TMI Blog2013 (7) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... lement of sale in the transaction between the society and the assessee the contention of the assessee that the said co-operative society was acting as the agent of the assessee has to be necessarily accepted - assessee is entitled to protection under rule 6DD(i) of the Rules as the disputed payments were made only to its agents - Apart from that aspect, by going through the nature of business and transaction between the parties an element of commercial expediency was also involved in this case which we can take judicial notice – there are no other materials placed by the Revenue to take a different view – appeal decided against revenue. - - - - - Dated:- 18-2-2013 - BANUMATHI R. MRS. AND RAVICHANDRABAABU K., JJ. JUDGMENT K. Ravich ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons were not agents of the assessee and the said payments did not appear to have been made on behalf of the assessee. He further proceeded to hold that the provisions of rule 6DD of the said Rules have no application to the cash payments under consideration and those payments are in violation of the provisions of section 40A(3) of the Income-tax Act. Accordingly, he disallowed 20 per cent. of the aggregate of such payments which works out to Rs. 26,10,552. The assessee went on appeal before the Commissioner of Income-tax (Appeals). The first appellate authority elaborately considered the issue. He pointed out that the ginning factories and traders and the growers are members of the Tiruchengode Agricultural Producers Marketing Society Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was pointed out by the Tribunal that the payments under dispute were made to five parties and all of them have charged 1 per cent. commission from the assessee which means that such persons including the co-operative society were acting on behalf of the assessee in the process of auction. Since those persons were charging commission from the assessee, it cannot be said that they were not acting on behalf of the assessee. It was also pointed out by the Tribunal that such persons in turn were required to make payment to the agriculturists in cash. Consequently, the Tribunal found that the payments made through the agents are clearly covered by the provision of rule 6DD(i) and addition should not have been made in respect of those payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draft, twenty per cent. of such expenditure shall not be allowed as a deduction. No doubt, in this case, the assessee had made payments in cash to five persons out of wham the present appeal is confined to the payments made to M/s. P. K. R. Murugan Commission Mundy and to Tiruchengode Agricultural Producers Co-operative Marketing Society. The claim of the assessee is that such payments were made to those persons as the assessee's agents and, therefore, the said payments were protected under rule 6DD(i) of the Income-tax Rules. A perusal of rule 6DD(i) shows that no disallowance under sub-section (3) of section 40A shall be made where any payment in a sum exceeding twenty thousand rupees is made otherwise than by a crossed cheque drawn on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done by the first appellate authority. In so far as the other persons, viz., P. K. R. Murugan Commission Mundy is concerned, the first appellate authority on verification of the return filed by the said person for the above assessment year 1998-99, found that the credit side of the profit and loss account showed receipts from agriculturists as cotton commission receipts and receipts from bidders as merchant commission. The first appellate authority also found that the sales tax assessment orders supported the case of the assessee to the effect that the total turnover as per the accounts representing local sales of cotton kappas as agents of agriculturist/principals. Therefore, after rendering such factual finding on the status of those ..... X X X X Extracts X X X X X X X X Extracts X X X X
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