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2012 (12) TMI 452 - HC - Income TaxDisallowance u/s 40A(3) read with rule 6DD - payment of expenditure in cash - mobile railway catering contractor - held that:- Apparently, that concern is also a small time one and insists on cash payments for ensuring continuity and timely supplies. Whilst, the Court is conscious and does not in any manner wish to comment adversely on the larger public interest element embedded in Section 40A and the underlying principle, at the same time, the Court also notes that the proviso seeks to relieve to a certain extent, the measure of hardship which might be imposed upon small businesses and professionals who are engaged in activities and are dependent entirely on timely cash flow. It is in such cases that Rule 6DD - which was formulated as a proviso to Section 40A (3) - steps in to aid such assessees and concerns. In this context, the statutory mandate in Section 6DD (k), at least in the circumstances of the case, has to be so construed as to mean that but for the cash payment, the assessee would have been deprived the benefit of supplies itself. This Court clarifies that the interpretation of the expression “who is required to make payment in cash” having regard to the circumstances of the case is fact dependent, at least in the present case. The consequence of instances of payment through account payee cheques in small business which are dependent on such supplies would be to completely stifle, if not stop, the business activities. It is in that sense that the expression “required” would have to be construed. Having regard to the peculiar facts and circumstances, the Tribunal and the lower authorities adopted an unduly narrow and technical interpretation of Rule 6DD(k), the benefit of which the assessee clearly was entitled to. - Decided in favor of assessee.
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