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TMI Blog2013 (12) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash to the south western railway, who insisted for cash payment were covered by the exception laid down in Rule 6DD(b) of the Income-tax Rules 1962, as such, it was outside the purview of the provision contained in sec.40A(3) – Following Sri Devendrappa M Kalal [2012 (8) TMI 188 - ITAT BANGALORE] – Decided in favour of assessee. - ITA No.498/Bang/2012 - - - Dated:- 17-1-2013 - N Barathvaja Sankar and George George K, JJ. For the Appellant : Shri Padam Chand Khincha, CA For the Respondent : Shri Etwa Munda, CIT-III ORDER:- Per: George George K: This appeal at the instance of the assessee is directed against the order of the learned CIT(A), Hubli dated 29.12.2011. The relevant assessment year is 2008-09. 2. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The AR of the assessee vehemently argued that as per the terms and conditions laid down by the Railways, the payment should be made in cash only. 5.1 The AR of the assessee also took shelter under Rule 6DD(b). For the sake of convenience, Rule 6DD(b) is reproduced herein below:- Where the payment is made to the Government and under the rules framed by it, such payment is required to be made in legal tender . A thorough reading of the above provision reveal that Rule 6DD(b) covers the cases where the payment is made to the Government under the rules framed by it, such payments is required to be made in legal tender. Therefore, the payments in the nature of legal tender such as direct taxes, customs excise duties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) by stating that the payment made in legal tender only comes under the exceptions prescribed in Rule 6DD(b) of the Incometax Rules 1962. Now, we have to analyze the various provisions of sec. 40A(3) and exceptions laid down in Rule 6DD(b) of the Income-tax Rules 1962. The provision contained in sec. 40A(3) of the Income-tax Act reads as under : Where the assessee incurs any expenditure in respect of which a payment or aggregate of payment made to a person in a day, otherwise than by an account payee cheques drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure." 12. From the above provisions, it is clear that the deductions for the expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be used as money. In the present case, the assessee made the payment in cash i.e in Indian currency because it is not the case of the department that the payment was made in foreign currency to the South Western Railway towards purchase of scrap by the assessee. We, therefore, are of the confirmed view that the payment made in cash by the assessee was actually made in legal tender. Therefore, it can safely be held that the cash payment made by the assessee to the South Western Railway which is a part of the Government was covered in the exceptions provided in clause (b) of Rule 6DD of the Income-tax Rules 1962. Therefore the provisions of sec. 40A(3) as invoked by the AO were not applicable to the facts of the present case. On a simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fundamental right to carry on business. If read together with Rule 6DD of the Income-tax Rules, 1962, it will be clear that the provisions are not intended to restrict business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the Assessing Officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted upon to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of income from undisclosed sources. The terms of section 40A(3) are not absolute. Consideration of business expediency and other relevant fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR is distinguishable on facts because in the said case, none of the exceptional circumstances under Rule 6DD(j)(i) (ii) of the Income-tax Rules 1962 were available. However, in the present case, the exceptions laid down in Rule 6DD(b) of the Income-tax Rules 1962 are applicable to the assessee s case, therefore, the case relied on by the learned DR is distinguishable. 18. In view of the above discussion and by considering the totality of the facts of the present case, we hold that the payment made by the assessee in cash to the south western railway, who insisted for cash payment were covered by the exception laid down in Rule 6DD(b) of the Income-tax Rules 1962, as such, it was outside the purview of the provision contained in sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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