9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (7) TMI 462 - AT - Income TaxApplication of section 40A(3) - purchase of mobile recharge vouchers on a wholesale basis - Involvement of cash payment withdrawal from ATM - payments which are made by way of direct deposit into the Bank Account of the creditor - Rule 6DD - principal agent relationship - Held that - Assessee is an individual who has undertaken dealings in mobile recharge vouchers on a wholesale basis Relying upon S. Rahumathulla Versus Assistant Commissioner of Income-tax 2010 (4) TMI 905 - ITAT COCHIN - payments made by the assessee towards purchases of Telephone cards were by way of cash which was sought to be disallowed by the AO by invoking section 40A(3) of the Act - there is no scope for invoking the provisions of section 40A(3) of the Act - the disallowance made by the AO by invoking section 40A(3) in the present case is misplaced - provisions of section 40A(3) of the Act are inapplicable in respect of transactions thus, the order of the CIT(A) and AO is directed to delete the disallowance made by invoking section 40A(3) of the Act Decided in favour of assessee.
Issues Involved:
1. Disallowance under Section 40A(3) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance under Section 40A(3) of the Income Tax Act, 1961: The primary issue in this appeal is the disallowance of Rs. 54,79,648/- made by the Assessing Officer (AO) under Section 40A(3) of the Income Tax Act, 1961. The AO noted that the assessee made payments exceeding Rs. 20,000/- in cash for the purchase of mobile recharge vouchers from M/s Aircare Engineers (I) Pvt. Ltd., Pune, which was deemed to be in violation of Section 40A(3). The assessee contended that the payments were made through banking channels, specifically through ATM withdrawals by the creditor from the assessee's savings account, and thus should not attract the provisions of Section 40A(3). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, leading to the present appeal. The assessee argued that the transactions were conducted through banking channels and cited the decision of the Cochin Bench of the Tribunal in S. Rahumathulla vs. ACIT, which dealt with similar circumstances and concluded that such transactions did not attract Section 40A(3). The Tribunal examined the facts and submissions. It noted that the assessee purchased mobile recharge vouchers totaling Rs. 62,23,541/- from M/s Aircare Engineers (I) Pvt. Ltd., Pune, with payments of Rs. 54,79,648/- being made in a manner allegedly violating Section 40A(3). However, the Tribunal found that the Cochin Bench's decision in S. Rahumathulla, which involved similar transactions and concluded that Section 40A(3) was inapplicable due to the principal-agent relationship in the distribution of mobile recharge vouchers, was relevant. The Tribunal highlighted that the Cochin Bench had relied on the Hon'ble Kerala High Court's judgment in BPL Mobile Cellular Ltd., which followed the Hon'ble Supreme Court's decision in BSNL, establishing that the value of SIM cards and recharge coupons represented a service rather than a sale of goods. Consequently, the payments between the principal and agent constituted commission income, not purchases, and thus Section 40A(3) was inapplicable. The Tribunal rejected the Revenue's argument that the nature of expenditure was irrelevant and that Section 40A(3) applied regardless of the relationship between the parties. It also dismissed the CIT(A)'s view that the transactions' non-disclosure in the return of income affected the determination of total income. The Tribunal concluded that the facts of the present case were akin to those in S. Rahumathulla, and thus the provisions of Section 40A(3) were inapplicable. Conclusion: The Tribunal set aside the CIT(A)'s order and directed the AO to delete the disallowance of Rs. 54,79,648/- made under Section 40A(3). Consequently, the assessee's appeal was allowed, and the related Stay Application was dismissed as infructuous. Order Pronouncement: The order was pronounced in the open Court on 10th June, 2014.
|
