TMI Blog2014 (2) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... i Enterprise and R.D Infocom - Decided in favour of assessee. - Tax Appeal No. 556 of 2013 - - - Dated:- 22-1-2014 - Akil Kureshi And Sonia Gokani,JJ. For the Petitioner : Mr. Manish J. Shah For the Respondent : Mr. Sudhir M. Mehta JUDGMENT (Per : Honourable Mr. Justice Akil Kureshi) Appeal is admitted for consideration of following substantial question of law :Page Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that Section 40A(3) applies to the payment of Rs. 33,10,194/= deposited by the Appellant in the bank account of Tata Tele Services Limited ? We have heard learned counsel for final disposal of the appeal. Brief facts are as under :The issue pertains to A.Y 200607. The appellant assessee is involved in the business of distribution of mobile and recharge vouchers of Tata Teleservices Limited. They are the authorized channel partners of the Company. They would make payment to the company for purchase of recharge vouchers. The assessee made such payment through account payee cheques till 22nd August 2005, when a circular was issued by Tata Teleservices Limited requiring the appellant to deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 12th November 2009, reversed the decision of the Assessing Officer. He held and observed as under : 6. I have gone through the submission of the appellant and the observations of the Assessing Officer. The fact of cash payment is not disputed. It is a fact that Tata Tele Services Limited had intimated that the DD/Payee Order issued by the assessee s banker namely Saraswat Cooperative Bank Limited would be accepted as a cheque and effect delivery after the cheques are cleared which will take 4/5 days. This delay might adversely affect the business of the assessee. The a is a Distributor of Tata Tele Services Limited and can obtain the recharge facilities only after payment made to the principal company. Therefore, the Tata Tele Services Limited insisted the company to pay in cash and get immediate delivery to avoid delay and suffering in the market. From 28.08.2005, in accordance with the instruction of Tata Tele Services Limited, the amounts were paid in cash. Such circumstances need to be kept in mind. The factum of payment made to the Tata Tele Services Limited is not disputed. The transactions are genuine. The assessee had filed a copy of account of Tata Tele Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made otherwise than by crossed cheque drawn on a bank or by a crossed bank draft in the cases and circumstances specified hereunder, namely : (j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike. The Tribunal concluded as under : The Hon ble jurisdictional High Court in the case of Hasanand Pinjomal [Supra] had interpreted the old provisions of Rule 6DD only. The decision of the Special Bench, Calcutta in the case of Kenaram Saha Subhas Saha [Supra] is the latest decision on the applicability of the provisions of Section 40A (3) and is squarely applicable to the facts of this case according to which the assessee can get exemption from the provision of Section 40A(3) only if he is able to show that his case falls within any of the clauses of Rule 6DD of the Income Tax Rules. It has further been held in that case that burden to establish under which particular clause his case falls is also on the assessee. Since the lower authorities have not examined the issue in hand in the light of this decision, we are of the considered opinion that the matter should go back to the file of the A.O for fresh adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing decisions : [ a] Attar Singh Gurmukh Singh v. IncomeTax Officer, Ludhiana, reported in [1991] 191 ITR 667, in which it was observed that the word expenditure has not been defined in the Act. It is a word of wide import. Section 40A(3) refers to the expenditure incurred by the assessee in respect of which payment is made. It means that all outgoings are brought under the word expenditure for the purpose of the section. It was observed that any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing the freedom of trade or business. [b] In case of Commissioner of IncomeTax v. Hynoup Food Oil Industries Private Limited, reported in [2007] 290 ITR 702 (Guj), wherein, the Division Bench of this Court, in a reference from the Income Tax Tribunal on a question of law, had an occasion to interpret Section 40A(3) read with Rule 6DD in which, it was observed as under : 16. Whether in the circumstances of the present case is it possible to state that the case of the assessee is governed by the exceptions carved out by Rule 6DD(j) of the Rules ? The Rule has to be read in the context of the second proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee made cash payments to the bank accounts of suppliers maintained with different banks, such payments would not be excluded from section 40A(3) of the Act. In case of Commissioner of Incometax, Madurai v. Venkatadhri Constructions, reported in [2013] 31 Taxmann.com 71 [Madras] in which similar view was expressed. We need to answer the question on the facts arising in the present case with the help of the decisions listed before us. The facts before us are more or less undisputed. The appellantassessee acted as an agent of Tata Teleservices Limited for distributing mobile cards and recharge vouchers. For getting such mobile cards and recharge vouchers, the assessee would make payment to Tata Teleservices Limited. Till a point of time, in the month of August 2005, such payments were made by account payee cheques. The Tata Teleservices Limited, however, issued a circular not only to the assessee but to all other distributors in the State stating that the distributors will pay only through demand draft drawn on nationalized bank or through bank deposit slips and where the distributor had a bank account with cooperative bank, the payment should be made in cash., In consonance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under this subsection where any payment in a sum exceeding twenty thousand rupees is made otherwise than by an account payee cheque drawn on a bank or account payee bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. Rule 6DD of the Income Tax Rules, 1962 provides for situations under which disallowance under section 40A (3) shall not be made and no payment shall be deemed to be the profits and gains of business or profession under the said section. Amongst the various clauses, clause (j) which is relevant, read as under : (j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike; It could be appreciated that Section 40A and in particular subclause (3) thereof aims at curbing the possibility of onmoney transactions by insisting that all payments where expenditure in excess of a certain sum [in the present case twenty thousand rupees] must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but relied solely on Rule 6DD (j) of the Rules to hold that since the case of the assessee did not fall under the said exclusion clause nor was covered under any of the clauses of Rule 6DD, consequences envisaged in Section 40A(3) of the Act must follow. In our opinion, the Tribunal committed an error in coming to such a conclusion. We would base our conclusions on the following reasons : [ a] The paramount consideration of Section 40A(3) is to curb and reduce the possibilities of black money transactions. As held by the Supreme Court in Attar Singh Gurmukh Singh [Supra], section 40A(3) of the Act does not eliminate considerations of business expediencies. [b] In the present case, the appellant assessee was compelled to make cash payments on account of peculiar situation. Such situation was as follow [i] the principal company, to which the assessee was a distributor, insisted that cheque payment from a cooperative bank would not do, since the realization takes a longer time; [ii] the assessee was, therefore, required to make cash payments only; [iii] Tata Teleservices Limited assured the assessee that such amount shall be deposited in their bank account on behalf of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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