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TMI Blog2025 (3) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40A(3) has no application, which included, inter alia, payments made to the agencies for procuring material could not be disallowed. The press note dated 02.05.1969 issued by the Ministry of Finance clarified that the provisions of section 40A(3) has no application in respect of payments made to agents who solely acting as commission agent. The dealers of petroleum products only acts only as commission agents of petroleum companies. Case of Sri Laxmi Satyanarayana Oil Mill [2014 (8) TMI 486 - ANDHRA PRADESH HIGH COURT] and Smt. Harshila Chordia [2006 (11) TMI 117 - RAJASTHAN HIGH COURT] and Suresh Kumar Agarwal [2001 (1) TMI 51 - ALLAHABAD HIGH COURT] are clearly applicable where in took the view that when the genuineness of the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appellant also relied on the following judgements: - i) CIT v. Suresh Kumar Agarwal [2001] 117 Taxman 2 (All) ii) Ramadity Investments v. CIT [2004] 138 Taxman 231 (Del) iii) K. Abdu & Co. v. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 which the provisions of section 40A(3) has no application, which included, inter alia, payments made to the agencies for procuring material could not be disallowed. The press note dated 02.05.1969 iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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