|CORAM:||G. D. Agrawal (VP), H. S. Sidhu (JM)|
|SECTION(S):||269SS, 271D, 271E|
|CATCH WORDS:||loan or deposit of money, penalty|
|DATE:||January 16, 2015 (Date of pronouncement)|
|DATE:||January 19, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 269SS: Loan & deposit by way of journal entries are not covered. Transactions between a firm and its partner are also not covered|
(i) As per Section 269SS, no person is supposed to take or accept from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft. The term ‘loan or deposit’ has also been defined by way of explanation by which loan or deposit means “loan or deposit of money”. Thus, for the purpose of Section 269SS, loan or deposit of money only is to be considered. Now, in the case of all the credit entries in the accounts of the assessee which are considered for levy of penalty under Section 271D, we find that there is no monetary transaction between the assessee and the creditors. The monetary transaction had taken place between the creditors and some third party which were all by account payee cheques. In the books of the assessee, there is only a journal entry by debiting the account of some other party and crediting to the account of the creditor. In these circumstances, in our opinion, when there is no monetary transaction between the assessee and creditor, it cannot be said that assessee accepted loan or deposit from the creditor in violation of Section 269SS.
(ii) The Apex Court clearly held that the partnership firm is only a collective name of separate persons and not a legal person in itself and therefore, a partner cannot be a servant of the firm because no person can be his own servant in law. The ratio of the above decision would be squarely applicable in the case under appeal before us. Similar to the contract for employment where two distinct persons employee and employer are required, for the purpose of giving and acceptance of loan or deposit also, two different persons are required – (i) the lender and (ii) the debtor i.e. the borrower. As per Hon’ble Apex Court, firm and partner are not two different persons, therefore, credit in the books of firm in the account of partner, it cannot be said that firm has taken loan or deposit from partner. Admittedly, in the assessee’s books of account, the amount has been credited in the capital account of Shri Inderpal Singh Wadhawan. The firm and partners have also treated the transaction as of contribution of capital from the partner to the firm and not as a loan by an individual to the partnership firm.