Introductory remarks as per Finance Bill, 2005
Chapter VII of the Finance Bill, 2005, contains provisions relating to Banking Cash Transaction Tax. This proposed new Chapter shall be applicable to the whole of India except the State of Jammu and Kashmir. This Chapter shall come into force with effect from 1st June, 2005.
Clause 94 of the Bill proposes to define person to have the same meaning as assigned in clause (31) of section 2 of the Income tax Act and also includes an office or establishment of the Central Government or the Government of a State.
The aforesaid clause also proposes to define the taxable banking transactions as follows:-
- a transaction of withdrawal of cash exceeding ten thousand rupees on any single day by a person from any scheduled bank; or
- a transaction of purchase of a bank draft or a banker’s cheque or any other financial instrument on payment of cash exceeding ten thousand on a single day by a person from any scheduled bank; or
- receipt of cash from a scheduled bank exceeding ten thousand rupees on any single day by a person on encashment of term deposit, whether on maturity or otherwise, from that bank
Sub-clause (1) of clause 95 of the Bill proposes to levy a Banking Cash Transaction tax on taxable banking transactions at the rate of 0.1% of the value of each such taxable banking transaction. Sub-clause (2) of this clause proposes to provide that the Banking Cash Transaction tax shall be payable by the following,-
- in case of cash withdrawals exceeding ten thousand rupees, by person withdrawing the cash from any scheduled bank;
- in respect of purchase of a bank draft or a banker’s cheques or any other financial instrument on payment of cash exceeding ten thousand, by the person purchasing any such instrument from the bank;
- in respect of receipt of cash on encashment of term deposit, by the concerned depositor;
- in respect of cash withdrawal exceeding ten thousand rupees by way of bearer’s cheques by the bearer of such cheques or instrument.
Proviso to sub-clause (2) of this clause proposes to provide that no banking cash transaction tax shall be payable if the amount of term deposit is credited to any account with the bank.
Clause 96 of the Bill proposes to define the value of taxable banking transactions as follows:
(i) in case of cash withdrawals exceeding ten thousand rupees, the amount of cash withdrawn,
(ii) in respect of purchase of a bank draft or a banker’s cheques or any other financial instrument on payment of cash exceeding ten thousand, the amount of cash deposited;
(iii) in respect of receipt of cash on encashment of term deposit, the amount of cash received on encashment of term deposit.
Clause 97 of the Bill proposes to provide that every scheduled bank shall collect the banking cash transaction tax at the specified rate, from every person entering into a taxable banking transaction with that bank. The banking cash transaction tax so collected during any calendar month shall be paid by every scheduled bank to the credit of the Central Government by the fifteenth day of the month immediately following the said calendar month. The said section also provides that any scheduled bank that fails to collect the tax shall be liable to pay the tax to the credit of the Central Government in accordance with the provisions of the said Chapter.
Clause 98 of the Bill proposes to provide that every scheduled bank shall within the prescribed time after the end of each financial year, furnish a return to the Assessing Officer or any other authority or agency authorised by the Board, in such form and verified in such manner as may be prescribed by the Board, in respect of all taxable securities transactions entered into during any financial year. The proposed clause 98 also provides that the Assessing Officer may issue a notice to any assessee who is responsible for collection of banking cash transaction tax and has not furnished the return within the prescribed time, asking the assessee to furnish the return within the time specified in the notice. It is also proposed to provide for furnishing of a revised return before the assessment is made in cases where the assessee has not furnished a return within the time allowed or on discovery of any omission or wrong statement in the return furnished earlier.
Clause 99 of the proposed Chapter confers power on the Assessing Officer to make an assessment of the taxable banking transaction and determine the banking cash transaction tax payable or refundable on the basis of such assessment. It is also proposed that no assessment shall be made after the expiry of two years from the end of the relevant financial year. The proposed section also provides that in cases where any refund has been issued to an assessee, the assessee shall refund the same to the person from whom it was collected within the prescribed time.
Clause 100 of the proposed Chapter provides that the Assessing Officer may amend any order passed by him under the provisions of the said Chapter with a view to rectify any mistake apparent from record, within one year from the end of the financial year in which the order sought to be amended was passed. It is also proposed that any amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall be made only after giving the assessee a reasonable opportunity of being heard.
Clause 101 of the proposed Chapter provides that every assessee who fails to credit the banking cash transaction tax to the account of the Central Government within the specified period shall pay simple interest at the rate of 1% of such tax for every month or part of a month by which crediting of the tax has been delayed.
Clause 102 of the proposed Chapter provides for penalty for failure to collect or pay the banking cash transaction tax. It is proposed that any assessee who fails to collect the whole or any part of the banking cash transaction tax shall be liable to pay by way of penalty a sum equal to the amount of banking cash transaction tax that he failed to collect. It is also proposed to provide that any assessee who having collected the banking cash transaction tax fails to pay such tax to the credit of the Central Government shall be liable to pay a penalty of one thousand rupees for every day during which the failure continues. However, the penalty imposable under this clause shall not exceed the amount of the banking cash transaction tax that was to be paid.
Clause 103 of the proposed Chapter provides that if an assessee fails to furnish a return in respect of the banking cash transaction tax within the prescribed time, he shall be liable to pay a sum of one hundred rupees for every day during which the failure continues by way of penalty.
Clause 104 of the proposed Chapter provides that any assessee who fails to comply with a notice issued under sub- clause (2) of clause 100 of the proposed Chapter shall be liable to pay by way of penalty a sum of hundred rupees for every day during which the failure continues.
Clause 105 of the proposed Chapter provides that no penalty will be imposable under any of the above sections if the assessee proves that there was reasonable cause for the failure to comply with the provisions of the said clause. It is also proposed that no order imposing a penalty under the proposed Chapter shall be made unless the assessee has been given a reasonable opportunity of being heard.
Clause 106 of the proposed Chapter provide that sections 120, 131, 133A, 156, 178, 220 to 227, 229, 232, 260A, 261, 262, 265 to 269, 278B, 282 and 288 to 293 of the Income-tax Act, shall apply in relation to banking cash transaction tax.
Clause 107 of the proposed Chapter provides that where the assessee is aggrieved by any assessment order passed by the Assessing Officer, he may file an appeal to the Commissioner of Income-tax (Appeals), in such form and verified in such manner as may be prescribed by the Board within thirty days from the date of receipt of the order of the Assessing Officer.
Clause 108 of the proposed Chapter provides for filing of appeal to the Appellate Tribunal in such form and verified in such manner as may be prescribed by the Board, in cases where the assessee is aggrieved by any order passed by the Commissioner of Income-tax (Appeals), and also in cases where the Commissioner of Income-tax objects to any order passed by the Commissioner of Income-tax (Appeals).
Chapter 109 of the proposed Chapter provides that if a person makes any statement in any verification, or delivers an account or statement which is false, and which he either knows or believes to be false or does not believe to be true, he shall be punishable by way of imprisonment upto a period of three years and with fine.
Consequent to the proposed levying of Banking Cash Transaction Tax, it is also proposed to insert a new clause in sub-section (1) of section 36 of the Income-tax Act so as to provide for allowing deduction in respect of banking cash transaction tax paid by the assessee during the year on the taxable banking transactions entered into by him.
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