TMI Blog2015 (4) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, there is no element of profit. The assessee has distributed Kerosene to various fair price shops as per the orders of Chief Executive Officer of Taluka Panchayat and the assessee as per the order three distributors have distributed kerosene to the appellant society. We find that the assessee has made payment to three agencies but that agencies are nominated by Govt but it cannot be said that this payment is made to Government. Therefore, we are of the view that A.O and CIT(A) is justified in holding that payments has been made to dealer authorised by the Govt. and not to the Government itself. Therefore, AO and CIT(A) is justified in their action and our interference is not required. - Decided against assessee. Deduction u/s 80P(2)(a)(i) claimed - Held that: - The assessee is a Primary Co-operative Agriculture and Rural Development Bank registered under the Karnataka Co-operative Society Act. Therefore, entire income should be deductible u/s 80P(2)(a)(i) of the Income Tax Act. We find that assessee has taken this ground for the first time before us and the CIT(A) has not executed this ground, therefore, in the interest of justice and fair play, we restore this issue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the relevant expenses. 8) Further the assessee was under bonafide belief that the cash payments are made against genuine transactions and the payee is identified and hence this will not amount to contravention of section 40A (3) 9) The learned CIT (A) and AO have not considered the law which states that the entire income (100%) is deductible u/s 80P 2 a (1) of the I T Act as the appellant is a Primary Agriculture Co-operative and Rural Development Society. 3. Ground Nos. 1 to 8 :- The short facts of the case are that the assessee is a Primary Co-operative Agriculture and Rural Development Bank registered under the Karnataka Co-operative Society Act. It is carrying on the business of accepting deposits from member agriculturist and providing credit facilities to members for agriculture activities. They also distributing food grains and Kerosene under PDS scheme to card holders. The assessee has filed the return of income for assessment for assessment year 2009-10 declaring NIL income claiming the deduction u/s. 80P(2)(a)(i) of the IT Act. The Assessing Officer has disallowed the cash payments of ₹ 5,13,176/- u/s. 40A(3) though the assessee has proved the unav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayat Athani, three distributors namely, (i) M/s S. R. Path, Sankeshwar, (ii) MIS Khimajibai Sons, Belgaum (iii) MIs S.C. Malagi, B gaum, have distributed kerosene to the appellant society on various dates in the year under consideration. 6. Considering the circumstances and nature of business of the appellant, the addition made under section 40A(3) of the Income Tax Act, 1961 is incorrect and not lawful on the following grounds: 6.1. Supply of food grains, sugar kerosene is under Public Distribution System -Central Government Scheme. 6.2. It is a no profit activity carried on by the appellant society. Appellant is only serving the PL families under the scheme. 6.3. Kerosene distributors are appointed by the government under the P05 scheme i.e. they are representatives/agents of Government. These distributors are also distributing the PDS goods with non-profit objective. 6.4. As no profit element is involved these distributors insist on spot payment in cash. 6.5. These distributors come from different places and hence if payment is make by cheque the cheque collection time and cost in the form of collection charges are involved. 6.6. In case Demand Drafts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach activity has to be considered. Hence we request you Sir to please reconsider the basis of apportionment of common expenditure. Prayer: The appeal may kindly be considered in favor of the Appellant to meet the ends of justice, for the kind act of Your Honor the Appellant remains ever grateful. 5. The learned DR relied upon the order of Revenue Authorities. 6. We have heard the rival contention of both the parties. We have gone through the written submissions made by the assessee and also perused the assessment order. We find that the disallowance has been made by the A.O u/s. 40A(3) of the IT Act for A.Y.2009-10, it may be pertinent to reproduce the amended provisions of Section 40A(3) as amended by the Finance Act, 2008, w.e.f 1.4.2009, which read as follows. Expenses or payments not deductible in certain circumstances. 40A(1)...... (2)..... (3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultural or..... (ii) the produce of animal husbandry..... (iii) fish or fish products; or (iv) the products of horticulture or.... (f) where the payment is made for the purpose of the products manufactured or processed without the aid of power in a...... (g) where the payment is made in village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town; (h) where any payment is made to an employee.... (i) where the payment is made by an assessee by way of salary..... (j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike; (k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person; (l) where the payment is made by an authorized dealer or a money changer....... Explanation.........For the purposes of this clause.... 6.2. It is amply clear that the first proviso to section 40A(3) makes it clear that the only exceptions to the law contained in section 40A(3) are those sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Delhi bench of the ITAT in the case of Jal Talkies Vs. ITO (ITAT,Delh) 57 TTJ 745 in the following words: Making payments on bank holidays do not ipso facto permit the assessee to make payments in cash. The circumstances which compelled the assessee to make payment on holidays have to exist and shown to the assessing authorities. No such compelling circumstances have been shown. 6.5 Though the burden of proof is on the assessee to prove that its case is covered by exceptions contained in Rule 6DD, this burden has to be discharged to satisfaction of the assessing Officer as held in a number of cases. Some of the decisions and ruling of the courts are as follows: (a) In the case of Attar Singh Gurmukh Singh v. ITO (1991) 191 ITR 667 (SC), it has been held that: It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in s. 40A(3) was not practicable or would have caused genuine difficulty to the payee. (b) In the case of S. Venkata Subba Rao vs. Commissioner of Income-Tax, (1988) 173 ITR 340 AP, it has been held that: Unless a payment falls within one or the other cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make enquiry whether the payments were entered in the books of account. In our opinion, this was not enough. It was also necessary to enquire whether there existed exceptional and unavoidable circumstances for making such payment. The Tribunal ought to have directed accordingly. (d) In the case of Jal Talkies Vs. ITO (ITAT, Delhi) 57 TTJ 745, it has been held in the following words: Making payments on bank holidays do not ipso facto permit the assessee to make payments in cash. The circumstances which compelled the assessee to make payment on bank holidays have to exist and shown to the assessing authorities. No such compelling circumstances have been shown. (e) In Associated Engineering Enterprise Vs. CIT(1995)216ITR366, The Gauhati High Court has ruled as under: Thus it is not merely the genuineness of the transaction but also the existence of the circumstances warranting payment by cash. 6.7. In the present case the appellant s plea had been that he had made payment to the Govt. which is patently wrong and deserves to be rejected out rightly as the payments had been made to dealers authorized by the Govt. and not to the Govt. itself. This aspect has been del ..... X X X X Extracts X X X X X X X X Extracts X X X X
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