9911796707
TMI Blog2025 (3) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,35,670/-. Against the said return of income, the assessment was completed by the by the ACIT, Circle - 1(1), Thrissur (hereinafter called "the AO") at a total income of Rs. 11,55,53,760/-. While doing so the AO disallowed the expenditure incurred in cash on fuel or Rs. 4,44,47,632/- u/s. 40A(3) of the Income Tax Act, 1961 (the Act) and remuneration to the Directors of Rs. 72,00,000/- invoking provisions of section 40(a)(ia) & 40A(3) of the Act. 3. Being aggrieved by the assessment order, an appeal was filed before the CIT(A) contending that provisions of section 40A(3) of the Act has no application, inasmuch as, the genuineness of the transactions were not in doubt and the cash payments were made on account of business exigencies. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration in the present appeal is whether the AO was justified in disallowing the deduction claimed in respect of expenditure on fuel and remuneration to the Directors payment of which is no made by cross cheques or bank drafts. Provisions of section 40A(3) of the Act empowers the AO to disallow any deduction claim as expenditure in respect of which the payment was not made by cross cheques of bank drafts. We perused the provisions of section 40A(3) of the Act. In our considered opinion the provisions of section 40A(3) are not absolute, as evident from rule 6DD of Income Tax Rules. These provisions of section 40A(3) cannot be read in isolation. This section must be read along with rule 6DD enumerating the exception circumstances under wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40A(3) has no application. Similarly with regard to the Directors' remuneration, The Directors have offered the remuneration in their respective hands and it is tax neutral transaction and the payees are identified and genuineness of the expenditure is also not in doubt. Therefore, the reasoning adopted by the us in respect of expenditure incurred on fuel, equally hold, good in respect of Directors' remuneration. In the light of the above legal discussion we are of the considered opinion that having due regard to the circumstances under which the cash payments exceeding Rs. 20,000/- were made, the claim for allowance on expenditure is not hit by section 40A(3) of the Act. Accordingly the AO is directed to allow the deduction. 9. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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