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2008 (1) TMI 564 - HC - Income TaxBusiness Expenditure - Disallowance - The assessee is a firm indulging in constructional activities. For the assessment year 1989-90, the assessee filed a return of income. The Assessing Officer disallowed an income of Rs. 37,17,788 holding that the expenditure incurred paid by way of cash is contrary to section 40A(3) of the Act. The assessee filed an appeal before the Commissioner of Income-tax (Appeals) which appeal came to be allowed. Against which a second appeal was filed by the Revenue which appeal has been dismissed by the Tribunal confirming the order passed by the Commissioner of Income-tax (Appeals). Against these two orders, the present appeal is filed. Held that-if both the authorities on facts had held that the assessee being a principal contractor had passed on the amount to the sub-contractor, such amount could not be treated as an expenditure. The cash payment of Rs. 37,17,798 made by the assessee did not attract the provision of section 40A(3) of the Act or an amount passed on to the sub-contractor was a question of fact and not a question of law. If both the authorities on the facts had held that the assessee being a principal contractor had passed on the amount to the sub-contractor, such amount could not be treated as an expenditure. The cash payment of Rs. 37,17,798 made by the assessee did not attract the provision of section 40A(3) of the Act.
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