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2017 (11) TMI 520 - RAJASTHAN HIGH COURTAddition on account of cash payment being made for an expenditure in violation of Section 40A (3) for purchasing stock in trade by the assessee - Held that:- As decided in PACL India Ltd [2010 (3) TMI 1118 - ITAT JAIPUR] the second proviso to s. 40A(3) refers to “the nature and extent of banking facilities available, considerations of business expediency and other relevant factors,” which means that the object of the legislature is not to make disallowance of such cash payments which have to be compulsorily made by the assessee in view of absence of banking facilities at the place of payment. In the present case, even if it assumed that the payment was made at the District headquarter, the admitted position is that the sellers did not have any bank accounts at such town and they did not reside or carry on any business or farming activity at such town. It would be too much to expect that the appellant-company would be able to compel the villagers to open bank accounts at the town which ultimately they will not be able to operate as they do not reside at such town. If such a myopic view is taken regarding the interpretation of r.6DD(h), the very object of the legislature would be frustrated. There is no dispute regarding the identity of the payees and the genuineness of the land transactions in respect of which payments have been made. It is notable that r.6DD(k) provides an exception in respect of cash payment which is made on a day on which the banks were closed. This proves that the object of the legislature is to provide exception in respect of such payment which is required to be made in cash or absence of banking facilities. Rule 6DD(h) must be interpreted keeping in view this object and purpose. Therefore, the cash payments recovered under section proviso to s. 40A(3) and r.6DD(h). The AO is directed to delete the addition - Decided in favour of assessee.
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