TMI Blog1975 (11) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... such payments came to Rs. 55,471. Being of the view that under section 40A(3) read with rule 6DD of the Income-tax Rules, 1962, such payments could not be allowed as deduction, the Income-tax Officer required the assessee to show cause why the payments amounting to Rs. 55,471 be not disallowed. After considering the explanation filed by the assessee, the Income-tax Officer came to the conclusion that the conditions laid down in rule 6DD were not satisfied and he accordingly disallowed the sum of Rs. 55,471 claimed as deduction and added it to the income of the assessee. The assessee's appeal was dismissed by the Appellate Assistant Commissioner of Income-tax and its second appeal was also dismissed by the Income-tax Appellate Tribunal. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion ". Clearly, any expenditure incurred by an assessee in a sum of Rs. 2,500 or above is not to be allowed as a deduction unless the payment is made by a crossed cheque or a crossed bank draft. In other words, payments made in cash are to be disallowed. Now, in the instant case, there is no dispute that the assessee made payments exceeding Rs. 2,500 in cash and the total of such payment comes to Rs. 55,741. The only argument raised by the learned counsel for the assessee is that the payments made for purchase of stock-in-trade cannot be called " expenditure " and, as such, section 40A(3) is not applicable. According to the learned counsel, the word expenditure " must be restricted to expenditure which is allowed as a deduction under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Parliament clearly was to prevent use of unaccounted money in carrying, on business. Unaccounted money may be used in the purchases of stock-in-trade or raw materials or in payment of overhead expenses. We will be defeating the intention of the legislature if we restrict the import of the word " expenditure " to merely overhead expenses and do not take into account the expenditure incurred on the purchases of stock-in-trade or raw materials. In Mudiam Oil Co. v. Income-tax Officer the Andhra Pradesh High Court has upheld the validity of section 40A(3) on the ground that it was only to regulate the business activities and prevent unaccounted money being used for clandestine transactions and it was in the interest of revenue and national e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged that money spent on purchase of stock-in-trade, etc., represents circulating capital and cannot be included in the term " expenditure " which means money spent away. He cited certain cases to support this contention. It is not necessary to notice these cases because it cannot be disputed that the money invested in the purchases of stock-in-trade and raw materials represents circulating capital and such payments are not covered by any of the provisions; contained in sections 30 to 43A. But the value of the stock-in-trade has to be taken into account while determining the gross profits under section 28 itself on principles of commercial accounting. It is no doubt true that the provisions contained in sections 30 to 43A some time may ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town; (i) where any payment by way of gratuity, retrenchment compensation or similar terminal benefit, is made to an employee of the assessee or the heirs of any such employee on or in connection with the retrenchment, resignation, discharge or death of such employee, if the income chargeable under the head " Salaries " of the employee in respect of the financial year in which such retirement, resignation, discharge or death took place or the immediately preceding financial year did not exceed Rs. 7,500; (j) in any other case, where the assessee satisfies the Income-tax Officer that the payment could not be made b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
