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TMI Blog2022 (8) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... that it has acted only as agent for his customers and has booked air ticket on behalf of its customers, because it is general practice in this kind of industry that tour operators will collect money from its customers and in turn, make cash payments for booking air ticket, because airlines generally does not accept cheque payments, other than cash payment or on line payment. Therefore, this fact needs to be verified from the Assessing Officer to ascertain fact with regard to arguments of the assessee that it has made cash payment to airlines on behalf of its customers as their agent and thus, same needs to be outside scope of section 40A(3). Cash payments made for hotel expenses - As observed that the assessee has paid cash for hotel expenses, whereas the assessee claims that it has paid cash for purchase of foreign currency and expenditure has been incurred in foreign currency by its customers. If at all, claim of the assessee is correct, then case of the assessee comes under clause (l) of Rule 6DD of I.T.Rules, 1962, which says where payment is made by authorized dealer or money changer against purchase of foreign currency or traveler cheque in the normal course of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding hotel expenses. The assessing officer stated that the cash expenses meet by the appellant is in violation of Section 40A(3) of the Act. It is relevant to note that the cash payments made by the appellant for ticket expenses Rs. 7,72,300/- and hotel bill settlement in SAUDI. Currency of (riyals) Rs. 14,96,975)-. The Assessing Officer as well as the Appellate Authority declared that the appellant is a principal and the passenger is an Agent. In that way they confirmed and assessed the expenses is an income. It is relevant to note the provisions of Clause (K) in Rule 6DD of IT Rules. Where the payment is made by any person to this agent, who is required to make payment in cash for goods or services on behalf of such person. The appellant contented that they were settled the hotel bills and Air ticket expenses covered under exception clause. The assessee produced relevant records before revenue authorities. But the 1st appellate authority in his order stated that the appellant didn t produce any evidence or substantiate their contentions either before the assessing officer or by 1st Appellate Authority. But it is an admitted fact that the appellant produced the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer has called upon the assessee to explain why disallowances cannot be made towards expenses incurred in cash by violation of provisions of section 40A(3) of the Act. In response, the assessee submitted that it has engaged in the business of tour and travels operator has booked air ticket on behalf of its customers and such air ticket needs to be booked by paying cash to the airlines and thus, its case comes under exception as per clause (k) of Rule 6DD of the I.T. Rules, 1962, and hence, disallowance cannot be made u/s.40A(3) of the Act. The assessee has also justified cash payment incurred for hotel expenses and argued that it has purchased foreign exchange currency to be paid to its customers, who were travelling abroad as per tour itinerary of tour and such currency has been used to settle hotel bills. Therefore, it cannot be said that cash expenditure was incurred which comes under the provision of section 40A(3) of the Act. The Assessing Officer however, was not convinced with the explanation furnished by the assessee and according to him, case of the assessee does not come under any of the exception as provided under Rule 6DD of the I.T.Rules, 1962 and thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it as per provisions of section 40A(3) of the Act. Therefore, applicability of provisions of section 40A(3) is not in dispute. But, it was arguments of the assessee before the Assessing Officer as well as learned CIT(A) that its case comes under exception as provided under clause (k) of Rule 6DD of I.T Rules, 1962, and as per said Rule, where payment is made by any person to his agent, who is required to make any payment in cash for goods or services on behalf of such person, then cash payments in excess of prescribed limit cannot be disallowed u/s.40A(3) of the Act. In this case, if you examine facts of the assessee s case in light of clause (k) of Rule 6DD of I.T. Rules, 1962, we find that the assessee has not made cash payment to his agent, who is required to make payment in cash for goods or services on behalf of the assessee, but the assessee has made direct cash payment to airlines for booking air ticket. Therefore, the assessee s case does not cover under Clause (k) of Rule 6DD of I.T. Rules, 1962. However, there is merit in arguments of the assessee that it has acted only as agent for his customers and has booked air ticket on behalf of its customers, because it is general ..... X X X X Extracts X X X X X X X X Extracts X X X X
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