TMI Blog2012 (3) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... APPA, SHRI A.D. JAIN, JJ. Appellant by : Dr. Rakesh Gupta, Adv., Sh. Ashwani Taneja, CA Respondent by : Sh. B.R.R. Kumar, Sr. DR ORDER PER A.D. JAIN, J.M. This is assessee s appeal for the A.Y. 2006-07 against the order dated 07.04.2010 passed by the ld. CIT(A)-I, Dehradun, raising the following grounds: 1. That having regard to the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in confirming the action of ld. AO in disallowing of Rs. 27,47,516,80/- i.e. (20% of 1,37,37,584/-) on account of cash payment u/s 40A(3) that too without considering the facts of the case. 2. That in any case and in any view of the matter action of ld. CIT(A) in confirming the action of ld. AO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offices, that this work is allotted to truck owners, who are the members of the society and they transport the goods; that whatever bill is received from the truck owners, is sent to the consignee; that at the time of payment to the truck owners, the society charges commission @ 3% from the payment of bill to the truck owners; that as such, the society does not earn any profit from the truck hiring charges; that all the receipts are only on behalf of the truck owners and payments are made after the receipt, as verifiable from the bank statement; that as such, the payments made to the truck owners are not the expenses incidental to the business, as is also evident from the clause 11 of the memorandum of the society and from the income and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) erroneously did not take them into consideration and confirmed the disallowance; that for A.Y. 2004-05, the AO had made a similar disallowance vide order dated 20.12.2006 (copy placed on record), amounting to Rs. 2 lacs; that however, vide order dated s02.03.2010 (copy placed on record), the ld. CIT(A) deleted this disallowance; and that Rule 6DD of the Rules would only get attracted if section 40A(3) of the Act is applicable, which is not the case here. The ld. Counsel has sought to place reliance on the following case laws: - 1. Commissioner of Income Tax Vs. Sirmour Truck Operators Union 236 CTR (HP) 550; 2. Commissioner of Income Tax Vs. Ambuja Darla Kashlog Mangu Transport Cooperative Society 227 CTR (HP) 299 and 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee society charges commission @ 3% from the payment of bill to the truck owners. The assessee made cash payments and the AO made disallowance u/s 40A(3) of the Act. The ld. CIT(A) confirmed the disallowance. The issue is as to whether the disallowance is in accordance with law. 7. It remains undisputed that the cash payment is under a resolution of the society that whenever necessary, like in the instance of refusal to load/unload goods, payment be made to the truck owners in cash. CBDT Circular No. 220 dated 31.05.1977, it is seen, clarifies that no disallowance u/s 40A(3) of the Act shall be made where payment could not be made by way of cross cheque drawn on a bank or by a cross bank draft, due to exceptional or unavoidable circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orries for carrying on the work and made cash payment to lorry owners for the services. It was held that the assessee did not carry on any business of transport operator, but its business was primarily of a commission agent or broker and it actually facilitated payment of transport hire charges by users of transport vehicles being Beedi manufactures and other customers to actual owners of the vehicles and, therefore, the payments were not business expenses of the assessee and could not be disallowed u/s 40A(3) of the I.T. Act. 11. In the present case also, transportation is not the business of the assessee company. It acts as a commission agent facilitating payment to the truck owners, who are its members. Therefore, the payments were not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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