| Question And Answer | |
|---|---|
| Subject: | Addition U/SEc. 68 in the hands of NBFC for accepting amount from borrower in demonetization period |
| Category: | Income-Tax |
| Querist: | neha |
| Answered by: | Advocate Neelam Jadhav |
| Tags: | cash deposit, demonetization, NBFC |
| Date: | April 7, 2023 |
Assessee is NBFC registered under Co Act as well as RBI. During the period of demonetization assessee co accepts cash in old currency amounting to Rs 1410000/- from the borrowers up to 14.11.2016 and from 15.11.2016 till 31.12.2016 amounting to Rs. 2010000/-. AO has made addition U/sec. 68 on the ground that NBFC are not permitted to accept currency in Old Notes from any one and therefore the amount is unexplained cash credit to be added U/sec. 68, eventhough assessee co has given complete details of the persons from whom amount is received towards repayment of loan taken from NBFC. Whether action of AO is justified ?
Pl guide .
On the facts and circumstances of the case, the Assessee Non-banking finance company (NBFC) is registered under Co Act as well as RBI.
The CBDT Circular No. 22 of 2017 states that receipt of repayment of the loan by the Non-Banking Finance Companies (NBFC) and Housing Finance Companies (HFC) will fall under the purview of section 269ST clause (b) if the repayment of ‘one’ loan instalment is equal to or above Rs. 2 lahks. “All the instalments paid for a loan shall not be aggregated for the purposes of determining the applicability of the provisions of section 269ST.” This means that the Rs.2 lakh limit will only be applied to a single loan instalment repayment.
The said circular has clarified that the NBFC or HFC will end up violating S. 269ST only if they receive a single loan instalment in cash of or over Rs.2 lakh. It means loan borrower can repay his entire loan in cash, provided each instalment is less than Rs.2 lakh. The action of the AO is not valid in law .
Here, the assessee company is in the position to give complete details of the persons from whom the amount is received towards repayment of loan, and said receipt of cash loan do not violets the provisions of section 269ST, that is entire loan repayment in cash, but each installment is less than Rs.2 lakh then the action of the Assessing officer to tax said repayment of loan amount u/s.68 as cash credit is not justified.
1.The issue is whether NBFC are permitted to accept the cash in old currency in demonetization period? and in my opinion till 31.12.2016, the old currency was valid and therefore any person can accept the currency, since it is valid legal tender.
2.Whether addition U/Sec. 68 can me made in the hands of NBFC. In my opinion, since the amount accepted by the NBFC during demonetization period from the borrowers is recorded in the books of accounts and this fact is not disputed by the AO , then no addition U/Sec. 68 can be made.