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Issues Involved: Interpretation of rule 6DD(f) of the Income-tax Rules regarding payments made for the purchase of forest produce exceeding Rs. 2,500 in cash.
Summary: The High Court of Allahabad addressed the issue of whether the words "cultivator, grower or producer" in rule 6DD(f) qualify all sub-clauses or only the products of horticulture or agriculture. The assessee, a timber firm, made cash payments for timber purchases exceeding Rs. 2,500, leading to a dispute with the Income-tax Officer. The Appellate Assistant Commissioner allowed the deductions based on rule 6DD(f)(i), exempting payments for forest produce. The Tribunal upheld this decision, prompting a reference to the High Court. Upon examination, it was revealed that the payments were made to brokers or suppliers, not directly to producers. The key contention was whether the qualifying words in rule 6DD(f) applied to all sub-clauses or only specific ones. The Court analyzed section 40A(3) and rule 6DD(f) to determine the legislative intent behind the provision. The Court concluded that the Revenue's interpretation was correct, emphasizing the use of "produce" and "products" in the rule. It was held that the intention was to exempt payments made to cultivators, growers, or producers directly, not intermediaries. Therefore, the Tribunal's decision was deemed erroneous, and it was ruled that the qualifying words in rule 6DD(f) apply to all sub-clauses, not just one specific sub-clause. In conclusion, the judgment favored the Revenue, denying the deductions claimed by the assessee. No costs were awarded in this matter.
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