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2022 (4) TMI 741 - AT - Income TaxDisallowance u/s. 40A(3) - cash expenses in excess of limit specified under the Act - AO rejected the assessee’s plea by holding that assessee has not been able to substantiate why payments could not be made by account payee cheque - assessee submitted that the payments in cash were made since firstly, payments were made to newspapers for political advertisements and secondly, payments were made after banking hours at 7.00 P.M. At the relevant time, elections were going in the state of Gujarat and for this purpose, payments were made to newspaper companies for political advertisements and they refused to accept payment through any other mode than by way of cash payment - HELD THAT:- We are of the considered view that in the facts of the instant case, no disallowance u/s 40A(3) is called for. The assessee has identified the parties to whom payments were made. The parties have confirmed receipt of payment in cash. The assessee has laid down the circumstances which necessitated payments in cash, being payment for advertisement for political parties on account of State elections, outside of banking hours. In a few instances, the assessee has obtained letter from the parties to the effect that it was at their insistence that cash payment was made. Exceptions contained in Rule 6DD are not exhaustive and that the said rule must be interpreted liberally, depending upon business necessities and facts and circumstances of the case. In the result, we are of the view that the Ld. CIT(A) erred in law and in facts in disallowing the sum u/s 40A(3) - Appeal of assessee allowed.
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