TMI Blog2012 (10) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the following concise grounds of appeal: :i. The AO and the CIT(A) have erred and their orders are deter mental to the interest of the appellant. The genuine expenditure totaling to ₹ 8,65,844/- incurred in cash exceeding ₹ 20,000/- at a time is disallowed even after proving that TDS is deducted and the recipients are assessed to tax and their identity established. The addition made results in double taxation in the hands of appellant and in the hands of recipient and hence to be deleted. ii. The second ground is that the expenditure incurred to purchase the computer software for the specific order, executed during the assessment year which was charged to the revenue is disallowed as capital expenditure and not even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 3,14,89,660/- and restricted the disallowance to ₹ 8,65,844/-. 6. Aggrieved by the said confirmation of the disallowance of ₹ 8,65,844/-, the assessee is in further appeal before us. 7. The learned counsel for the assesee submitted that the assessee being manufacturer and exporter of silk fabrics, is supposed to complete his work by time bound contracts. For this purpose, the assesee had to outsource weaving and processing work to weavers mostly in mofussil areas. He submitted that it is on the request of these job workers that the assessee has been constrained to make the payments exceeding ₹ 20,000/- by cash. He submitted that the recipients have been identified and have also confirmed before the AO that the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be exempt from the requirement of payment by a crossed cheque or crossed bank DD in the circumstances specified under this Rule. Thus, according to the learned counsel for the assessee, since the genuineness of the payment and the identity of the recipients is established, the disallowance is not called for. 8. The learned DR on the other hand supported the orders of the authorities below and submitted that the genuineness of the transaction and the identity the recipients alone is not sufficient compliance of sec. 40A(3) of the Income-tax Act. He submitted that as long as the assessee has not been able to establish the commercial requirement to make such payment in cash, the disallowance u/s 40A(3) is justified. In support of this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put together. However, we find that the Revenue has not doubted the genuineness of the transactions as it has not contradicted the assessee s submissions that the recipients have admitted that the payments are made in cash as per their demand. The assessee has thus established the commercial requirement or exigency for making the payment in cash. In view of the same, we are of the opinion that the disallowance u/s 40A(3) of the Income-tax Act is not called for and the assessee s appeal is accordingly allowed. 10. Coming to the second ground of appeal, the learned counsel for the assessee submitted that the assessee had claimed the expenditure for the purchase of computer software as revenue expenditure as it was for specific purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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