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TMI Blog1990 (1) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... f the staff to receive the salary in cash was rejected by the ITO. The ITO was also of the view that the case of the assessee did not fall under r. 6DD(j) of the IT Rules, 1962 since no exceptional or unavoidable circumstances existed for the payment being made in cash. The ITO, accordingly, made the following disallowance in the three respective assessment years. Asst. yrs. Disallowance 1986-87 Rs. 2,88,059 1987-88 Rs. 3,42,687 1988-89 Rs. 3,96,540 On appeal by the assessee, the CIT (A) concurred with the view taken by the ITO and after rejecting the contentions put forward by the assessee before him, confirmed the disallowance made in all the three assessment years. 3. The assessee is in appeal before us. Shri Trivedi, learned counsel for the assessee vehemently contended that the disallowances under s. 40A (3) were not legally correct. He contended that similar payments in cash had been made in the past keeping in line with the nature and business of the assessee and the same had never been disallowed on any count. He submitted that the genuineness of the payments as well as identity of the payees was not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decisions of the High Court as well of the Tribunal is well placed. In Girdharilal Goenka vs. CIT (1989) 80 CTR (Cal) 140 : (1989) 179 ITR 122 (Cal), the Calcutta High Court has an occasion to examine this provision. The Hon'ble Court was of the view that the object of s. 40A(3) is to check evasion of tax and not to deprive the assessee of the deduction which he is otherwise entitled to claim. Where the amount was paid in cash and if the transaction was genuine in nature keeping in view the Circular of the CBDT No. 220 dt, 31st May, 1977, the ITO should not disallow such payment by invoking the s. 40A(3). In CIT vs. Satish Chandra (1983) 34 CTR (All) 321: (1983) 143 ITR (All), the Allahabad High Court in a case where the payees insisted on cash payment and filed certificates to this effect, the Hon'ble High Court held that the payment being not in doubt, the same could not be disallowed under s. 40A(3). Similarly, in CIT vs. Sawaran Singh Balbir Singh (1981) 20 CTR (P H) 131 : (1982) 136 ITR 595 (P H), the Punjab and Haryana High Court in a case where the payments were genuine and the identity of the payee stood established and where there was an oral agreement for the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent year was negatived by the ITO. The ITO, accordingly, brought to tax a sum of Rs. 1,22,513 in asst. yr. 1986-87, Rs. 74,723 in asst. yr. 1987-88 and Rs. 2,57,208 in asst. yr. 1988-89. On appeal, the CIT (A) confirmed this addition. 6. The plea of the assessee's counsel before us was the same as urged before the Revenue authorities. We are of the view that the Revenue authorities have correctly brought into tax the profits of the branch office in the relevant assessment years. The accounting year of the assessee ends on 30th June every year and whatever income whether it be of branch office or head office which accrues to the assessee upto 30th June is chargeable to tax as income of that year. We, accordingly, endorse the finding of the Revenue authorities. The assessee fails on this ground. 7. The next ground of appeal which is for asst. yrs. 1986-87 and 1987-88 only is against the disallowance of depreciation on foreign cars. This ground is decided against the assessee in view of the decision of the Tribunal in 5 SOT page 1.6 that depreciation on foreign cars is not permissible under the Indian IT Act. The assessee fails on this ground. 8. The next ground is regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the amounts were within the limits or ceiling provided under s. 40 (c), made a disallowance of Rs. 65,000 in each of the three years by holding that the total emoluments received by her were not commensurate with the services rendered by her and hence unreasonable. The following items were taken into account by the CIT(A). Salary Rs. 17,900 Society Maintenance Expenses Rs. 24,000 Electricity Charges Rs. 16,264 taken for personal user Rs. 7,065 One fourth depreciation on car Rs. 7,800 M/s. Kadri Consultants (P) Ltd. . Asst. yrs. 1986-87, 1987-88 1988-89 Repairing and maintenance of premises . total debited Rs. 11,308 Rs. 5,000 Telephone and postage debited Rs. 51,252 for personal taken at Rs. 4,000 Club expenses separately not available but . staff welfare and membership debited . Rs. 23,986 and membership subscription . at Rs. 6,040. Rs. 5,000 He was of the view that such a high emoluments inclusive of salary and perquisites on the basis of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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