| The Tax Publishers2020 TaxPub(DT) 3540 (Mum-Trib) INCOME TAX ACT, 1961
Section 40A(3)
Where assessee incurred exhibition charges in cash in foreign currency abroad, merely because the expression 'rupee' has been mentioned in section 40A(3), it would not debar applicability of provision to expenditure incurred in cash in foreign currency, thus, even if expenditure was incurred in cash and in foreign currency, still provision of section 40A(3) was applicable.
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Business disallowance under section 40A(3) - Cash payments exceeding prescribed monetary limit - Applicability of provision in case expenditure was incurred in cash in foreign currency -
Assessee was a partnership firm engaged in business of manufacturing and export of garments. Assessee claimed foreign travel expenses including an amount towards exhibition charges. AO found that exhibition charges were incurred in cash in foreign currency abroad. AO disallowed expenditure incurred in cash by invoking provisions of section 40A(3). Assessee contended that since provision contained under section 40A(3) speaks of incurring of cash expenditure exceeding Rs. 20,000, in a day, provision would apply only in a case where expenditure in cash has been incurred in Indian currency. Held: Contentions of assessee were unacceptable. Reading of section 40A(3) makes it clear that in case assessee incurs any expenditure for which payment to a person in a day exceeds the amount of Rs. 20,000, (as it existed during the relevant period) it would not be allowable, unless, it is paid through account payee cheque or account payee bank draft. The mention of the word 'rupee' in section 40A(3) cannot be interpreted in a limited or narrow sense to mean only cash expenditure incurred in rupee. What the expression means is expenditure incurred exceeding the particular amount in rupee terms. Therefore, even if expenditure is incurred in cash and in foreign currency, still provision of section 40A(3) would be applicable if it exceeds the specified quantum in rupee term. Therefore, merely because the expression 'rupee' has been mentioned in section 40A(3), it would not debar applicability of provision to expenditure incurred in cash in foreign currency.
Distinguished:Vodafone India Services (P) Ltd. v. Union of India & Anr., W.P. No. 871 of 2014 : 2014 TaxPub(DT) 3959 (Bom-HC); and Union of India v. Azadi Bachao Andolan, (2003) 263 ITR 706 (SC) : 2003 TaxPub(DT) 1429 (SC).
REFERRED :
FAVOUR : Against the assessee
A.Y. : 2014-15
INCOME TAX ACT, 1961
Section 37(1)
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