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TMI Blog2013 (12) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked? 2. Whether the Tribunal is right in holding that the disallowance of cash payment under Section 40A(3) is proper on the facts of the case ?" 2. The appellant firm carries on the business of manufacture and sale of dhalls and grains. The appellant made cash payments of Rs.7,80,027/- towards lorry freight in excess of the limit contained in Section 40A(3) of the Income Tax Act, 1961 (hereinafter called as the "Act"). The Assessing Officer disallowed the same and added it to the income of the appellant. The Assessing Officer pointed out that the lorry freight payments made throughout the year by the assessee were through cash payments only; since the assessee was liable to deduct tax at source towards lorry freight made in excess of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge etc., Thus, the Commissioner of Income Tax (Appeals) held that the claim of the assessee that the lorry drivers acted as an agent of the assessee was a farfetched claim, thus, Rule 6DD(k) of the Income Tax Rules would not be applicable to the facts of the assessees case. In the light of the amended provisions of Section 40A(3) of the Act and Rule 6DD of the Income Tax Rules, disallowance was held as proper. Aggrieved by this, the assessee filed further appeal before the Income Tax Appellate Tribunal. 5. The Income Tax Appellate Tribunal, however, pointed out that the assessee had not placed any material to show that the remuneration was paid by the assessee to the lorry drivers for acting as agents for the assessee. The Income Tax Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned lorry; lorry freight was paid in cash by the assessee to the lorry drivers because they needed cash to purchase diesel, tyres and spare parts and for repairs en route. It is further stated that the lorry drivers could not receive the cheques from the assessee since they were their proprietors of P.K.Ramasamy Nadar & Bros. Virudhunagar, and they did not have any bank account to encash cheques in places like Virudhunagar; in the circumstances, the lorry driver acted as an agents of the assessee, to receive the lorry hire in cash. We find that the facts narration contained in the affidavit at best would only contain the modality on receiving the freight from the assessee and that the lorry drivers acted only on behalf of the lorry own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract, the assessee was bound to maintain constant supplies in the trains and ensure that at no point in time could the passengers be deprived of these article (which are food articles, soft drinks and other items necessary for travel). Thus, the Delhi High Court pointed out that the expression in Rule 6DD(k) of the Income Tax Rules "who is required to make payment in cash" to be read in the context of the nature of business activities; the consequence of instances of payments through account payee cheques in small businesses which are dependant on such supplies would be to completely stifle, if not stop, the business activities. Thus, the Delhi High Court held that Rule 6DD(k) of the Income Tax Rules would apply to the case of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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