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2017 (3) TMI 183 - AT - Income TaxDisallowance u/s 40A(3) - payments made in cash to land owners - Held that:- Rule 6DD(g) excludes the payment, which is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town. In the above rule, with regard to the person who receives the payment, it prescribes two situations wherein first situation, rule allows the payer to pay in the place of residence and in the second situation, the payment made in the place of the dealing or place of registration in which the person carries the business, profession or vocation. In the given case, the assessee claims that the payment was made in the place of vocation and the revenue infers that the payment was made in the place of residence due to the fact that the banking facilities are available in the place of residence. The revenue has not substantiated its claim that the payments were actually made in the place of residence. In the absence of such evidence, we are inclined to accept the contention of the assessee that these payments were made in the place of vocation i.e., the payments were made in villages where the agricultural lands are situated. Thus we set aside the orders of CIT(A) and allow the appeals of the assessee in both the years under consideration. With regard to land development expenditure, these expenses were incurred in the villages to develop the land, where there is no banking facilities. Hence, we are inclined to accept the contention of the assessee that these payments were made directly to the employees of the company to carry out the development work. Accordingly, these expenses are also not hit by the provisions of section 40A(3). With regard to payment of commission, we have noticed that the AO has disallowed the payment to agents due to the fact that genuineness of the payments were not proved due to non-compliance to the notices of AO and mismatch of the signatures on the confirmation letters submitted by the assessee. The ld. AO had accepted the payments which are properly documented. Hence, we accept the findings of the AO and accordingly grounds raised by the assessee in this regard are dismissed.
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