TMI Blog1985 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... h Rs. 14,026 recorded on July 4, 1970, was 'an expenditure' within the meaning of section 40A(3) of the Incometax Act, 1961 ? " The assessee-petitioner carries on business in petrol, diesel, kerosene, motor parts, etc., at Banswara. The accounting year of the assessee-firm for the assessment year ended on October 30, 1970. On July 4, 1970, the assessee debited in its cash book a sum of Rs. 14,026 against the purchase price of 18,000 litres of diesel. The quantity of diesel purchased recorded in the stock register on July 4, 1970, is as under : " 1,500, 1,000, 2,100, 1,500, 2,100, 1,800, 1,500, 2,100, 2,100, 1,500 18,000 litres. In the cash book, the assessee made an entry in respect of purchase of diesel in one lump sum. The assessee did not obtain purchase voucher. However, Kalimuddin, partner of the assessee-firm, submitted an affidavit to the effect that during Samvat year 2026, the firm had purchased 18,000 litres diesel worth Rs. 14,025.75 from various private parties to meet the temporary scarcity in the area. According to the assessee-firm, the said purchases were recorded in one lump sum in the books of account on July 4, 1970. The cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the price of diesel purchased), it was held by the Tribunal that it was only one payment. The assessee's contention was repelled that the word " expenditure " does not include purchase. An application filed by the assessee under section 256(1) of the Act was rejected on February 14, 1975. The assessee filed an application under section 256(2) of the Act to this court praying for stating the case and referring the questions of law arising out of its order. In pursuance of that, the aforesaid questions have been referred for our opinion. We have heard Mr. Rajendra Mehta, learned counsel for the assessee, and Mr. B. R. Arora for the Revenue. We have also examined the order dated October 22, 1974, of the Tribunal and having considered that order and the facts and circumstances of the case, we consider it proper to deal with question No. 3 first. Before we do that, we may mention that the Tribunal, as stated above, came to the conclusion that the payment of Rs. 14,026 is clearly caught in the net of section 40A(3) of the Act. It, therefore, affirmed the order passed by the authorities below that the aforesaid amount was rightly added back in terms of section 40A(3) of the Act as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t being an assessment year commencing prior to the 1 st day of April, 1969, in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year the assessee makes any payment in respect thereof in a sum exceeding two thousand five hundred rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, the allowance originally made shall be deemed to have been wrongly made and the Income-tax Officer may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the assessment year next following the previous year in which the payment was so made: Provided further that no disallowance under this sub-section shall be made where any payment in a sum exceeding two thousand five hundred rupees is made otherwise than by a crossed cheque drawn on a bank or by crossed bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Store v. CIT [1976] 104 ITR 664 (All) in the accounting year relevant to the assessment year 1970-71, the assessee-firm had made payments in cash exceeding the sum of Rs. 2,500 for some purchases. The total of such payments was Rs. 55,471. It was contended on behalf of the assessee that payments made for purchase of stock-in-trade could not be called " expenditure " and, as such, section 40A(3) was not applicable. The contention was repelled by the Allahabad High Court holding that there was no justification for accepting the plea that the word " expenditure " used in section 40A(3) should be restricted to overhead expenses enumerated in sections 30 to 43A, including depreciation allowance, etc., and that the payments made for purchases would also be covered by the word " expenditure " and such payments could be disallowed if they are made in cash in sums exceeding Rs. 2,500. The court opined that the payments made for purchases are expenditure within the meaning of section 40A(3) of the Act. Sajowanlal, Jaiswal's case [1976] 103 ITR 706 (Orissa) and U. P. Hardware Store's case [1976] 104 ITR 664 (All) were followed in CIT v. Grewal Group of Industries [1977] 110 ITR 278 (P H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd/or raw materials, etc., and such payments, in our considered opinion, fall within the sweep of section 40A(3) of the Act. We are in respectful agreement with the view taken in the aforesaid decisions referred to hereinabove. The cash book refers to the payment of Rs. 14,026 in one lump sum for the purchase of 18,000 litres of diesel. This is undoubtedly a sum in excess of Rs. 2,500 having regard to the meaning of the word " expenditure " used in section 40A(3) of the Act. The Tribunal was right in holding that the purchase of diesel worth Rs. 14,026 recorded on July 4, 1970, was an it expenditure " within the meaning of section 40A(3) of the Act. Question No. 3 referred to us by the Tribunal is, therefore, answered in the affirmative, in favour of the Revenue and against the assessee. In view of our answer to question No. 3, we are of the opinion that question Nos. 1 and 2 need not be answered because in the face of the answer given by us to question No. 3, their answers in the affirmative or negative, i.e., for or against the assessee or the Revenue, as the case may be, is not of much consequence, for, in any case, the amount involved will not be deductible in the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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