2015 (2) TMI 850 - HC - Income Tax

Deduction in respect of lorry charges paid in cash exceeding ₹ 20,000 under section 40A(3) denied - lorry hire charges to strangers for one-time transportation in cash exceeding the prescribed limit of ₹ 20,000 is out side the ambit of business expediency as provided under the proviso to section 40A(3) as held by Tribunal - relationship of the drivers of the lorries hired for transportation of goods towards the appellant - Held that - The assessee is neither the owner of the goods nor the owner of the vehicle carrying the goods. If the assessee has to claim exemption under section 40A(3), necessarily he has to comply with the statutory provision and the rules framed thereunder. Only in instances where the assessee falls under any of the exemptions covered in rule 6DD, he is entitled to claim the said amount as an exemption under section 40A(3). In so far as both the authorities had found that the claim of the assessee is not justifiable, we do not think that the questions of law projected by the assessee arises for consideration in the above appeal and the same is therefore dismissed. - Decided against assessee.

Summary

Issues involved:
1. Disallowance of lorry hire charges exceeding cash payment limit under section 40A(3) of the Income-tax Act.
2. Interpretation of exceptions provided under rule 6DD of the Income-tax Rules.
3. Determining the relationship between the lorry drivers and the assessee.
4. Compliance with payment methods under section 40A(3) for lorry hire charges.
5. Claiming exemption under section 40A(3) based on statutory provisions and rules.

Analysis:
The case involves an appeal filed by the assessee against the order of the Income-tax Appellate Tribunal regarding the disallowance of lorry hire charges exceeding the cash payment limit under section 40A(3) of the Income-tax Act for the assessment year 2009-10. The assessee, a partnership firm engaged in transporting contracts, argued that the cash payments were made due to business expediency and the nature of their operations. However, the Tribunal found the explanation unsatisfactory as the payments did not fall under any exceptions provided in rule 6DD of the Income-tax Rules.

The substantial questions of law raised by the assessee included the correctness of disallowing deductions for cash payments exceeding the limit, the business expediency of one-time cash payments to strangers for lorry hire charges, the relationship of lorry drivers with the assessee, the mandatory payment methods for lorry hire charges, and the acceptance of lower authorities' orders without allowing deductions based on the prescribed limit.

The Tribunal observed that the assessee was not the owner of the goods or the vehicles used for transportation, and to claim exemption under section 40A(3), compliance with statutory provisions and rules was necessary. The appellate authorities determined that lorry drivers could not be considered as agents of the assessee, and the provisions of the Kerala General Sales Tax Act regarding agents did not apply to the Income-tax Act.

Ultimately, the Tribunal dismissed the appeal, stating that the assessee did not qualify for any exemptions under rule 6DD and therefore was not entitled to claim the disallowed amount as an exemption under section 40A(3). The judgment emphasized the importance of adhering to statutory provisions and rules to claim exemptions under the Income-tax Act.