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| The Tax Publishers2021 TaxPub(DT) 0316 (Mum-Trib) INCOME TAX ACT, 1961
Section 40A(3)
Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO [(1991) 191 ITR 667 (SC) : 1991 TaxPub(DT) 1528 (SC)] had held that provisions of section 40A(3) read with rule 6DD(e) cannot be said to be intended to restrict business activities and assessee had demonstrated before the authorities that the payments were made for purchase of agricultural produce, hence, AO was directed to delete the addition made under section 40A(3).
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Business disallowance under section 40A(3) - Applicability of provisions - Payment to transporters -
The case of assessee was selected for scrutiny and AO issued notice under section 143 (2) and 142 (1). During the year relevant to the assessment year, assessee had made payments to the transporters in cash under the heading transportation (inward) in its ledger accounts. Accordingly, AO asked the assessee to show cause as to why the amount should not be disallowed under section 40A(3). Assessee contended that the amount paid to the transporters forms the part of the amount payable to the farmers. The said amounts were paid to the transporters on behalf of the farmers under their instructions. AO rejected the contention of assessee and disallowed the claim of assessee and made addition of the said amount to the income of assessee. Held: Revenue had not disputed the payments made to transporters and assessee had explained the circumstances under which questioned payments were made to the transporters. Supreme Court in the case of Attar Singh Gurmukh Singh vs. ITO [(1991) 191 ITR 667 (SC) : 1991 TaxPub(DT) 1528 (SC)] had held that provisions of section 40A(3) read with rule 6DD(e) cannot be said to be intended to restrict business activities. Assessee had demonstrated before authorities that the payments were made for purchase of agricultural produce. There was no evidence on record to conclude that the questioned payments do not come within the ambit of rule 6DD(e) of the Income Tax Rules. Hence, AO was directed to delete the addition made under section 40A(3).
Followed:Attar Singh Gurmukh Singh v. ITO (1991) 191 ITR 667 (SC) : 1991 TaxPub(DT) 1528 (SC). Relied:Harshila Chordia v. ITO (2007) 298 ITR 349 (Rajasthan) : 2007 TaxPub(DT) 0716 (Raj-HC) Mudiam Oil Co. & Others v. ITO & Others [1973] 92 ITR 519 (AP) : 1973 TaxPub(DT) 0051 (AP-HC) Sai Steel Industries India (P) Ltd. v. ACIT 2018 TaxPub(DT) 0499 (Mum-Trib) ITO v. Dhanshree Ispat ITA No. 749/PUN/2013 dated 31-5-2017 : 2017 TaxPub(DT) 1650 (Pune-Trib)
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2014-15
IN THE ITAT, MUMBAI BENCH
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