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TMI Blog2016 (8) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... actions of the business. The assessee firm makes cash payments in the circumstances as per the intention of the vendors/supplier who transact on cash basis and no credit facility is available in the remote villages. So, considering the apparent facts and nature of business of the assessee being laying of roads, building bridges and culverts in the remote village and purchase of sand, jelly from the local vendors and lorry brokers who are illiterate and does not have permanent place of Business and also vendors and Hawkers deliver the sand, jelly at the working sites of assessee during odd hours in remote areas and we support our opinion with the decision of Anupam Tele Services vs. ITO (2014 (2) TMI 30 - GUJARAT HIGH COURT ) and we set aside the order of the Commissioner of Income Tax (Appeals) and delete the addition made by the ld. Assessing Officer on this ground. Disallowance being expenses for tea, coffee, freight charges and diesel expenditure - Held that:- The fact that nature of expenditure being tea, coffee, freight charges and diesel expenditure, the assessee has claimed these expenditure incurred wholly and exclusively for the purpose of activities of the business and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. At the time of hearing the ld. Counsel has filed an affidavit explaining the reasons for delay and the ld. DR has no serious objections for condonation of delay. After hearing the submissions, we are satisfied with sufficient and reasonable cause for filing the appeal belatedly and we therefore condone the delay and admit the appeal for adjudication. 3. The assessee has raised the following grounds of appeal:- 2.The learned Commissioner Of Income Tax (Appeals)-2, Madurai erred in law in disallowing a sum of ₹ 19,09,420/- by invoking section 40A(3) of the Income Tax Act. 3. The learned Commissioner Of Income Tax (Appeals)-2 erred in law in not considering the business expediency and other factors including extent of banking facility before invoking section 40A(3) of the Income Tax Act. 4. The learned Commissioner Of Income Tax (Appeals)-2 ought to have seen that the appellant has discharged his primary onus both during the assessment proceedings and first appellate proceedings to demonstrate the fact that the cash payments made by the appellant fall under rule 6DD 5. The learned Commissioner Of Income Tax (Appeals)-2 erred in law In disallowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of sand and jelly and local suppliers always insist for cash payments. Due to time frame, the assessee is bound to complete the rural works within limitation period and it is a common practice to make cash payments as there are no adequate Banking facilities available in remote villages. The ld. Assessing Officer accepted the nature of the work of the assessee but alleged that the assessee firm being regular contractor and there is no necessity to make cash payment on various occasions and disallowed the claim. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 4.1 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) has confirmed the order of the ld. Assessing Officer. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 4.2 Before us, the ld. Authorised Representative submitted that the ld. CIT(A) erred in confirming the findings of the ld. Assessing Officer and failure to consider the factors of banking facilities and cash payments fall within exception of Rule 6DD of the Act and prayed that the disallowance are not warranted as the local con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed in respect of such expenditure . and Rule 6DD and exception under Income Tax Rules No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment59 or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely :- (a)where the payment is made to- ( i ) the Reserve Bank of India or any banking company as defined in clause ( c ) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); ( ii ) the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); ( iii ) any co-operative bank or land mortgage bank; ( iv ) any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949); ( v ) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of section 192 of the Act, and when such employee- ( i ) is temporarily posted for a continuous period of fifteen days or more in a place other than his normal place of duty or on a ship; and ( ii ) does not maintain any account in any bank at such place or ship; 70 ( j ) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike; ( k ) where the payment is made by any person to his agent71 who is required to make payment in cash for goods or services on behalf of such person; ( l ) where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business. The payments to the hawkers and vendors by cash by the assessee firm other than account payee cheques was never doubted by the Revenue. The assessee firm is following prevailing business practice from earlier years. Further, provisions of Sec. 40A(3) of the Act must not be read in isolation or exclusion of Rule 6DD o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals) 5.2 In the appellate proceedings, the ld. Authorised Representative explained that working system of the business on laying of roads and culvert in the remote areas and these expenses are compulsory incurred on labour and takes the characteristic of welfare measures. On comparing with the turnover of the contracts were contract receipt being 15.16 Crores, the disputed expenditure is very negligible which work out to 0.33%. The ld. Commissioner of Income Tax (Appeals) has considered the submissions but due to agreed addition by the assessee, non availability of evidence and overlooked the working conditions of the labour at work site has confirmed the addition. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 5.3 Before us, the ld. Authorised Representative expressed that this expenditure is necessary to co-ordinate with the labour. Providing coffee and tea during day and night during work of laying of roads and culverts in the villages and there are no proper food facilities and further some time work in forest area and such expenditure is generally incurred to upkeep the labour and prayed for allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depends on lorry brokers, hawkers and does not issue bills or vouchers. The assessee in own interest maintain the accounts by providing internal vouchers to cut down any fraudentiall activities. The ld. Commissioner of Income Tax (Appeals) however confirmed the order of the ld. Assessing Officer. Aggrieved by the order, the assessee assailed an appeal before Tribunal. 6.3 Before us, the ld. Authorised Representative expressed that these expenditure is necessary to carry out the works at remote areas. The amount paid on account of labour charges, jelly purchase, sand purchase and gravel purchase for laying of road and culvert in the villages and there are no proper facilities and some time work in forest area and no separate bills are issued by the vendor. Hence, internal vouchers are prepared to make the payments to vendor and prayed for allowing the appeal. 6.4 Contra, the ld. Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals) and vehemently opposed the grounds. 6.5 We heard the rival submissions, perused the material on record. The fact that labour charges, jelly purchase, sand purchase and gravel purchase incurred wholly and exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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