TMI Blog2007 (7) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... nder rule 6DD(f) of the Income-tax Rules, 1962 ('Rules'). The Assessing Officer rejected the explanation of the assessee by observing (the various clauses under rule 6DD provides liberalization of the rigour of section 40A(3) which entitles the assessee-company to claim full deduction on cash payment over Rs. 20,000 where banking services are not available'. Reliance was also placed on the judgment of Hon'ble Allahabad High Court in the case of CIT v. Pehlaj Rai Daryanmal [1991] 190 ITR 242 wherein, it was observed by the court that the idea for allowing cash payments to cultivators, growers or producers etc., was that these people were mostly residents of rural areas not used to banking systems or not having bank accounts and, therefore, the requirement of sub-section (3) of section 40A was impracticable and would lead to difficulties in its appreciation. According, the disallowance of Rs. 83,90,623 was made being 20 per cent of the total cash purchases. On appeal, learned CIT(A) confirmed the order of the Assessing Officer by observing that the assessee was not purchasing the poultry from the farmers or from the producers of poultry residing in rural areas but, in fact, purchasin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forest produce or other produce and products mentioned in sub-clauses (1) to (iii) from whomsoever they are purchased." Mr. Dastur has contended that the above observations are merely stray observations unconnected with the issue before Their Lordships and, therefore, the same are not of any precedent value. According to him, it is either the ratio of judgment or at best obiter dicta, which can be said to be binding on the subordinate courts or the tax authorities. The stray observations made in the judgment are not binding on the subordinate courts. In this connection, he drew our attention to the decision of the Hon'ble Allahabad High Court mentioned above to point out the question referred for their opinion which is reproduced as under:- "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal's view that the words 'cultivator, grower or producer' occurring at the end of rule 6DD(f) qualify the products of horticulture or agriculture only and they do not qualify the other clauses mentioned in the said rule?" According to him, this question was answered in favour of the revenue by holding that the words 'cultivator, grower or producer' occurring a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 40A(3). 5. On the other hand, learned D.R. has reiterated what has been observed by the Assessing Officer as well as learned CIT(A). According to him, the exceptions in the rule were provided to avoid hardships to those producers who are living in rural areas where banking facilities are not provided. That is what has been observed by the Hon'ble Allahabad High Court. According to him, the intention of the Legislature must be given its due respect and, therefore, considering the same, the disallowance sustained by the learned CIT(A) is justified. 6. Rival submissions of the authorities have been considered carefully in the light of case laws and the relevant provisions. In order to appreciate the controversy, it would be appropriate to refer to the relevant provisions of section 40A(3) as under:- "(3) Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than 31-3-1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding [[twenty] thousand] rupees otherwise than by [an account payee cheque drawn on a bank or account payee bank draft], [twen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statute is not permissible. The Constitution Bench of the Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1 has observed as unde "....This exercise of purposive interpretation by looking into the object and scheme of the Act and the legislative intendment would arise, in our opinion, if the language of the statute is either ambiguous or conflicting or gives a meaning leading to absurdity." In the case of Keshavji Ravji Co. v. CIT [1990] 183 ITR 1, the Apex Court observed as under:- "... As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then be appealed to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words, it is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the Legislature." Similarly, in the case of Guru Devdatta V.K.S.S.S. Maryadit. Their Lordships of the Apex Court held as under:- "It is a cardinal principle of interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal for the opinion of the Hon'ble Allahabad High Court: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal's view that the words 'cultivator, grower or producer' occurring at the end of rule 6DD(f) qualify the products of horticulture or agriculture only and they do not qualify the other clauses mentioned in the said rule?" The contention of the assessee was that the words 'cultivator, grower or producer' at the end of rule 6DD(f) only related to the last clause i.e., clause (iv) and not to the earlier three clauses and, therefore, the payments made in respect of forest produce to any party was exempt from the rigour of section 40A(3). On the other hand, the contention of the revenue was that these words would apply to all the clauses in rule 6DD(f) and, therefore, the exemption was available only if the payment was made to the producer of the various produce. It is in this context that Their Lordships upheld the contention of the revenue by observing as under:- "On a reading of the clause, we are of the opinion that the contention urged by the revenue is the correct one. In the first two sub-clauses, the word 'produce' is used and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision." The above judgment is the authority for the proposition that the judgment of the court has to be understood in the context of the question which was under the consideration of the court and it is neither desirable nor permissible to pick out the word or sentence from the judgment which is divorced from the context of the question under reference. That means it is the principle laid down in the judgment with reference to the question involved which is binding and not the other observations made by the way of passing remarks. The other judgments relied on by the learned counsel for the assessee also lays down that casual/general observations by the courts are not binding on the subordinate courts. Therefore, if the ratio of these judgments is applied to the judgment of Hon'ble Allahabad High Court than we are of the view that the observations of the Court relied upon by the lower authorities were by way of casual observations since such observations were unconnected with the question referred for the opinion of the court. Therefore, the observations of Their Lordships of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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