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2018 (3) TMI 1880 - AT - Income TaxDisallowance u/s.40A(3) - whether the assessee is entitled for exemption under Rule 6DD in respect of all the payments or any of the payments made in cash? - HELD THAT:- Genuineness of the payment and the identity of the payee are not disputed. The assessee pleads that it was compelled to pay cash owing to the insistence of its principal and if it had not abided by the direction, its business would have suffered involved in trying to revive the sick company in the role of ‘Co-Promotor’ and in the process salvage the huge investment already made in M/s. Sitalakshmi Mills Ltd. In the best interest of the assessee to ensure that M/s. Sitalakshmi Mills Ltd was deregistered from BIFR. This was finally achieved when the Hon’ble Madurai bench of the Madras High Court ordered so, also with a word of appreciation for your humble assessee. Cash payments were made with the whole objective and primarily to protect the business interests of the assessee whose funds were locked up and due from M/s. Sitalakshmi Mills Ltd. These actions clearly fall within the scope of considerations of business expediency and other relevant factors as mentioned in the provisions itself (in the second proviso). The assessee is also right in its pleading that these aspects are to be judged from the point of prudent businessman. Thus, on the facts and on relying the purposive interpretation of ATTAR SINGH GURMUKH SINGH [1991 (8) TMI 5 - SUPREME COURT] the assessee has clearly made out a case in its favour and hence, we allow the assessee’s appeal.
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