May 2016
Business expenditure – Disallowance u/s. 40A(3) – A. Y. 2008-09 – Payments in cash – Agents appointed by assessee for locations to enable dealers of petrol pumps to buy diesel and petrol – No cash payment made directly to agents but cash deposited in respective bank accounts of agents – Rule 6DD(k) applicable – Amount not disallowable u/s. 40A(3)
By K. B. Bhujle Advocate
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CIT vs. The Solution; 382 ITR 337 (Raj);
The assessee was engaged in supplying diesel at various sites. The Assessing Officer noticed that the assesee had debited huge expenses on account of purchase of diesel and had made payment in cash exceeding Rs.20,000. The Assessing Officer disallowed the expenditure relying on section 40A(3). The Commissioner (Appeals) and the Tribunal deleted the addition.
On appeal by the Revenue, the Rajasthan High Court upheld the decision of the Tribunal and held as under:
“i) The findings of the Commissioner (Appeals) and the Tribunal are findings of fact. The assessee had appointed various representatives and agents for 110 locations, wherein diesel and petrol were purchased by dealers of the petrol pumps. No cash payment was made directly to the agents, but was deposited in their respective bank accounts. The case of the assessee fell under exception clause of Rule 6DD(k), as the assessee had made payment to the bank account of the agents, who were required to make payment in cash for buying petrol and diesel at different location.
ii) The assessing Officer did not find any discrepancy in copies of the ledger accounts produced, and no unaccounted transaction had been reported or noticed by him.
iii) The finding arrived at by the Tribunal based on the material, was essentially a finding of fact. No substantial question of law arose for consideration. Appeal is dismissed.”
