June 2019

Section 40A(3) r.w.r. 6DD of ITR 1962 – Business expenditure – Disallowance u/s. 40A(3) – Payments in cash in excess of specified limit – Exceptions u/r. 6DD – Payment to producer of meat – Condition stipulated u/r. 6DD satisfied – Further condition provided in CBDT circular of certification by veterinary doctor cannot be imposed – Payment allowable as deduction

K. B. BHUJLE
Advocate

14

Principal CIT vs. GeeSquare Exports; 411 ITR 661 (Bom)

Date of order: 13th March, 2018

A.Y.: 2009-10

 

Section 40A(3) r.w.r. 6DD of ITR 1962 – Business expenditure – Disallowance u/s. 40A(3) – Payments in cash in excess of specified limit – Exceptions u/r. 6DD – Payment to producer of meat – Condition stipulated u/r. 6DD satisfied – Further condition provided in CBDT circular of certification by veterinary doctor cannot be imposed – Payment allowable as deduction

 

The assessee exported meat. It purchased raw meat paying cash. Payments made in cash in excess of Rs. 20,000 were disallowed u/s. 40A(3) of the Income-tax Act, 1961 on the ground that in view of Circular No. 8 of 2006 issued by the CBDT for failure to comply with the condition for grant of benefit u/r. 6DD of the Income-tax Rules, 1962 requiring certification from a veterinary doctor that the person issued the certificate was a producer of meat and slaughtering was done under his supervision.

 

The Tribunal allowed the assessee’s appeal. It held that section 40A(3) provided that no disallowance thereunder should be made if the payment in cash was made in the manner prescribed u/r. 6DD. The Tribunal held that the payment made to the producer of meat in cash satisfied such requirement and that neither the Act nor the Rules provided that the benefit would be available only if further conditions set out by the CBDT were complied with. The Tribunal further held that the scope of Rule 6DD could not be restricted or fettered by the circular.

 

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

 

“i)   The assessee having satisfied the requirements u/r. 6DD could not be subjected to the disallowance of the deduction of expenditure on purchases in cash of meat u/s. 40A(3).

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