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TMI Blog2019 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... tly permitted. Therefore, we do not find any reason to interfere with the orders of the lower authorities. Thus, ground of appeal No.2 filed by the assessee stands dismissed. Disallowance of commission paid to Balakrishnan Minor (HUF) u/s.40A(2) (b) - there was no proof of rendering any services by the Balakrishnan Minor (HUF) and secondly the services stated to have been rendered only in individual capacity - HELD THAT:- It is settled position of law that commission payment cannot be allowed as deduction in the absences of any evidence on record establishing rendition of services. Even before us, no material is shown establishing rendition of actual services by Balakrishnan Minor (HUF) and therefore commission payment cannot be allowed as deduction. Ground No.3 filed by the assessee is also stands dismissed. - Shri Inturi Rama Rao, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For the Appellant : Shri. N. Arjun Raj, C.A. for S. Sridhar, Advocate For the Respondent : Ms. Vidya Ramachandan, Addl. CIT. ORDER PER INTURI RAMA RAO, ACCOUNTANT MEMBER This is an appeal filed by the Assessee directed against the order of the Commissioner of Income Tax (Appeals)-3, Coimbato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Industries Paid to the partner V. Balakrishnan to the party 617301 617301 6 M/s.Vijayalakshmi traders Cotton supplier Paid by the partner Smt. Rampriya to the party 389003 389003 Therefore, the Assessing Officer disallowed the same under the provisions of Section 40A(3) of the Act. Even before the ld. CIT(A), it is submitted that trade credit balance of the parties from whom purchases were made were transferred to partners account who in turn made payments to the parties. Thus, it was submitted that there is no violation of Section 40A(3) of the Act, in as much as, the firm had not made any payments in cash to the parties. However, the ld. CIT(A) has rejected the above arguments and accordingly confirmed the addition. Even before us, it is submitted that the provisions of Section 40A(3) of the Act cannot be applied to the facts of the present case, as assessee firm had not made any cash payments directly to the parties. It is further submitted that it was not possible for the assessee to sort out the disputes with the parties, hence the partners had taken up the responsibility of resolving the disputes. Ld. Authorised Representative also submitted that book adjustment was not mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in spite of anything to the contrary contained in any other provision of the Act relating to the computation of income under the head Profits and gains of business or profession . The Legislature has thus made it clear that the provisions of section 40A will apply in supersession of other contrary provisions of the Act relating to the computation of income. Sub-section (3) empowers the assessing officer to disallow, as a deduction, any expenditure in respect of which payment is made of any sum exceeding ₹ 10,000 otherwise than by a crossed cheque or crossed bank draft. Rule 6DD of the Income-tax Rules, 1962, refers to cases and circumstances in which payment of a sum exceeding ₹ 10,000 may be made otherwise than by a crossed cheque or by a crossed bank draft. The rule so far as it is relevant reads: 6DD. Cases and circumstances in which payment in a sum exceeding ten thousand rupees may be made otherwise than by, a crossed cheque drawn on a bank or by a crossed bank draft.-No disallowance under sub-section (3) of section 40A shall be made where any payment in a sum exceeding ten thousand rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of unaccounted money or reduce the chances to use black money for business transactions. ( Mudiam Oil Company v. ITO [1973] 92 ITR 519 (AP)). If the payment is made by a crossed cheque drawn on a bank or a crossed bank draft, then it will be easier to ascertain, when deduction is claimed, whether the payment was genuine and whether it was out of the income from disclosed sources. In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing the freedom of trade or business . Furthermore, what is not directly permitted cannot be indirectly permitted. Therefore, we do not find any reason to interfere with the orders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 847/Bang/2014 dated 30/12/2015 held as follows: ....................Thus, the assessee failed to discharge the burden of proving that the expenditure laid out were incurred wholly and exclusively for the purpose of business. We may further add that the Hon ble Supreme Court in the case of CIT Vs Imperial Chemical Industries (Ind.) Pvt. Ltd (1969) 74 ITR 17 has unequivocally held that the burden of proving that a particular expenditure had been aid out or incurred wholly and exclusively for the purpose of business entirely lies on the assessee. The discharge of the burden had to be effective and meaningful and not to cover up by merely book entries and paper work. The mere fact of payment of commission by account payee cheques and compliances with the TDS provisions shall not alone enable the assessee to claim deduction unless and amount has been expended wholly and exclusively for the purpose of business. 11. A Co-ordinate Bench Tribunal of Delhi in the case of Kanu Kitchen Kulture (P)Ltd Vs DCIT (2013) 28 ITR (T) 49 (Del.- Trib.) held that whether the assessee failed to demonstrate the services rendered by the commission agent, the commission was disallowed. The relevant paras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an oral business relationship involving such huge amounts of money over a period of time . 13, The Co-ordinate Bench of Delhi in the case of Printer House Pvt.Ltd. Vs DCIT (Del.) authored by Accountant Member, after referring to the above precedence on this issue held as follows: Thus, having regard to the ratio laid down in the above cases that in the absence of proof in support of the services rendered by the commission agent, no commission can be allowed as a deduction. Therefore, we dismiss the appeal filed by the assessee and allow the appeals filed by the revenue . 14. In the present case, the learned CIT(A) had not examined any evidence to show that the agents have actually rendered their services. The learned CIT(A) had totally misdirected himself by examining the issue from the angle of tax deducted at source and he had failed to examine whether the services are actually rendered by the commission agents or not. Therefore, we are unable to sustain the order of the learned CIT(A) and hold that the commission payments in question are not allowable keeping in view the ratio laid down in the cases cited supra. The assessee company had miserably failed to demonstrate the actua ..... X X X X Extracts X X X X X X X X Extracts X X X X
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