2014 (3) TMI 259 - AT - Income Tax

Deletion made u/s 40A(3) of the Act Whether the assessee s case falls under exception contained in Rule 6DD(b) of the I.T Rules Held that - CIT(A) held that the Rule 6DD(b), would not hold water in so far as exemption provided is in Rule 6DD - The various clauses of the said Rule would have to be considered - Even otherwise, the said Rule is not exhaustive The decision M/s. Amrai Pachwai & C.S Shop Vs. DCIT, Cir-1, Durgapur 2014 (2) TMI 979 - ITAT KOLKATA followed - The State Government has closed its doors in so far as the local treasury is concerned and the payment for the purchase of country spirit or country liquor has to be made to the warehouse, run by the government - This shows that any payment made to the warehouse, which is under the direct control of the state government, is a payment made directly to the government. Once, this is accepted then the provisions of Rule 6DD(b) of the I.T Rules 1962 which clearly spells out that the payment made to the government in legal tender under the rules framed by the Government, is exempted from the rigours of section 40A(3) of the Act - the payments made by the assessee for purchase of country spirit and country liquor is to the government as per the notification issued by the government and is in legal tender specified by the notification - the payment made by the assessee for the purchase of country liquor and country spirit from the territorial licensee bottling plant is protected by the exemption in terms of Rule 6DD(b) of the I.T Rules 1962 thus, the finding of the CIT(A) on the issue stands confirmed Decided against Revenue.

Summary

Issues:
Appeal against deletion of addition under section 40A(3) - Rule 6DD(b) applicability.

Analysis:
The judgment pertains to an appeal filed by the revenue against the order of the Commissioner of Income-tax (Appeals) for the assessment year 2010-11. The main issue raised in the revenue's appeal was the deletion of an addition made under section 40A(3) by the ld.CIT(A), based on the claim that the assessee's case falls under the exception contained in Rule 6DD(b) of the Income Tax Rules. The revenue contended that the cash purchases made by the assessee of country liquor were in violation of section 40A(3) and should not have been deleted by the ld.CIT(A).

During the hearing, the learned AR for the assessee submitted that the issue was covered by decisions of the co-ordinate bench of the tribunal in similar cases for earlier assessment years. The AR relied on precedents to support the contention that the payments made by the assessee for the purchase of country liquor were protected by the exemption provided under Rule 6DD(b) of the IT Rules. The AR argued that the payments were made directly to the government, as required by the notification issued by the Government of West Bengal.

The tribunal considered the submissions of both parties and analyzed the relevant provisions of Rule 6DD(b) of the IT Rules. The tribunal observed that the issue was similar to cases previously decided by the co-ordinate bench, where payments made to the government in legal tender under rules framed by the government were exempted from the provisions of section 40A(3). The tribunal, relying on the decisions of the co-ordinate bench, upheld the finding of the ld.CIT(A) that the payments made by the assessee for the purchase of country liquor were protected by the exemption under Rule 6DD(b). Consequently, the revenue's appeal and the assessee's cross objection were dismissed for the assessment year 2010-11.

In conclusion, the tribunal's decision was based on the interpretation of Rule 6DD(b) of the IT Rules and the application of precedents set by the co-ordinate bench in similar cases. The judgment reaffirmed that payments made to the government in legal tender under specified rules are exempt from the provisions of section 40A(3), as demonstrated in the specific circumstances of the case at hand.