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TMI Blog2022 (2) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... al entities distinct from State Government. 2. The Ld CIT(A) has erred in presuming that receipt of payment in legal tender was not prohibited by any rules framed by the State Government Undertakings thereby ignoring that clause(b) of Rule 6DD required that such expenditure was allowable only if under the rules framed by Government, such payment was required to be made in legal tender and no such rules have been pleaded. 3. The Ld CIT(A) while holding that receipt of payment in legal tender was not prohibited by any rules framed by the State Government Undertakings did not appreciate that the such reasoning would negate the provisions of the statute and render section 40A(3) of the Income Tax Act a nullity. 4. The Ld. CIT(A) has erred in holding that no disallowance u/s 40 A(3) could be made as genuineness of the payment was not in doubt thereby ignoring that any expenditure not covered under the exceptions provided under clause(a) to (1) of Rule 6DD had to be disallowed under section 40 A(3) of the Act and that genuineness of such payments was not provided as an exception under the exhaustive list of Rule 6DD. 5. The Ld. CIT(A) has erred in ignoring the findings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,97,340/- a/w agriculture income of Rs. 3.50 lacs. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). After deliberating at length on the contentions advanced by the assessee, the CIT(A) concurred with his claim that the provisions of Sec. 40A(3) would not stand triggered as regards the payments in question. Observing, that as the assessee had made the payments to the undertakings of the State Government of Rajasthan, which as per the judicial precedents relied upon by the assessee were to be considered as an arm of the State Government, and the said payments were made in legal tender, i.e., in Indian currency, the CIT(A) concluded that by virtue of the exception carved out in Rule 6DD(b) of the Income Tax Rules, 1962, the said respective amounts were not liable to be disallowed u/s 40A(3) of the Act. Backed by his aforesaid conviction the CIT(A) vacated the disallowance that was made by the A.O u/s 40A(3) of Rs. 2,07,24,418/- [1,37,31,676/- + Rs. 69,92,742/-]. 5. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We have heard the Ld. Authorized Representatives for both the parties, perused the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de have been reflected in the TCS returns of the Govt. Undertakings and is also reflected in Form 26AS of the appellant. In the circumstances, it is held that the appellant is entitled to be exempted from the operation of the provisions of section 40A(3) by virtue of falling in the category of Rule 6DD(b). Accordingly, the disallowance and the consequent addition of Rs. 2,07,24,418/- [Rs. 1,37,31,676/- + Rs. 69,92,742/-] is directed to be deleted. The ground of appeal pertaining to this issue is thus treated as allowed." 6. Controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not the CIT(A) is right in law and the facts of case, in concluding, that the cash payments made by the assessee towards purchase of wine to the aforementioned undertakings of the Government, viz. (i) M/s Rajasthan State Ganganagar Sugar Mills Ltd; and (ii) M/s Rajasthan State Beverages Corporation Ltd., which as per him were to be considered as an arm of the State Government that had received the payment in legal tender, i.e., in Indian currency, would by virtue of the exception carved out in Rule 6DD(b) of the Income Tax Rules, 1962 be saved from the disallowance cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We find that the issue as to whether or not a corporation could be said to be an instrumentality or agency of the Government had after exhaustive deliberations been looked into and adjudicated upon by a co-ordinate Bench of the Tribunal, viz. ITAT, Pune Bench "B", Pune in the case of Smt. Sapna Sanjay Raisoni v. ITO, Ward-2(1), Pune. In the aforesaid order, it was observed by the Tribunal that if a body was found to be an instrumentality or the agency of the Government, then, it would be an authority included in the term "State" under Article 12 of the Constitution of India. After referring to Article 12 of the Constitution of India, it was observed by the Tribunal that the definition of "the State" therein provided, though inclusive and not exclusive, included, viz. (a). the Government and Parliament of India; (b). the Government and the Legislature of each of the States; (c). all local and other authorities within the territory of India; and (d). all local and other authorities under the control of the Government of India. Observing, that the term "other authorities" used in Article 12 was neither defined in the Constitution of India nor in any other statute, the Tribunal had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Phrases", is "the coinage of a country in which debts may be paid and which the creditor is bound to accept". The dictionary meaning of the coin is; "metal used for the time being as money and stamped and issued by the authorities of the state in order to be used." Therefore, it can be said that "legal tender" means the currency of a state which is to be used as money. Backed up our aforesaid observations, we are of the considered view, that as in the case of the assessee before us the payments in question to the aforementioned State Government undertakings have been made by the assessee in Indian currency, therefore, it can safely, or in fact inescapably be concluded that the same have been made in legal tender. In the backdrop of our aforesaid deliberations, we are of the considered view that the payments made by the assessee to the aforementioned Government undertakings, viz. (i) M/s Rajasthan State Ganganagar Sugar Mills Ltd; and (ii) M/s Rajasthan State Beverages Corporation Ltd., which could safely be held as a part of the Government would fall within the realm of the exception carved out in Clause (b) of Rule 6DD of the Income- Tax Rues, 1962, qua, the applicability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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