Circular No. 25/2022

Clarification for the purposes of clause c of section 269ST of the income tax act 1961 in respect of dealership/distributorship contract in case of co operative societies

What this is

Circular No. 25/2022 was issued by the Central Board of Direct Taxes on 30 December 2022. Its subject is Clarification for the purposes of clause c of section 269ST of the income tax act 1961 in respect of dealership/distributorship contract in case of co operative societies.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Clarifies how clause (c) of section 269ST applies to a co-operative society's dealership or distributorship arrangements. Section 269ST prohibits receipt of two lakh rupees or more otherwise than by account payee cheque, account payee bank draft, electronic clearing system through a bank account or another prescribed electronic mode. The Board clarifies that for a co-operative society a dealership or distributorship contract does not by itself constitute an event or occasion for clause (c). Receipts related to such a contract on any day in a previous year, which are within the limit and which comply with clauses (a) and (b) of section 269ST, need not be aggregated across multiple days for the purposes of clause (c) for that year.

Why it was issued

References were received from milk producers' co-operatives asking whether cash received from a distributor against the sale of milk on a bank holiday or a day the bank was closed, within the limit, where payment came through the bank on all other days, was a single transaction or had to be aggregated over the year as one event or occasion.

Who it reaches

Milk producers' co-operative societies receiving cash from distributors
Co-operative societies with dealership or distributorship contracts
Distributors making occasional cash payments to such societies
Societies facing a penalty under section 271DA

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.269ST	s.2, s.186, s.189

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

F. No. 2251129/202211,1\- II.
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
•••••
Circular No. 2512022
New Delhi, Datcd 30th December, 2022
Subject: Clarification for the purposes of clause (c) of Section 269ST of the Income-tax Act, 1961 in respect of dealership/distributorship contract in case of Co-operative Societies - reg.

Section 269ST inter-alia prohibits receipt of an amount of two Jakh rupees or more (hereinafler referred to as 'the prescribed limit ') by a person, in the circumstances specified therein, through modes other than by way of an account payee cheque or an account payee bank draft or usc of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.

2. References have been received in respect of Milk Producers' Cooperative as to whether under the provisions of Section 269ST of the Act, receipt(s) in cash in a day of bank holiday/closure of bank day within 'the prescribed limit' from a distributor against sale of milk when payments were through bank on all other days is to be consic!-.:red as a single transaction or whether all such receipts in cash in a previous year would be aggregated in respect of transactions with a distributor to treat it as onc event or occasion.

3. With respect to the reference at Para 2 above, it is clarified that in respect of Co -operative Societies, a dealership/ distributorship contract by itself may not constitute an event or occasion for the purposes of clause (c) of Section 269ST. Receipt related to such a dealership/distributorship contract by the Co-operative Society on any day in a previous year, which is within 'the prescribed limit' and complies with clause (a) as well as clause (b) of Section 269ST, may not be aggregated across multiple days for purposes of clause (c) of St;ction 269ST for that previous year.

Copy to:
I. PS to FMJ aSD to FMJ aSD 10 MoS(R).
2. PS 10 Secrclary (Rcvenue).

sd-/-
(Ravlnder Malnl)
Director to the Govenunent India

3. The Chairperson, Membcrs and all olhcr officers in CBDT of the rank of Under Secretary and above.
4. All Pro Chief Commissioners! Pro Director General ofIncome-lax - with a request to circulate amongst all officers in their regions! charges.
5. CIT (M&TP), CBDT.
6. Web manager for posting on the Departmental websile.
7. Database Cell for posting on the irsofficerson·,;ne website.
8. Guard File. ~3ol',-\>02.>- . Director to the Govcnunent India

What to watch

The relief is confined to clause (c) — the day limb in clause (a) and the single-transaction limb in clause (b) must independently be satisfied, and the circular says so expressly.
It speaks of co-operative societies and their dealership or distributorship contracts; it is not a general licence to disaggregate contract receipts.
Each day's receipt must itself be within the prescribed limit; the clarification only stops the aggregation across days.
The clarification does not permit cash receipts as a practice — the facts put to the Board were of a bank holiday or a day the bank was closed, with bank payments on all other days.

Where you meet it

On a penalty proceeding under section 271DA against a co-operative society where cash receipts from one distributor over a year have been added up and treated as a single occasion.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 56/2021 [F. No. 225/58/2021-ITA.II] / SO 1803 — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 7 May 2021
Circular No. 27/2017 — Clarification on cash sale of agricultural produce by cultivators/agriculturists 3 November 2017
Circular No. 22/2017 — Circular No. 22 of 2017 3 July 2017
Notification No. 57 /2017, F.No.370142/10/2017-TPL]/ SO 2065(E) — To BE Published in the Gazette of INDIA, Extraordinary, Part II, section 3, Sub-section (ii)] 3 July 2017
Notification No.28/2017, F.No.370142/10/2017-TPL/S.O. 1057(E) — To BE Published in the Gazette of INDIA, Extraordinary, Part II, section 3, Sub-section (ii)] 5 April 2017

← Circular No. 1/2023 · Circular No. 24/2022 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.