Applicability of Rule 114E vis-a-vis S. 269ST and S. 206C in sales transactions

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Every person, listed in section 285BA(1) is under an obligation to furnish a periodic statement of specified financial transactions (SFT) as prescribed under the Income Tax Rules and now includes any person liable to tax audit u/s 44AB of the I.T Ac. . Rule 114E of the Income Tax Rules, as amended w.e.f. 01.04.16, specifies the nature and value of reportable transactions, periodicity of furnishing of SFT, format of SFT, etc.

Further, Tax collection at source (TCS) limit for cash purchase of bullion was kept at Rs 2 lakh, but for jewellery, it was fixed at Rs 5 lakh. Finance Minister Arun Jaitley, in his Budget for 2016-17, had provided for the seller to collect tax at the rate of 1 per cent from the purchaser on sale in cash of any goods or offering any services exceeding Rs 2 lakh w.e.f 1.6.2017.

However, in the Budget 2017-18, the Finance Minister brought in a new provision banning cash transaction above Rs 3 lakh in S. 269ST. This cap was lowered to Rs 2 lakh through an amendment. To reconcile the two provisions, the tax at source on goods and services, including jewellery and bullion, has now been removed through an amendment to the Finance Bill 2017 w.e.f 1.4.2017.

In midst of the confusion regarding the filing of  Form 61A with nearing deadline on this 31st May 2017, we have made an attempt to decode Rule 114E vis-a-vis S. 269ST and S. 206C in regard to Sales transactions.

As far as sale of goods or services are concerned, it would be interesting to analyse as to how these three machineries are going to supplement each other or create a redundancy.

Applicability of Rule 114E vis-a-vis S. 269ST vis-a-vis S. 206C in sales transactions

Sr. No.Nature of TransactionS. 269 ST w.e.f. 01.04.2017 applicableYearly Reporting in Form 61A w.e.f. (01.04.16)TCS provision as per 206C w.e.f 1.6.2016

( omitted from 1.4.2017 )

 
Threshold limit>=2,00,000>2,00,000>2,00,000
1Single Bill below threshold limit
– Full Recovery in cashNONONO
– Part recovery in cashNONONO
– Full recovery by ChequeNONONO
2Single Bill fulfilling threshold limit
– Full Recovery in cash on single occasionYESYESYES
– Part recovery in cash below thresholdNONONO
 – Part recovery in cash above Rs. 2 Lacs on single occasionYESYESYES
– Part recovery in cash above Rs. 2 Lacs on multiple occasions but not a single receipt exceeds Rs. 2 LacsYESNOYES
– Full recovery by ChequeNONONO
3Multiple Bills issued during year to same person and the aggregate bill amount fulfilling threshold limit. (However, not even a single bill fulfils threshold limit)
– Full Recovery in cash on single occasionYESYESNO
– Part recovery in cash above Rs. 2 Lacs on multiple occasions (on different days) but not a single receipt exceeds Rs. 2 LacsNONONO
– Part recovery in cash above Rs. 2 Lacs on multiple occasions (IN SINGLE DAY) but not a single receipt exceeds Rs. 2 LacsYESNONO
 – Part recovery in cash above Rs. 2 Lacs on single occasionYESYESNO
– Full recovery by ChequeNONONO

 

4Receipt in cash exceeding Rs. 2,00,000/- on single occasion from Debtors outstanding before 1.6.2016YESYESNO

Assumptions:

Multiple bills issued to a person do NOT relate to one event or occasion
‘On single occasion’ means, at a moment in a day

The norms of aggregation contained in sub-rule 3 of Rule 114E have been amended vide CBDT’s Notification No. 91/2016 dated 6th October, 2016; clearly indicating that the said transactions did not require aggregation and the reporting requirement under SFT for this purpose is on receipt of cash payment exceeding Rupees Two Lakh for sale of goods or services per transaction.

 

Note : S. 269ST is applicable to even transactions Equal to Rs. 2,00,000/- , and readers are expected to read the Particulars of Table accordingly.

Now a major confusion arises whether Form 61A has to be filed for all Audited concerns even in case of Nil reportable transactions as per Rule 114E.

In my opinion, users should file the Preliminary response and there is no need to Nil statement in File 61A.  CBDT has recently changed the available Options in Preliminary Response from “No” to “Nil transactions” which concurs the above view and further now there is no need to even generate ITDREIN when Preliminery response is Nil transaction.

Further, in my opinion when the return filed under the provisions of TCS already gives information to Income Tax Department of the payer along with PAN for F.Y 2016-17, there was no need of a specific entry in Rule 114E creating redundancy increasing the reporting burden of the assessee. Hence the provisions of 206C(1D) were deleted w.e.f 1.4.2017.

Further , the provisions of Rule 114E can be escaped easily if it is shown in books of accounts that a sum of say Rs. 1,99,999/- is received at 9:00 am and another sum of Rs. 1,99,999/- at 9:01 am ( different occassions…! Hence one cannot take a view that Form 61A shall supplement or track the violations of S. 269ST and 206C ….!

An amendment should be brought to aggregate transactions in a single day in respect of single person for the purpose of reporting under Rule 114E.

1 COMMENT

  1. Thanks Mehulji for such an enriching article. Lot of my confusions have been cleared by this article of yours.
    Thanks again!

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