment per se will not affect the validity of the transactions or will not affect the date of the transfer under the property laws concerning transfer or will not affect even the date of transfer under the provisions of the Income-tax law more particularly with reference to provisions contained in clauses (v) and (vi) of sub section (47) of section 2 of the Act.
