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TMI Blog2013 (5) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees that there were trade advances on which no interest was charged, has not been properly appreciated by the authorities below - the capital account of the assessee has credit balances - then to that extent it can be said that the assessee has advanced the money interest-free, otherwise also out of assessees’ own capital - Matter Remanded to AO X X X X Extracts X X X X X X X X Extracts X X X X ..... the circulation of black money and if payments made are bonafide, then there is no requirement, as per the intention of the Legislature, to make the disallowance. He further argues that for reducing the hardship, Rule 6DD is incorporated which is in the nature of proviso to sub-section (3) to section 40A. He submits that as per clause (b) to Rule 6DD, if payments are made to the Government, those payments are out of the harsh provisions of section 40A(3). The Ld. Counsel submits that assessees are to do the business and it is undisputed fact that as per the Rules framed by the autonomous bodies like MSRTC, assessees are bound to make 25% of payment in cash on fall of the hammer and balance payment may be made within 15 working days of the acceptance of the bid. He submits that in all these cases, the payments were made to MSRTC, MSEB, BEST, Zilla Parishad, etc. except few private parties. He submits that so far as MSRTC, MSEB, BEST, Zilla Parishad, Public Works Department, they are the instrumentalities of the Government and these are the limbs of the Government only and mainly because it partakes the character of the business enterprises to some extent, does not make them away fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been taken by the Parliament by introducing Rule 6DD. 5.1. So far as the cases before us are concerned, the facts are not in dispute. While participating in the auction for purchase of scrap these assessees have made the payment in cash which are in excess of ₹ 20,000/-. We have to consider the Rule 6DD as it was applicable for the A.Ys. 2006-07 and 2007-08. The main thrust of argument of the Ld. Counsel is that MSRTC, MSEB, Zilla Parishad, Public Works Department are instrumentalities of the Government, may be discharging the commercial functions which are also not prohibited under the Constitution and, hence, these payments are covered by clause (b) to Rule 6DD. He also argued that Government is a very wide term and there is a plethora of decisions to support the contention of the Ld. Counsel which are rendered under Article 12 of the Constitution of India. Let us consider the decisions relied on by the Ld. Counsel. 6. In the case of Rajasthan State Electricity Board (supra), the writ petition filed under Articles 226 and 227 alleging the violation of Articles 14 and 16 was allowed in respect of the service conditions of the respondent. When the matter reached before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation Act, 1956 (28 of 1956), which was subsequently replaced by Warehousing Corporation Act, 1962 (58 of 1962). The appellant is a statutory body fully controlled and managed by the Government. The entity before the Hon'ble Supreme Court was also a similarly established Corporation, being a statutory body wholly controlled and managed by the State Government of UP. The Hon'ble Supreme Court referred to its earlier decision in the case of Sukhdev Singh (supra) and addressed the question as to whether the Regulations of such a statutory corporation, providing, inter alia, for the terms and conditions of employment and services of their employees carry a force of law or not. Another allied question was as to whether such statutory corporations are "State" within the meaning of Article 12 of the Constitution. Nevertheless the pertinent question was whether the regulations providing for the terms and conditions of employment and conditions of service have the force of law or not? In this connection, the following portion of the judgment of the Hon'ble Supreme Court is worthy of notice: "The statutory bodies in that case were Oil and Natural Gas Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in our view, the Service Regulations framed by the appellant Corporation for the terms and conditions of employment and services of their employees carry a statutory force. In this context, we have perused the Maharashtra State Staff Warehousing Corporation (Staff) Service Regulations and find that the same have been framed with the previous sanction of the Government of Maharasthra in exercise of the powers conferred by section 42 of the Warehousing Corporation Act, 1962 (58 of 1962). Therefore, the impugned contribution made by the appellant as an employer towards the Karmachari Welfare Fund falls within the expression "as required by or under any other law" for the purposes of section 40A(9) of the Act. As a consequence, such an amount is not disallowable in terms of section 40A(9) of the Act. 9. The Ld. DR argues that the definition of State given in Article 12 of the Constitution cannot be applied to the term 'Government' as referred to in Rule 6DD as it is in very narrow concept. He also argues that every limb of Government, semi-Government, autonomous bodies and Government Undertakings come within the purview of the State and hence, MSRTC and MSEB are also part of the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad, Municipal Corporations, Municipal Councils, Panchayat Samithis, etc. The Public Works Department is part of the Government. In our opinion, this aspect has not been considered by the authorities below and they have closed door to the assessees to make out the case for examination under Rule 6DD. We are, therefore, of the opinion that in the light of our above discussion, the plea of the assessees need reconsideration by the Ld. CIT(Appeals). We, therefore, set aside the issue in respect of the disallowance made u/s.40A(3) to the file of the Ld. CIT(A) to decide the same de novo in the light of our above observations and discussion. Accordingly, the relevant Grounds taken by the assessees in all these appeals are allowed for statistical purposes. Needless to say the CIT(A) is directed to give opportunity of being heard to the assessees as per the principles of natural justice. 13. The next issue is addition made u/s.68 of the Act. We will decide this issue independently assessee-wise. We first take the case of Shri Manikchand G.Raisoni. In this case, in the A.Y. 2006-07, the Assessing Officer made the addition of ₹ 18,00,000/- u/s.68 of the Act. The Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to MSRTC, then the assessee could have filed confirmation from the said party. Assessee failed to discharge the burden to prove the identity of the creditor, genuineness of the transaction as well as the capacity of the said creditor. The Ld. CIT(A) accordingly confirmed the said addition to the extent of ₹ 13,50,000/-. So far as the credit balances from Sl.No.2 onwards are concerned, the assessee could not file any confirmation letters from those persons. In our opinion the addition has been rightly made by the Assessing Officer u/s.68 as assessee failed to discharge his burden. We therefore, find no merit in the Grounds taken by the assessee in the A.Y. 2006-07. Accordingly relevant Grounds are dismissed. 17. So far as A.Y. 2007-08 is concerned, the Assessing Officer made the addition of ₹ 15,50,000/- u/s.68 of the Act. It was noticed by the Assessing Officer that the assessee has shown the credit balance in the name of one Mr.Jakir M.Subedar which was to the extent of ₹ 15,50,000/-. No confirmation from the said party was filed by the assessee. Even before Ld. CIT(A), no confirmation or any evidence was filed to prove the identity of the creditor, genuinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2006-07 and made the addition of ₹ 7,40,000/-. So far as Shri Amjad Ali Khan is concerned, the Assessing Officer made the full addition of ₹ 21,80,000/- u/s.68 of the Act. In respect of Shri Javed M.Subedar, the Assessing Officer again made the addition of ₹ 21,80,000/- and accordingly total addition made u/s.68 is to the extent of ₹ 40,98,148/-. As observed by the Assessing Officer, the assessee was making cash payments to MSRTC in the auctions held at various places and the amounts were shown in the names of the above persons. The assessee did not prove the identity of the said creditor, genuineness of the transactions as well as the creditworthiness of the said creditors to make such huge payments on behalf of the assessee. Even before the Ld. CIT(A), except filing the receipts from MSRTC, no other evidence was filed. 22. We have anxiously considered the reasons given by the Ld. CIT(A). We find that assessee even at that stage did not file any confirmation from those creditors to prove any identity. The fact remains that the assessee is in the business of scrap and bidding the auctions of MSRTC. The payments are shown in the names of different perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Sanjay M.Raisoni, in the A.Y. 2006-07 as observed by the Assessing Officer the assessee has debited to P & L Account towards the amount of interest of ₹ 83,559/- paid to six individuals and ₹ 20,145/- paid to G.E. Capital. The Assessing Officer has noted that assessee had advanced ₹ 66,37,551/- to different individuals without charging of interest, but at the same time has shown to have paid interest to some private parties by debiting to the Profit & Loss Account. The Assessing Officer also rejected the contention of the assessee and disallowed the entire interest. In the A.Y. 2007-08, it was noticed by the Assessing Officer that assessee has debited an amount of ₹ 2,50,147/- towards the interest payment and at the same time as per the Balance Sheet it was noticed by the Assessing Officer that assessee has advanced ₹ 92,14,750/- but interest is only charged of ₹ 1,73,827/-. The Assessing Officer, therefore, disallowed the interest debited by the assessee to Profit & Loss Account. Same way, the Assessing Officer made disallowance in respect of Shri Santosh M.Raisoni in A.Ys. 2006-07 and 2007-08 and also in respect of Smt.Sapna S.Raisoni in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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