TMI Blog1976 (11) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... f machines. Raw material was purchased from M/s. Ludhiana Crucible Cupola Association on various occasions and, on as many as five occasions in the course of the accounting year 1969-70, payment was not made by crossed cheque or crossed bank draft. It was not shown that there was any business expediency for making the payments in cash. The Income-tax Officer disallowed the payments under section 40A(3). The order of the Income-tax Officer was affirmed by the Appellate Assistant Commissioner. Before the Income-tax Appellate Tribunal, it was urged on behalf of the assessee that payments made for the purchase of raw material or goods was not expenditure within the meaning of section 40A(3) since the amount expended did not leave the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable having regard to the fair market value of the goods, services or facilities for which the payment is made for the legitimate needs of business or profession of the assessee. Similarly, section 40A(3) empowers the Income-tax Officer to disallow as a deduction any expenditure in respect of which payment is made of any sum exceeding Rs. 2,500 otherwise than by crossed cheque or crossed bank draft, unless the payment is made under the circumstances which may be prescribed by the Rules, having regard to the nature and extent of banking facilities available, consideration of business expediency and other relevant factors. The object of section 40A(3) is patent and is discernible from the provision itself. It is obviously designed to check t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1975] 36 STC 191, 198 (SC), construing section 7A of the Madras General Sales Tax Act, the Supreme Court observed : "Its main object is to plug leakage and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. The view taken by the High Court is repugnant to this cardinal canon of interpretation." In the case before us, there is really no need to invoke any rule of construction since, to our minds, the language is clear and the meaning of the word "expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and if it is made to any of the persons specified in clause (b) of section 40A(2). There is no reason to assume that payment for goods falls within the mischief of the expression "expenditure" in section 40A(2) but not within the mischief of the same expression in section 40A(3). We are, therefore, satisfied that the payments made for purchase of goods fall within the meaning of the expression "expenditure" occurring in section 40A(3). Our view is supported by the decision of the Allahabad High Court in U. P. Hardware Store v. Commissioner of Income-tax [1976] 104 ITR 664 (All), the decision of the Orissa High Court in Sajowanlal Jaiswal v. Commissioner of Income-tax [1976] 103 ITR 706 (Orissa) and the decision of the Kerala High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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