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2017 (4) TMI 458 - HC - Income TaxDisallowance under Section 40A(3) - AO opined that banker’s cheques were not covered in any of the provisions of Rule 6DD of the Income Tax Rules as they were the account payee demand drafts under Section 40A(3)- cancellation of disallowance by ITAT - Held that:- This Court is of the opinion that the literal construction of Section 40A(3) sought to be canvassed by the Revenue is narrow and contrary to the provisions of the Negotiable Instruments Act, 1881, especially Section 5 thereof. See Punjab & Sind Bank Vs. Vinkar Sahakari Bank Ltd. & Ors. [2001 (9) TMI 993 - SUPREME COURT OF INDIA] held once the holder, which in this case is the complainant Bank, has elected to treat the instrument as a cheque it cannot but be treated as a cheque thereafter. This is an irretrievable corollary of exercising such an election by the holder himself. A complaint is maintainable under Section 142 in the event a banker’s cheque is dishonoured. This Court also notices that the expression used in the Income Tax itself is “a bill of exchange”, which is a class of instruments, that cannot be ignored or disallowed by virtue of Section 40A(3) read with Rules 6 DD of the Income Tax Rules. No substantial question of law arises.
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