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TMI Blog2025 (4) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... .S.Sriraman appearing for the appellant are as follows:- (i) The appellant is in the business of wholesale milk distribution of Arokya Milk to dealers for Hatsun Agro Products Limited (hereinafter referred to as 'Company'). (ii) A return of income had been filed for AY 09-10, which was processed initially under Section 143(1) and thereafter taken up for scrutiny. (iii) In the course of assessment, the appellant's accounts were verified and it was found that cash payments in excess of Rs.20,000/- as stipulated under Section 40A(3) of the Income-Tax Act, 1961 (Act) had been made on various dates. (iv) The smallest of the payments was a sum of Rs.1,05,000/- and the largest, a sum of Rs.12,36,100/-. On average, each payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t come under the protection of Rule 6DD at all. As against the adverse order of the Tribunal, the assessee is in appeal before us. 5. Learned counsel for appellant would reiterate the contentions made before the lower authorities, that the appellant would be entitled to the full benefit of 6DD(e)(ii) as, according to him, the Company is engaged in production of milk. To this end, he would rely on two decisions of this Court in Tamil Nadu Cooperative Milk Producers' Federation Ltd vs State of Tamil Nadu [Tax Case (Revision) No. 1149 of 2006 dated 20.07.2012], and Chettinad Builders v the Deputy Commissioner of Income Tax, Corporate Circle 1(2), Chennai in TCA No.261 of 2017 dated 08.08.2017 as well as of the Calcutta High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr.J.Narayanaswamy, learned Senior Standing Counsel, would rely on the provisions of Section 40A(3), arguing that the exclusions are not attracted in the present case, and hence there is no necessity to advert to the same. Both the entities are situated within urban limits and have full access to banking facilities. The exclusions provided under Rule 6DD target those situations where either the payments are made to the Government or to a recipient situated in a rural area or one engaged in specific activities, such as animal husbandry, dairy or poultry farming or fish or fish products, horticulture or apiculture who is the cultivator, grower or producer of the aforesaid articles, produce or products. The other instances mentioned in Rule 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act on the misreading of the exceptions given in the form of illustrations under Rule 6DD of the Income Tax Rules, 1962 in the extension of the proviso below the section 40A(3A) of the Act, which provisions exempted/excluded the Appellant from the rigours of the main section 40A(3) of the Act? (iii) Whether the Appellate Tribunal is correct in law in sustaining the action of the Respondent in disallowing the cash payments exceeding Rs.20,000/- for procurement of dairy products from the producer of milk/milk products by recording a perverse finding of fact in treating the producer as a manufacturer even though there was no distinction drawn statutorily in the said sub rule SDD(E) of the Income Tax Rules, 1962?" 13. Section 40A( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the appellant/distributor for onward sale by the appellant to dealers of the Company. This, admittedly, is the structure of the transaction. 15. Section 40A deals with expenses or payments not deductible in certain circumstances, and states that where expenditure is incurred in excess of a sum of Rs.10,000/- in cash, no deduction would be available in respect of such expenditure. The proviso thereunder reads as follows:- "Where the assessee incurs any expenditure in respect of which a payment 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, or use of electronic clearing system through a bank account [or through such other electronic mode as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, it assumes the status of 'producer'. 19. We do not agree as the reference to 'producer' in the conclusion of clause (e) of Rule 6DD is clearly to a dairy farmer and not to a company. The term 'producer' qua 'dairy farming' has to be understood noscitor a sociis with the terms 'cultivator' and 'grower' qua agriculture, forestry, poultry farming, apiculture etc, respectively. It cannot, by any stretch of the imagination stretch to include a company that is engaged in the activity of pasteurisation of milk, particularly bearing in mind the object of section 40A(3), being to discourage cash payments. 20. Both entities, the company and the distributor (appellant) have full access to banking facilities. In fact, the Supreme Court, in Attar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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