9911796707
|
Home
Issues:
Applicability of section 40A(3) of the Income-tax Act to payments exceeding Rs. 2,500 made by a registered firm for purchase of goods. Analysis: The judgment revolves around the interpretation of section 40A(3) of the Income-tax Act in relation to payments exceeding Rs. 2,500 made by a registered firm for purchase of goods. The Income-tax Appellate Tribunal initially added the total amount of such payments under s. 40A(3) due to the lack of evidence and explanation from the assessee. However, the Appellate Tribunal later restored the addition, considering payments by post-dated cheques and in cash on the same date as a device to circumvent the provision in s. 40A(3). Upon detailed examination, the High Court observed that the provision in s. 40A(3) mandates that payments exceeding Rs. 2,500 must be made through a crossed cheque drawn on a bank or a crossed bank draft to be allowed as deduction. The Court emphasized that payment by post-dated bearer cheques is a recognized mode of payment in business transactions and not a means to evade the law. The Court clarified that payments made by post-dated cheques should be considered as made on the date the cheque matures and is encashed, not on the date it is issued. The Court highlighted that the disputed payments did not exceed Rs. 2,500 in cash at one time and that the use of post-dated bearer cheques did not violate the provisions of s. 40A(3). Therefore, the Court concluded that the Appellate Tribunal erred in its interpretation and application of the law. Consequently, the Court ruled in favor of the assessee, holding that s. 40A(3) was not applicable to the disputed payments. The department's appeal was dismissed, and the assessee was awarded costs amounting to Rs. 250.
|
