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2012 (8) TMI 283 - AT - Income TaxInvoking provisions of section 40A(3) - additions made in respect of the payments made for purchase of milk from the milk producers - Held that:- AO made the impugned additions without examining the relevant evidences in detail as noted if the payments at the level of milk producers are considered, each payment never exceeded the specified sum of ₹ 20,000. There is, therefore, no violation of S.40A(3) - it is a fact that the representative of milk collection centre functions in a dual capacity, both for the assessee as well as the milk supplier for incentives & that the said representative filed confirmation letters before the AO asserting that they are the agents of the company alongwith their duties and responsibilities towards suppliers of milk too. As it is the requirement of these agents to make the payment in cash for goods, i.e. milk, to the cattle owners, who belong to economically weaker section, on behalf of the assessee the impugned payments are squarely covered by the exceptions provided in clause (l) of Rule 6DD of the Income-tax Rules, 1962. The CIT(A) also reasoned in his order that the exceptions provided in clause (f) of Rule 6DD also apply to the assessee as the representatives are the agents of the assessee, who are required to make payment in cash to the producers of milk - the assessee should be entitled for relief even if the impugned payments are covered under any one of the exceptions prescribed in Rule 6DD, viz. either under clause (f) or clause (l) of Rule 6DD, even if not both. In the assessment year 2004-05, the disallowance made in terms of S.40A(3) is ₹ 23.78 crores, as against only ₹ 42,25,796 for assessment year 2005-06 this vast difference in the disallowance between these two years is on account of deviation in the approach of the assessing officer and acceptance of the assessee’s arguments mentioned above. Therefore, on fairer side, the AO should not have considered the payments made in cash to the ‘representative’ for applying the provisions of section 40A(3)and he should have considered the payments made in cash at the stage of the supplier/producer of the milk - in favour of assessee.
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