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2016 (11) TMI 525 - ITAT KOLKATA

2016 (11) TMI 525 - ITAT KOLKATA - TMI - Disallowance under section 40A(3) - Held that:- The assessee has a commercial expediency under Rule 6(2) of the West Bengal Rules referred to above to make payments to the credit of M/s. Asansol Bottling and Packaging Pvt. Limited, Burdwan and M/s. Asansol Bottling and Packaging Pvt. Limited, Burdwan, who is deemed to be an agent of the State Government, as such in terms of Rule 6DD(b) and Rule 6DD(k) of the Income Tax Rules, they are exempted and the dis .....

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Commissioner of Income Tax (Appeals), Asansol (hereinafter referred to as learned CIT ) for the assessment year 2010-11. 2. Brief facts of the case are that the Assessee is a retail vendor of Country Spirit, which is an excisable commodity. The purchase and sale are strictly controlled by the State Government. Earlier the retail dealers like the assessee were depositing the cost price, excise duty, bottling charges, etc. in the Treasury for getting supplies from the wholesale licensee. However, .....

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ing, the Assessing Officer disallowed the cash deposits which were in excess of ₹ 20,000/- on each occasion, made into the Bank account of M/s. Asansol Bottling and Packaging Pvt. Limited, Burdwan under section 40A(3) of the Income Tax Act. The assessee carried the matter in appeal before the ld. CIT(Appeals), who by way of the impugned order dated 25.11.2013 dismissed the same and confirmed the order of the Assessing Officer. Challenging the same, the assessee carried the matter in appeal .....

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tly made in the bank account of the seller and a such the provisions of sec. 40A(3) were not applicable. (4) For that the ld. CIT(A) erred in confirming the addition of ₹ 62,68,458/- when village where the assessee s shop was established had no banking facility and the payment made directly to the bank account of the seller was not hit by the provisions of sec. 40A(3). (5) For that even otherwise having regard to the nature and extent of banking facilities available consideration of busine .....

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d reasonable. (7) For that on the facts and circumstances of the case, the order of the CIT(A) be modified and the assessee be given the relief prayed for. 3. It is the argument of the ld. A.R. that pursuant to the Rules framed by the State Government, the assessee deposited cash in the account of the wholesale licensee, as such the provisions under section 40A(3) are not attracted in view of the exemption allowed under section 6DD(a)(ii) of the Income Tax Rules. He further submitted that the wh .....

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yment is made to Government. Further he contended that by virtue of Notification dated 04.09.2006, the wholesale licensee shall be treated as an agent of the State Government because it is only through him, the Government receives the amount from the retail vendors, as such the payments made by the assessee fall under the exception provided in Rule 6DD(k) of the Income Tax Rules. He, therefore, prayed to the Tribunal to delete the addition made on account of application of section 40A(3) of the .....

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ld. CIT(Appeals) is justified in upholding the disallowance under section 40A(3) of the Act in the facts and circumstances of the case. 6. At the outset, we may state that there is no dispute in respect of the genuineness of the transactions made by the assessee. So also the identity of the receiver of the funds is not in dispute. Payments made into the Bank account of the wholesale licensee or the appointment of M/s. Asansol Bottling and Packaging Pvt. Limited, Burdwan by the State Government .....

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untry spirit on payment of duty in labelled and capsule bottles from country spirit bottling plants and in bulk from warehouses by licensed wholesale vendors of the same for the purpose of selling country spirit by wholesale. This Rule 6(2) stipulates 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, duty, cost price, bottling charges, if there be any, at the prescribed rate and o .....

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reasonableness of the payment. When this is the primary object of enacting section 40A(3), we will have to see whether the payments made by the assessee into the account of M/s. Asansol Bottling and Packaging Pvt. Limited, Burdwan would frustrate the purpose of enactment of section 40A(3). By virtue of payment through cash dated 04.09.2006, the wholesale licensee with exclusive privilege for bottling and/or sale by wholesale country spirit in sealed or capsule bottles and for manufacture and wh .....

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otification. We, therefore, can safely conclude that the payments made to M/s. Asansol Bottling and Packaging Pvt. Limited, Burdwan for all practical purposes are the payments to be reached to the State Government and once this is so, the said wholesale licensee shall be construed as an agent of the State Government. We, therefore, can safely conclude that once such payments are made to the credit of M/s. Asansol Bottling and Packaging Pvt. Limited, Burdwan, the source and destination of such fu .....

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