9911796707
TMI Blog2016 (5) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of Mr. J. Narayanasamy Sr.Standing Counsel JUDGMENT V.RAMASUBRAMANIAN,J This tax case appeal is by the assessee. It was admitted on 9.7.2008 on the following substantial questions of law : 1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in confirming the disallowance of 20% of total consideration paid to agriculturists in respect of purchase of agricultural lands in the light of Finance Minister's explanation regarding the scope and sweep of Section 40A(3) ? and 2. Whether the Tribunal was justified in upholding the disallowance, when the genuineness of the cash payments have not been doubted by the authorities and further considering the business expediency and in the light of the Supreme Court decision in 191 ITR 667, there was no scope for disallowance under Section 40A(3)? 2. Heard Mr.N.V.Balaji, learned counsel for the appellant/assessee and Mr.S.Rajesh, learned Junior Standing Counsel appearing for Mr.J. Narayanasamy, learned Senior Standing Counsel for the Department. 3. The assessee filed a return of income for the assessment year 1996-97. The return of income was processed under Section 143(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in the Proviso. As per the Proviso, no disallowance under Sub-Section (3) can be made, if it has been necessitated (i) on account of the nature and extent of banking facilities available (ii) on account of considerations of business expediency and (iii) on account of other relevant factors. There are no clear guidelines as to what 'business expediency' means and as to what would constitute 'relevant factors' under Section 40A(3). But, Rule 6DD of the Income Tax Rules, 1962 lists out the cases and circumstances, in which, the Proviso to Sub-Section (3) could be invoked. 9. Rule 6DD of the Income Tax Rules, 1962, states that no disallowance under Sub-section (3) of Section 40A shall be made where any payment in a sum exceeding ₹ 10,000/- is made otherwise than by a crossed cheque or by a crossed bank draft in the cases and circumstances specified therein. There are 10 types of cases and circumstances listed out under Rule 6DD, from Clauses (a) to (j). Clause (a) contains the list of institutions, the payment into which by way of cash will be exempted from disallowance. Clause (b) deals with the payment to Government. Clause (c) deals with the payment under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of Clause (j), unless such impracticality or genuine difficulty is shown to have arisen out of the nature of the transaction and the necessity for expeditious settlement. 14. All types of cases covered by Clause (j) required further proof to establish the genuineness of the payment and the identity of the payee. 15. Keeping the scope and ambit of Rule 6DD(j) in mind, if we come back to the case on hand, it is seen that the cash payments made by the appellant were for the purchase of immovable properties. Admittedly, several lands were purchased by the appellant from about 46 persons under different sale deeds. Out of those 46 sale deeds, it is only under 8 sale deeds that cash payments were made. These cash payments were made before the Sub Registrar and they were made for the purchase of agricultural lands. 16. Therefore, the two fundamental requirements, namely (a) the genuineness of the payment, and (b) the identity of the payee, stands satisfied in the case on hand. 17. That leaves us with the question whether the assessee had pleaded and proved either of the other two requirements, namely (a) existence of exceptional or unavoidable circumstances, or (b) imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then, the same may not normally happen before the Sub Registrar at the time of registration of documents, as the payments made at that time get recorded officially. 23. All the three authorities have failed to appreciate that when a vast extent of agricultural lands is purchased from several persons, especially in villages, it is not possible to expect the villagers to accept the sale consideration by way of crossed account payee cheque or bank draft. Therefore, so long as the payees are identified and the genuineness of the transaction is not questioned and so long as the payments have been made at the time of registration in the presence of the Sub Registrar, the case would fall under the exceptions provided in Clause (j) of Rule 6DD. This position has also been clarified by Circular No.220 dated 31.5.1977, the relevant portion of which reads as follows: 4. All the circumstances in which the conditions laid down in rule 6DD(j) would be applicable cannot be spelt out. However, some of them which would seem to meet the requirements of the said rule are : a. the purchaser is new to the seller, or b. the transactions are made at a place where either the purchaser or the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
