2012 (9) TMI 590 - HC - Income Tax

Disallowance u/s 40A (3) - payments made to the butchers - ITAT deleted the addition - Held that - As decided in The Commissioner Of Income Tax Versus M/S Milky Exports International 2010 (11) TMI 55 - ALLAHABAD HIGH COURT payment has been made to the butchers whose genuineness has never been doubted - this is finding of fact and there is no illegality in the same can be pointed - against revenue. Building Repair & Maintenance at Mumbai and Meerut - Held that - Similar issue arise in M/S Milky Exports International 2010 (11) TMI 55 - ALLAHABAD HIGH COURT case wherein the AO had earned in holding amount were not for Building Repair & Maintenance at Mumbai and Meerut is revenue expenditure - AO had earned in holding that these were not capital expenditure ignoring the fact that the expenditure related to the capital works during the year and the definition of words current repairs under Section 31 of the Act - against revenue.

Summary

Issues:
1. Interpretation of Section 40A (3) of the Income Tax Act, 1961 regarding disallowance of payments made without cross cheque.
2. Applicability of circular issued by CBDT exempting cash payments from Section 40A (3) to ongoing proceedings.
3. Determination of whether building repair expenses are capital expenditure under Section 31 of the Act.

Analysis:
1. The case involved an Income Tax Appeal under Section 260-A arising from a judgment by the Income Tax Appellate Tribunal regarding the disallowance of payments made without a cross cheque under Section 40A (3). The AO disallowed payments made by the respondent-assessee to meat suppliers, citing non-compliance with the provision. The CIT (A) allowed the payments, relying on exceptions under Rule 6DD (f) (ii) and a judgment by the Mumbai Bench of ITAT. The High Court affirmed the decision, stating that the Tribunal did not commit any error of law in following precedent.

2. Another issue was the applicability of a circular issued by CBDT exempting cash payments from Section 40A (3) to the ongoing proceedings. The Tribunal, in line with a previous judgment by the High Court, upheld the allowance of certain payments that were deleted by the AO under Section 40A (3). The High Court dismissed the appeal, noting that the questions raised were covered by a previous judgment involving the same parties.

3. The third issue pertained to the classification of building repair expenses as capital expenditure under Section 31 of the Act. The AO had disallowed a sum for building repair expenses, considering them not allowable as capital expenditure. However, the CIT (A) disagreed and deleted the addition, emphasizing that the expenditure related to capital works during the year and fell within the definition of "current repairs" under Section 31. The High Court, following precedent, upheld the decision of the CIT (A) regarding the building repair expenses.

In conclusion, the High Court dismissed the Income Tax Appeal, affirming the decisions of the CIT (A) and the Tribunal on all issues raised in the case.