TMI Blog2014 (2) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is under the direct control of the state government, is a payment made directly to the government. Once, this is accepted then the provisions of Rule 6DD(b) of the I.T Rules 1962 which clearly spells out that the payment made to the government in legal tender under the rules framed by the Government, is exempted from the rigours of section 40A(3) of the Act - the payments made by the assessee for purchase of country spirit and country liquor is to the government as per the notification issued by the government and is in legal tender specified by the notification - the payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant is protected by the exemption in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in law. 2. FOR THAT under the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Durgapur acted unlawfully in upholding the impugned disallowance resorted to by the Ld. Deputy Commissioner of Income Tax, Circle 1, Durgapur by invoking the provision of s. 40A(3) of the Income Tax Act, 1961 in the sum of Rs. 1,11,11,235/- incurred for making purchase of country spirit acting as a licencee of the Government without considering the exception contained in Rule 6DD(b) read with Rule 6DD(k) of the Income Tax Rules, 1962 and his purported finding on that behalf is altogether capricious, unwarranted and erroneous. 3. FOR THAT the Ld. Commissioner of Income Tax (Appeals) Durgapur misread evidences, considered improper fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed the purchase in its entirety by invoking the provisions of section 40A(3) of the I.T Act 1961. It was the further submission that the ld.CIT(A) also did not accept the contentions of the assessee by relying upon the decision of the Hon ble Kerala High Court in the case of K. Abdu Co. reported in 170 Taxman 297(Ker). It was the submission that the Hon ble Kerala High Court in the case of K. Abdu Co (refer to supra) has referred to the provisions of Rule 6DD(a) of the I.T Rules 1962. It was the submission that said decision of Hon ble Kerala High Court in the case (refer to supra) was in relation to the payments to institutions referred to therein and not to the account of persons whose accounts are maintained by such institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned AR for the assessee has further submitted that the addition as made by the AO and as confirmed by the ld.CIT(A) in the interest of justice may be deleted in so far as the complete purchase of the assessee have been disallowed without, appreciating the fact. 5. In reply, the learned JCIT(Sr.DR) has vehemently supported the orders of the AO and the ld.CIT(A). It was the submission that whether the licensee was to deal in country spirit itself, is to be verified. It was the submission that the orders of the AO and ld.CIT(A) were liable to be upheld on this issue. 6. We have considered the rival submissions. At the outset a perusal of the assessment order clearly shows that the AO has recognised the assessee s business in trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealize the necessary amount of duty, cost price and bottling charge, if there be any, at the prescribed rate and such other imposition, as may be prescribed by law, from the retail vendor to whom the country spirit is to be issued from the concerned warehouse. It is also specifically mentioned in section (2) of the said notification that no retail vendor of country spirit shall deposit duty direct into the local treasury for issue of country spirit to be taken by him from the warehouse concerned, which clearly shows that the warehouse is for the supply of the country liquor, specifically, the warehouse is under the direct control and custody of the State Govt. The State Government has closed its doors in so far as the local treasury is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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