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2013 (10) TMI 767 - AT - Income TaxPayment exceeding Rs.20000 to fall within the exception of Rule 6DD of the Income Tax Rules – Disallowance u/s 40A(3) of the Income Tax Act - Assessee was a Pakka Arahtia and made purchases from Kachcha Arahtias - Kachcha Arahtia acted as agents in its true senses - i.e., it mediates between two constituents, i.e., on one side there are farmers and on the other there are purchasers (whole sellers/pakka Arahtias) - The Kachcha Arahtias in order to facilitate the sale of agricultural produce which farmers brought to the Mandi has taken commission from the Pakka Arahtia, i.e., the assessee – Held that:- Reliance has been placed upon the judgment in the case of Renukeshwara Rice Mills[2004 (8) TMI 319 - ITAT BANGALORE-B ] - . The Kachcha Arahtias have also filed their affidavits acknowledging that cash payments were made at their insistence as they did not maintain any bank accounts as well as farmers have not maintained bank accounts and in turn Kachcha Arahtia has to make payments to the farmers in cash – Thus, in the absence of proper banking facilities, the assessee was under business expediency to make cash payment to the Kachcha Arahtias - Certain payments were made directly to the farmers as well as on bank holidays. Reliance has also been place upon the Board's circular No. 220 dated 31.05.1977, in which certain conditions have been laid down for making cash payments and some of the conditions are that when payments are made on bank holiday and the seller has refused to accept the payment by way of crossed cheques/draft. Further, the seller, acting as a commission agent is required to pay cash in turn to the persons from whom he purchased the goods - Kachcha Arahtia obtained the agricultural produce from the farmers and have arranged to make sales to the assessee being Pakka Arahtia. Since Kachcha Arahtia insisted for cash payment from the assessee for making cash payments to the farmers, therefore, sub-rule (e) along with sub-rule (k) of Rule 6DD would also apply in the case of the assessee - Considering the facts and circumstances of the case, the case of the assessee is clearly covered by exceptions provided under Rule 6DD of the IT Rules – Decided against the Revenue.
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