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2018 (10) TMI 1437 - AT - Income TaxAddition u/s 40A(3) - cash payments made through the agents of suppliers - purchase of building materials for the purpose of construction - Held that:- The primary object of enacting section 40A(3) were two folds, firstly, putting a check on trading transactions with a mind to evade the liability to tax on income earned out of such transaction and, secondly, to inculcate the banking habits amongst the business community. Apparently, this provision was directly related to curb the evasion of tax and inculcating the banking habits. Therefore, the consequence, which were to fall on account of non-observation of Section 40A(3) must have nexus to the failure of such object. Therefore, the genuineness of the transactions being free from vice of assessment any device of evasion of tax is relevant consideration. The assessee being a contractor frequently purchased building materials from various suppliers through their agents. The agents have flexibility to the assessee to make payments in installments. However, for giving such facility they required payments to be made in cash only. The assessee was compelled to make cash payments in excess of ₹ 20,000/-. In the instant case, the assessee had also established the circumstances under which the payment in the manner prescribed in section 40A(3) of the Act was not practicable or would have caused genuine problems and hence the business expediency is proved beyond doubt. This has not been controverted by the ld DR before us. Thus we direct the ld AO to delete the disallowance made u/s 40A(3). - Decided in favour of assessee. Disallowance u/s 40(a)(ia)- non deduction of tds on account of carriage inwards - retrospectivity of amendment - Held that:- In view of the amendment to second proviso to section 40(a)(ia) read with section 201(1) of the Act, if the payees have included the subject mentioned receipts in their returns and paid taxes thereon, if any, then the disallowance u/s 40(a)(ia) of the Act would not operate in the hands of the payer. This second proviso though introduced by the Finance Act 2012 w. e. f. 1. 4. 2013 had been held to be retrospective in operation in the case of Principal CIT vs Tirupati Construction [2016 (8) TMI 1310 - CALCUTTA HIGH COURT]. Hence in the interest of justice and fairplay, we deem it fit and appropriate, to remand this issue to the file of the ld AO for denovo adjudication of the issue in the light of second proviso to section 40(a)(ia) - Decided in favour of assessee for statistical purposes.
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