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Commissioner of Income-Tax Versus The Solution

2016 (5) TMI 287 - RAJASTHAN HIGH COURT

Disallowance under section 40A(3)(a) - Held that:- The case of the assessee can be said to cover in the exception of rule 6DD(k), as the payment is made by any person (assessee) to his agent who is required to make payment in cash for goods or services on behalf of such person (in the instant case, the assessee). The assessee has made the payment to the bank account of the agent which is a finding recorded by the Tribunal who was required to make payment in cash for buying petrol or diesel at di .....

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Income Tax Appeal No. 2 of 2015 - Dated:- 4-1-2016 - Ajay Rastogi And J. K. Ranka, JJ. For the Petitioner : R. B. Mathur JUDGMENT J. K. Ranka, J. 1. Instant Income-tax Appeal under section 260A of the Income-tax Act, 1961 (for short, "Act"), is directed against the order dated September 5, 2014, passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, "Tribunal") and relates to the assessment year 2008-09. 2. Brief facts noticed are that the respondent-a .....

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and on a further enquiry about the details of purchases of the aforesaid diesel, it was noticed by the Assessing Officer that the assessee had made payment in cash exceeding ₹ 20,000 to various suppliers throughout the State and the cash purchase through the said suppliers was ₹ 2,40,85,381. The assessee also claimed cash payment of ₹ 29,189 under the head vehicle running and maintenance expenses and dissatisfied with the aforesaid cash payments exceeding ₹ 20,000, the As .....

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pumps and supply it to the sites of M/s. Idea Cellular Company in that area and the assessee deposits the amount in the bank account of the agents, who are located at various locations including interior and remote places in Rajasthan and contended that as per rule 6DD(k), it is covered by the said definition and provisions of section 40A(3)(a) are inapplicable. However the Assessing Officer was dissatisfied and made disallowance of the entire amount of ₹ 2,41,14,570. 4. On an appeal, the .....

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ed in disallowing the said amount. The assessee was well aware that violation of section 40(A)(3)(a) entails total disallowance and despite the same, it made cash payments and therefore, the addition was well justified by the Assessing Officer and has wrongly been deleted by the Tribunal. He relied upon the judgment rendered by the Kerala High Court in the case of MRS Roadways v. CIT [2014] 367 ITR 62 (Ker) and contended that the Kerala High Court in identical circumstances in a case of a transp .....

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ents for various locations numbering 110 who purchased diesel/petrol from dealers of the petrol pumps and arranged supply to various locations of diesel generating sets for Idea Cellular Company. The petrol pump asked for payment in cash as neither the assessee nor the agents were known to them and it was neither practicable nor feasible for the assessee to open office or branch at every location. It is also an admitted fact that the assessee has placed on record the agreements with the various .....

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corded that no cash payment was made directly to the agents but was deposited in their respective bank accounts. Therefore, in our view, the Tribunal has come to a correct finding that transaction, if any, was not by cash so as to come within the purview of provisions of section 40A(3)(a). The Tribunal alternatively has also held that the case of the assessee falls under the exception clause of rule 6DD(k) as the assessee has made the payment to the bank account of the agents who were required t .....

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Cases and circumstances in which payment in a sum exceeding twenty thousand rupees may be made otherwise than by an account payee cheque drawn on a bank or account payee bank draft.- No disallowance under clause (a) of sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under clause (b) of sub-section (3) of section 40A where any payment in a sum exceeding twenty thousand rupees is made otherwise than by an account pay .....

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ment in cash for goods or services on behalf of such person (in the instant case, the assessee). The assessee has made the payment to the bank account of the agent which is a finding recorded by the Tribunal who was required to make payment in cash for buying petrol or diesel at different locations. 9. As regards the judgment rendered in the case of MRS Roadways v. CIT (supra), relied upon by learned counsel for the appellant, the facts are distinguishable as the Kerala High Court found that eve .....

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exemptions covered in rule 6DD and found that no substantial question of law emerge and accordingly dismissed the appeal. The facts, as noticed herein above and found by the Tribunal in the instant case, are distinguishable as in the instant case, the assessee has directly engaged the agents to function for and on behalf of the assessee and admittedly such agreements with the various agents have been placed on record by the assessee and payments have been deposited in the respective bank account .....

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