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TMI Blog2002 (12) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... d for disallowance of entire expenditure subject to rule 6DD in excess of payments over Rs. 10,000 made other than through account payee cheques and demand drafts. However, until the amendment of rule 6DD(j) with effect from December 1, 1995, the Assessing Officer was free to allow deductions on cash payments in excess of Rs. 10,000 if he was satisfied that such payments are made in unavoidable circumstances or it was not practical to make payment other than through cash or payment through account payee cheques or demand drafts would have caused genuine difficulty to the payee having regard to the nature of the transaction and the necessity for expeditious settlement thereof and on production of proof in this regard. Consequent to the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to counsel, the decision of the Supreme Court in Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 cannot be relied on by the Department to sustain validity of the section as it stands now. Standing counsel for the Department, on the other hand, contended that the Government of India has not deleted rule 6DD(j) as such but has reframed the entire rules among others introducing new provisions, namely, (k) and (l) along with substituted clause (j). According to him, the safeguards provided in rule 6DD after the amendment referred to above will cover all practical difficulties for businessmen. His further contention is that section 40A(3) does not affect the petitioners' right to carry on business under article 19(1)(g) of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess of the limit provided then under section 40A(3) which was Rs. 10,000. While considering the validity of section 40A(3), the Supreme Court has also strongly relied on rule 6DD(j) as it stood then which is as follows: "(j) in any other case, where the assessee satisfies the Assessing Officer that the payment could not be made by a crossed cheque drawn on a bank or by a crossed bank draft- (1) due to exceptional or unavoidable circumstances, or (2) because payment in the manner aforesaid was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof, and also furnishes evidence to the satisfaction of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een days or more in a place other than his normal place of duty or on a ship; and (B) does not maintain any account in any bank at such place or ship; (k) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike; (l) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person." In view of the above binding decision of the Supreme Court, the question now to be considered is whether the amendment to the Act and the Rules under challenge will make any change in the law as declared by the Supreme Court. In principle, the Supreme Court held that section 40A(3) does not violate article 14 or 19(1)(g) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined as to the scope of the new rules which have come in the place of the earlier rule based on which the Supreme Court rendered its decision. Now even after the amendment to the rules by the Income-tax (Twenty First Amendment) Rules, 1995 and the Income-tax (Twenty Fourth Amendment) Rules (sic) there is a provision for complete deduction of expenditure over Rs. 20,000 incurred in cash under clause (h) of rule 6DD for payment made for the purchase of agricultural or forest produce or the produce of animal husbandry or dairy or poultry farming or fish or fish products or the products of horticulture or apiculture to the cultivator, grower or producer of such articles, produce or products. Similarly, exemption is provided for payment on purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nking services are available to the parties. It cannot be said that insistence of money transactions through the bank where the facilities are available which is to ensure transparency in the transactions any way affects the rights of the parties to carry on any trade or business. In fact I am of the view that clauses (h) and (k) of rule 6DD are sufficient liberalisation to get over the practical difficulties of section 40A(3) and clause (1) only provides a leverage to the unscrupulous to get over the discipline of section 40A(3) of the Act. In the circumstances, I do not think, the amendment to the rule any way changes the position declared by the Supreme Court and, therefore, the petitioners are not entitled to succeed in the challenge ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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