2018 (9) TMI 67 - AT - Income Tax

Disallowance u/s 40A(3) - cash payments in violation of specified modes for purchasing country spirit from payee M/s Asansol Bottling & Packaging Co Ltd. - Held that - The very payee that it falls within the exception provided in Rule 6DD(k) of the Income Tax Rules since acting as agent of the Government of West Bengal (principal). No exception on facts or law has been pointed out at the Revenue s behest during the course of hearing. See PUSPALATA MONDAL VERSUS INCOME TAX OFFICER, WARD-2 (2) , ASANSOL 2011 (7) TMI 1183 - ITAT KOLKATA

Summary

Issues:
Revenue's appeals against CIT(A)'s orders for assessment years 2012-13 & 2013-14 involving disallowances under section 40A(3) for cash payments in purchasing country spirit.

Analysis:
The judgment pertains to two Revenue's appeals against separate orders of the Commissioner of Income Tax (Appeals)-Asansol for assessment years 2012-13 & 2013-14. The core issue revolves around the disallowance under section 40A(3) of the Income Tax Act, 1961, totaling &8377; 2,52,77,125/- and &8377; 99,63,303/- for the respective years, concerning cash payments made for purchasing country spirit from M/s Asansol Bottling & Packaging Co Ltd. The Revenue contended that the CIT(A) erred in deleting the disallowance, invoking Rule 6DD(k) of the Income Tax Rules, arguing that the payee acted as an agent of the Government of West Bengal, falling within the exception. The Tribunal analyzed the legal provisions and upheld the CIT(A)'s decision, finding the Revenue's grievance devoid of merit, as no new facts or legal grounds were presented during the hearing.

The CIT(A) based the decision on precedents and legal provisions, emphasizing that the payee, M/s Asansol Bottling & Packaging Co Ltd, was a warehouse established by the State Excise Commissioner, qualifying as a State Government establishment. The Tribunal referred to Rule 6DD(b) of the IT Rules, which exempts payments made to the State Government from the cash payment disallowance rule. Additionally, the relationship between the assessee and the wholesale licensee was deemed one of 'Principal' and 'Agent,' falling under Rule 6DD(k)'s exception. The Tribunal concurred with the CIT(A)'s findings, noting that the payee acted as an agent of the State Government, justifying the deletion of the disallowance under section 40A(3) for both assessment years.

In conclusion, the Tribunal dismissed both Revenue's appeals, upholding the CIT(A)'s orders. The judgment reaffirmed the application of Rule 6DD(k) to the case, recognizing the payee's role as an agent of the State Government, thereby justifying the deletion of the disallowance under section 40A(3) for the cash payments made for purchasing country spirit. The decision was pronounced on 29/08/2018, affirming the legal position established by the precedents and statutory provisions cited in the case.