Ittamp. No: 98 Of 2006 v. Prasad

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD WEDNESDAY, THE NINTH DAY OF NOVEMBERTWO THOUSAND AND TWENTY TWO PRESENT THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYANANDTHE HON'BLE SRI JUSTICE C.V. BHASKAR REDDY INCOME TAX TRIBUNAL APPEAL NO: 75 OF 2006 Appeal under Section 260 -A of the lncome Tax Act, 1961 against theorderdated 27-12-2005 in l.T.A. No. 1094 IHydl 2004, forAssessmentyear2001-02 on the file of the lncome Tax Appellate Tribunal, A- Bench, Hyderabadpreferred against the order of the Commissioner of lncome Tax (Appeals) -V ,Hyderabad dated 03-09-2004 in l.T.A.No. 0047lffO - 5 (1/CIT(AFV/2004-05preferred against the order of the lncome Tax Officer, Ward -5 (1), Hyderabaddated 3i-03-2004 in GIR No. s-340 - Between: M/S Sri Murugan Ghee Store, 4-5-822, Opp. Badi Chowdi Road, Sultan Bazar,Hyderabad - 500 027, ( Represented by its Partner Mr V.S. Jawahar Raj) ...APPELLANT/ AppellantAND 1 . The lncome Tax Officer, Ward 5-[1], Aayakar Bhavan, Basheerbagh,Hyderabad - 500 001Hyderabad - 500 001 2. The Commissioner of lncome Tax, No.4, Aayakar Bhavan, Basheerbagh,HyderabadHyderabad ...RESPONDENTS/ RESPONDENTS ITTAMP. NO: 98 OF 2006 Petition under Section 151 CPC praying that in the circumstances stated [in]the affidavit filed in support of the petition, the High Court may be [pleased ]to staythe proceedings for the recovery of the arrears demand of Rs. 4,33,777l- till theappeal disposed of. Counsel for the Appellant: SRI. KARTHIK RAMANA PUTIAMREDDY Counsel for Respondents: SRI J. V. PRASAD SC FOR INCOME TAX DEPARTMENT The Court made the following JUDGMENT: THE IION'BLE THE CHIEF JUSTICE UJJAL BHITYANAND THE IION,BLE SRI JUSTICE C.V.BHASKAR REDD'YI.T.T.A.No.75 of 2OO6 JUDGMEN'II: tPer tLLe Hon'bte the Chief Justice Ujjal BhuVa ) Hear,:. Mr. Karthik Ramana Puttamreddy, learncdcounsel fc, [- ]the appellant and Mr. J.V.Prasad, learnedStanding [t-)ounsel ]for Income Tax Department appearingfor the res:,ondents. 2. This ;rppeal has been filed under Section 260-A of theIncome Ta:< Act, 1961 (briefly, "the Act" hereirraftt:r) b1, theiISSCSSCE- ssailing the legality and validity of he ordcrrlatcd 27. t2.2OOS passed by the Income Tax AppellateTribunal, Hyderabad Bench 'A', Hyderabad (Tribunal)lnI.T.A.No.l19a/Hyd/2004 for the assessment I'e:Lr 200 1-'2002. 3. We lind from the docket proceedings that onI 3.03.20Ct,: stay was granted by this Court subj ect t.opa\,ment ,rf 5O7o of the demanded ta-x. Tt-rercafter, theappeal u',,.s admitted on 17.04.2006, but no substantialquestion o1' lavt, was framed. \ / 4. From the memo of appeal we lind that appellant hasproposed a number of questions as substantial questionsof law. However, we are of the view that the follou'ing twoquestions would cover the controversy in question: i) Whether on the facts and in thecircumstances of the case, Tribunal was justified inaffirming the disallowance made by the assessingofficer in payments beyond Rs.20,0O0.0O in cash interms of Rule 6DD(f)(ii) of the Income Tax Ru1es,1962 (briefly, "the Rules" hereinafter), in otherwords, denying the benefit of exemption undcr thealoresaid provision? i0 Whether on the facts and in thecircumstances of the case, Tribunal was [justified ]inholding that the benefit of exemption contained inRute 6DD(f)(ii) of the Rules would not be availableu,hen total payment made exceeds Rs.20,O00-O0? 5. Appellant is an assessee under the Act having thestatus of a firm. It is engaged in the business of sale ofbutter and a-lso converting butter into ghee for saleAssessment year under consideration is 200 1-2002 . 6. By the assessment order dated 31.03.2004, assessingofficer noted that the appellant had made certain pal mentsin cash beyond Rs.20,000.00 to two companies but sought i0 Whether on the facts and in thecircumstances of the case, Tribunal was [justified ]inholding that the benefit of exemption contained inRute 6DD(f)(ii) of the Rules would not be availableu,hen total payment made exceeds Rs.20,O00-O0? 5. Appellant is an assessee under the Act having thestatus of a firm. It is engaged in the business of sale ofbutter and a-lso converting butter into ghee for saleAssessment year under consideration is 200 1-2002 . 6. By the assessment order dated 31.03.2004, assessingofficer noted that the appellant had made certain pal mentsin cash beyond Rs.20,000.00 to two companies but sought exemption by applying Rule 6DD(f)(ii) of the [Rules]Referring t,: the provisions contained in Section 4OA(3) ofthe Act ancl Rule 6DD(0(ii) of the Rules, the cash [payments]made to the two companies from which assessee hadpurchased dairy product i.e., crearn, exceedingRs.20,000.00 was disallowed at the rate of 2O7o ald wasadded to t he total income of the appellant u,hich wasquantilied at Rs.9,58,395.00. 7. In agrpeal before the first appellate authoritv i.e.,Commissioner of Income Tax (Appea,ls)-V, Hyderabad(briefly, "the CIT(A)" hereinafter), the disallou,ance made bythe assess,:ng officer under the above head was conlirmedvide the orrler dated 03.09.2004. 8. Therr:after, appellant preferred further appeal beforethe Tribu:rai. By the order daLed 27.12.2OO5, Tribunaltook the view that Rule 6DD(i)(ii) of the Rules would beapplicable only if the seller carries on dairy farming andnot othenvise. Tribunal helcl that the ts.o companies from,,which [apprellant ][had purchased ]cream [were ]not carrying onthe business ol dairy farming. Therefore, this ground of tt appeal was rejected by the Tribunal. On the secondground, Tribunal held firstly that incurring of expenditureby the assessee was above Rs.20,000.00 and splitting thepayment in smaller amounts would not take the case out ofthe mischief of Section 40A(3) of the Act. That apart,Tribunal held that appellant had factuall-v failed to showthat the certificate given by the auditors is wrong.Therefore, this contention of the appellant was alsorejected.ground, Tribunal held firstly that incurring of expenditureby the assessee was above Rs.20,000.00 and splitting thepayment in smaller amounts would not take the case out ofthe mischief of Section 40A(3) of the Act. That apart,Tribunal held that appellant had factuall-v failed to showthat the certificate given by the auditors is wrong.Therefore, this contention of the appellant was alsorejected. 9. Hence, this appeal. 10. l,earned counsel for the appellant furnished acompilation comprising relevant portion of the statute andcitations and submits therefrom that a careful analysis ofRule 6DD(f)(ii) of the Rules would go to show that cashpayments made by the appellant to the trr'o companies forprocurement of cream would be entitled to the benefitthereunder. He particularly emphasised on tlre language ofclause (!(ii) of Rule 6DD of the Rules and submits that theword "dairy" is not prefixed or suffixed bl anv explanationIor elaboration to restrict the same to dairl' [farming.] 9. Hence, this appeal. 10. l,earned counsel for the appellant furnished acompilation comprising relevant portion of the statute andcitations and submits therefrom that a careful analysis ofRule 6DD(f)(ii) of the Rules would go to show that cashpayments made by the appellant to the trr'o companies forprocurement of cream would be entitled to the benefitthereunder. He particularly emphasised on tlre language ofclause (!(ii) of Rule 6DD of the Rules and submits that theword "dairy" is not prefixed or suffixed bl anv explanationIor elaboration to restrict the same to dairl' [farming.] Therefore, providing a restrictive meaning to the aboveexpression rv:,uld be contrary to the legislative intent. Insupport of strch contention, he has placed reliance on thedecision ol t'- e Supreme Court in Attar Singh GurmukhSingh v. Inr:ome Tax Offrcer, Ludhianal. He has alsotaken us to Si:ction 40A(3) of the Act and submits that on aconj oint rea,ling of Section 4OA(3) of the Act and Rule6DD(0(ii) of t r-re Rules, it [."r,ould ]be evident that the revenueauthorities [,r,ere ]in error in denying the benefit of Rule6DD(f)(ii) of the Rules to the appellant for individual cashtransactions above Rs.20.000.00. To support hiscontention l rat it is not the entirety of the tralsactionswhich is to l)e takcn into account for the purpose of Rule6DD(0(ii) ol the Rules but each individual transaction,learned counsel for the appellant relied upon a decision ofthe Orissa igh Court ir-r Commissioner of Income Tax,Orissa v. ltloo Supply Co.2 SLP filed against the abovedecision u,as; disnrissed b-v the Supreme Court, he submits. 1 1. Reverting back to the order of the Tribunal, learned ,t counsel for t}-re appellant submits that the Tribunal fell in'1r99t;+ scc [185]t 1to8o1 tzt Il R tr80 orissa : t!r79 scc online ori 167 \ error in relying upon the decision of the Allahabad HighCourt in Commissioner of Income Tax v. Pehlaj RaiDaryanmals inasmuch as the decision of the AllahabadHigh Court was rendered in the context of cash payments,not being made directly to the producers of forest produce,but to brokers or to timber suppiiers which cannot beequated u,ith the factual scenario of the present appeal 12. On the other hald, Mr. J.V.Prasad, learned StandingCounsel representing the respondents relied upon thedecision ol Himachal Pradesh High Court inSmt. Chanchal Dogra v. Income Tax Officer+ andsubmits therefrom that a milk producers union cannot beconsidered to be producer of mi1k. It is the individualmember n,ho can only be a producer of milk. He hasmeticulousll' taken us to the orders passed by theassessing officer, CIT(A) and that of the Tribuna-l andsubmits that the proposed substantial questions of law doot arise in thc facts and circumstances of the case. HeIfurther submits that admittedly appellant had purchasedcream from tno companies r.l,hich in turn had pu'ichasedr (199 t) 19o trR 242 (Alt) o ZO|Z 1Z+21 CrtrrTR (:16 milk from th e actual [producers ]of milk. The [two]companies u'ere not engaged in dairy farming. Appellant'scash p:rymen,s to the two companies therefore cannot besaid to be pal ments made to dairy farmers. In that view ofthe matter, appellant is not entitled to the benefit ol Rule6DD(0(ii) of -he Rules. Insofar contention ol learnedcounsel for the appellant that the Tribunal had erred1nconsidering ttre totality of the transactions instead of eachindividual tr::nsaction, he submits from the assessmentorder that a r;sessing oflicer very clearly mentioned thatcash pavments exceeding Rs.20,000.00 for each timer.r'ould attract provisions under Section a0A(3) of the Act.Thr:rcfore, th,s question does not arise at a-11 in the lacts ofthi s case. 13. Submi-sions made by iearned counsel lor the partieshave receive:l the due consideration of the Court 14 . To appreciate the rival contentions it [q,ould ]beappositr- to [r, ]dvert to the statutory provisions at the outsetWc ma-r, rrLention that Section 4OA(3) of the Act has undergone several amendments. The said Section as it 13. Submi-sions made by iearned counsel lor the partieshave receive:l the due consideration of the Court 14 . To appreciate the rival contentions it [q,ould ]beappositr- to [r, ]dvert to the statutory provisions at the outsetWc ma-r, rrLention that Section 4OA(3) of the Act has undergone several amendments. The said Section as it stood at the relevant point of time is as under: "Where the assessee incurs any expenditure inrespect of which payment is made, aJter such date (notbeing later than the 31st day of March, 1969), as maybe specified in this behalf by the Central Government bynotification, in the Official Ga"Ette, in a sum excecdingtwo thousand five hundred rupees otherwise than by acrossed cheque drawn on a bank or by a crossed bankdraft, such expenditure shall not be allowed as adeduction :. ....."respect of which payment is made, aJter such date (notbeing later than the 31st day of March, 1969), as maybe specified in this behalf by the Central Government bynotification, in the Official Ga"Ette, in a sum excecdingtwo thousand five hundred rupees otherwise than by acrossed cheque drawn on a bank or by a crossed bankdraft, such expenditure shall not be allowed as adeduction :. ....." 15. The second proviso to Section 404.(3) read as under: "Provided further that no disallowance under thissub-section shall be made where any payment in a sumexceeding two thousand five hundred rupees is madeotherwise than by a crossed cheque drawn on a bank orby a crossed bank draft, in such cases and under suchcircumstances as may be prescribed, having regard tothe nature and extent of banking facilities available,considerations of business expediency and otherrelevant factors."sub-section shall be made where any payment in a sumexceeding two thousand five hundred rupees is madeotherwise than by a crossed cheque drawn on a bank orby a crossed bank draft, in such cases and under suchcircumstances as may be prescribed, having regard tothe nature and extent of banking facilities available,considerations of business expediency and otherrelevant factors." 16. Thus, the Section as it stood at the relevant time saysthat u,here an assessee incurs any expenditure in respectof arry payment in a sum exceeding two thousand five/ hundred rupees otherwise than by a crossed cheque drau,non a bank or by a crossed bank draft, such expdnditureshall not be allowed as a deduction. As per the second proviso, no disallowance under sub-section (3) would bemade wher',: any payment in a sum exceeding [two]thousand five hundred rupees is made otherwise than [by a]crossed chr:que drawn on a bank or by a crossed bankdraft, in su<:h cases and under such circumstances as maybe prescrib:,d, having regard to the nature ald extent ofbanking fa<:ilities available, consideratlons oi businessexpediency and other relevant factorsmade wher',: any payment in a sum exceeding [two]thousand five hundred rupees is made otherwise than [by a]crossed chr:que drawn on a bank or by a crossed bankdraft, in su<:h cases and under such circumstances as maybe prescrib:,d, having regard to the nature ald extent ofbanking fa<:ilities available, consideratlons oi businessexpediency and other relevant factors 16. 1. It be mentioned that the amount of twomay thousand five hundred rupees u'as increased to trventythousand r'-rpees. 17. Rule {jDD of the Rules is the appropriate Rule interms of thr' aforesaid provision. Rule 6DD of the Rules asit stood at l.lee relevant point of time read as under: "R.6DD. Cases and circumstances in which paymentin a sum exceeding twenty thousand rupees may bemade otherwise than by an account payee chequedrawn on a baak on account payee bank draft - Nodisallorvance under sub-section (3) of Section 4OA sha.llbe macle where any payment in a sum e\ceeding tq,enty\thousand rupees is made othcnvisc than b1,an itccounttpayee ,rheque drawn on a battk or accoultl 1t;r_r,ee bankdraft in the cascs and circuntstanccs spcciliedhereu:r der namely:- I the payment is made to - (a) where 17. Rule {jDD of the Rules is the appropriate Rule interms of thr' aforesaid provision. Rule 6DD of the Rules asit stood at l.lee relevant point of time read as under: "R.6DD. Cases and circumstances in which paymentin a sum exceeding twenty thousand rupees may bemade otherwise than by an account payee chequedrawn on a baak on account payee bank draft - Nodisallorvance under sub-section (3) of Section 4OA sha.llbe macle where any payment in a sum e\ceeding tq,enty\thousand rupees is made othcnvisc than b1,an itccounttpayee ,rheque drawn on a battk or accoultl 1t;r_r,ee bankdraft in the cascs and circuntstanccs spcciliedhereu:r der namely:- I the payment is made to - (a) where (i)the Reserve Bank of India or anybanking company as defined in clause(c) of section 5 of the BankingRegulation Act, 1949 (10 of l9a9);banking company as defined in clause(c) of section 5 of the BankingRegulation Act, 1949 (10 of l9a9); the State Bank of India or anysubsidiary bank as defined in section 2of the State Bank of India (SubsidiaryBanks) Act, 1959 (38 of 1959); (ii) (ii, any co-operative bank or land mortgagebank; any primary agricultural credit societyas dehned in clause {cii} of scction 2 ofthe Reserve Bank of lndia Act, 1934 12of 1934), or any primary crcdit societyas defined in clause [(civ) ]of that scction;the Life Insurance Corporation of Indiaestablished under section 3 ol the LifeInsurance Corporation Act, l95tr (31 of1956); (iv) (v) ttre Industrial Finance Corporation ofIndia established under section 3 of theIndustrial Finance Corporation Act,1948 (15 of 1948); ("i) the Industria-l Credit and InvestmentCorporation of India Ltd; (vii) the Industrial Development Bank ofIndia established undcr section 3 of theIndustrial Dcvclopment Bar-rk of lndiaAct, 1964 (18 of 1964); (viii) I (ix) the Unit Trust of India establishedunder section 3 of the Unit Trust ofIndia Act, 1963 (52 of 1963);under section 3 of the Unit Trust ofIndia Act, 1963 (52 of 1963); (x) the Madras tndustrial InvestmentCorporation Ltd., Madras;Corporation Ltd., Madras; (xi) The Andhra Pradesh IndustrialDevelopment Corporation Ltd.,Hyderabad;Development Corporation Ltd.,Hyderabad;(xii) the Kerala State Industria,lDevelopment Corporation Ltd.,Trivandru m;Development Corporation Ltd.,Trivandru m; (xriil the State Industrial arld InvestmentCorporation of Maharashtra Ltd.,Bombay:Corporation of Maharashtra Ltd.,Bombay: (riv) the l)unjab State IndustrialDevclopment Corporation Ltd.,Chandigarh;Devclopment Corporation Ltd.,Chandigarh; (>n,) the National Industrial DevelopmentCorporation Ltd., New Delhi;Corporation Ltd., New Delhi; (xvi) the Mysore State Industrial Investmentand Development Corporation Ltd.,Bangetlorc;and Development Corporation Ltd.,Bangetlorc; (xvii) the Har)'ana State IndustrialDcvelopment Corporation Ltd.,Chandigarh;Dcvelopment Corporation Ltd.,Chandigarh; (xvti) any State Financial Corporationestablishetl under section 3 of the StateFin:rncial Corporation Act, 1951 (63 of195 r);establishetl under section 3 of the StateFin:rncial Corporation Act, 1951 (63 of195 r); {b) [where ][the ][pa}'mcnt ]is made to Governrirentiurd, under thr rxles framed by it, suchiurd, under thr rxles framed by it, such ttt I payrnent is required to be made in legaltender;tender; (c) where under arry contract entered into by theassessee before the 1st day of April, 1969, thepayment is required to be made in legaltender;assessee before the 1st day of April, 1969, thepayment is required to be made in legaltender; (d) where the payment is made by- (il any letter of credit arrangementsthrough a bank;through a bank; (ii) a mail or telegraphic transfer through abank;bank; (iii) a book adjustment from any account ina bank to any other account in that orany other bank;a bank to any other account in that orany other bank; (iv) a bill of exchange made payable only toa bank.a bank. {b) [where ][the ][pa}'mcnt ]is made to Governrirentiurd, under thr rxles framed by it, suchiurd, under thr rxles framed by it, such ttt I payrnent is required to be made in legaltender;tender; (c) where under arry contract entered into by theassessee before the 1st day of April, 1969, thepayment is required to be made in legaltender;assessee before the 1st day of April, 1969, thepayment is required to be made in legaltender; (d) where the payment is made by- (il any letter of credit arrangementsthrough a bank;through a bank; (ii) a mail or telegraphic transfer through abank;bank; (iii) a book adjustment from any account ina bank to any other account in that orany other bank;a bank to any other account in that orany other bank; (iv) a bill of exchange made payable only toa bank.a bank. Explanolion:- For the purposes ofthis clause and clause (h), the term"bank" means any bank, bankingcompany or society referred to in sub-clauses (i) to (iv) of clause (a) andincludes any bank not being a bankingcompany as dehned in clause (c) ofsection 5 of the Banking RegulationAct, 1949 (10 of 1949l., whetherincorporated or not, which isestablished outside India; (e) wherc the pavment is made by way ofadjustment against the amount of any liabilityincurred by the payee for any goods supplicdor services rcndered by the assessee to suchpa_vee; adjustment against the amount of any liabilityincurred by the payee for any goods supplicdor services rcndered by the assessee to suchpa_vee; d -. t) where the payment is made for t1e [purchase]of-of- {i) agricultural or forest produce; or (ii) The produce of anirnal husbandry(including hides and skins) or dairy orpoultry farming; or(including hides and skins) or dairy orpoultry farming; or (iii) fish or frsh products; or (iv) the products of horticulture orapiculture,apiculture, to the cultivator, grower or producer of sucharticles, produce or products;articles, produce or products; (g) where the payment is made for the purchaseof the products manufactured or processedwithout the aid of power in a cottage industry,to the producer of such products;of the products manufactured or processedwithout the aid of power in a cottage industry,to the producer of such products; h) where the payment is made in a village ortown, which on the date of such payment isnot served by any bank, to any person whoordinarily resides, or is carrying on anvbusiness, profession or vocation, in any suchvillage or town;town, which on the date of such payment isnot served by any bank, to any person whoordinarily resides, or is carrying on anvbusiness, profession or vocation, in any suchvillage or town; (i) where any payment by way of gratuity,retrenchment compensation or similarterminal benefit, is made to al employee ofthe assessee or the heirs of any such empioyeeon or in connection with the retrenchment,resignation, discharge or death of suchemployee, if the income chargeable under thehead "Salaries" of the employee in respect ofthe hnancial year in which such retiremcnl..tretrenchment compensation or similarterminal benefit, is made to al employee ofthe assessee or the heirs of any such empioyeeon or in connection with the retrenchment,resignation, discharge or death of suchemployee, if the income chargeable under thehead "Salaries" of the employee in respect ofthe hnancial year in which such retiremcnl..tresignation, discharge or death look plac,' or' I the immediately preceding financia-l year didnot exceed Rs.7,500; fi) [where ][the ][payment ][is ][made ][by an ][assessee ][by]way of salary to his employee after deductingthe income tax from salary in accordance withthe provision of section 192 of the Income TaxAct, 1961, and when such employee-way of salary to his employee after deductingthe income tax from salary in accordance withthe provision of section 192 of the Income TaxAct, 1961, and when such employee- I the immediately preceding financia-l year didnot exceed Rs.7,500; fi) [where ][the ][payment ][is ][made ][by an ][assessee ][by]way of salary to his employee after deductingthe income tax from salary in accordance withthe provision of section 192 of the Income TaxAct, 1961, and when such employee-way of salary to his employee after deductingthe income tax from salary in accordance withthe provision of section 192 of the Income TaxAct, 1961, and when such employee- (A) is temporarily posted for a continuousperiod of Iifteen days or more in a placeother than his normal place of duty oron a ship; andperiod of Iifteen days or more in a placeother than his normal place of duty oron a ship; and (B) does not maintain any account in anyba,nk at such place of ship;ba,nk at such place of ship; (k) where the payment was required to be madeon a day on which the banks were closedeither on account of holiday or strike;on a day on which the banks were closedeither on account of holiday or strike; (l) where the payment is made by any person tohis agent who is required to make payment incash for goods or services on behalf of suchperson;his agent who is required to make payment incash for goods or services on behalf of suchperson; (m)where the pa5ment is made by an authorizeddealer or a money changer against purchaseof foreign currency or travellers cheques in thenormal course of his business.dealer or a money changer against purchaseof foreign currency or travellers cheques in thenormal course of his business. Explanation-- For the purpose of thisclause, the expression 'authorised dea.ler' or'money changer' means a person authorize das an authorized dealer or money changer todeal in foreigrr currency or foreign exchangeunder any law for the time being in force." 18. A rearling of Rule 6DD of the Rules, as extractedabove, would go to show that no disallowance under sub-section (3) of Section 40A of the Act shall be made wherearly paymerrt in a sum exceeding Rs.2O,OO0.OO was madeotherwise 1.ran by an account payee cheque drawn on abank or zrccount payee bank dra-ft in the cases andcircumstan,les specified thereunder. As per clause (f)(ii) ofRule 6DD of the Rules, where the payment rs made for thepurpose of agricultural or forest produce or the produce ofanimal hu.bandry including hides and skins or dairy orpoultry farrning, to the cultivator, gro\{/er or producer ofsuch articles, produceor products, the restrictions ordisallowan:e under Section 4OA(3) ol the Act rvould not beattracted. In other words, arry pavment made for thepurchase of dairy products to the culti\rator, grower orproducer c,f such articles produced or products i.e., dairyproducts, then the cash payments made aboveRs.20,000.t)0 would be eligible for the benefit under Rule6DD of the Rules. In such cases there u'ould be nodisallowan<:e of cash payments above Rs.20.000.00. Thus,to avail ttre said benelit the pa,vment u'orrld have to be 1 made to a cultivator or to a grower or to a producer of dairyproduce or products. 19. In the instant case, appeilant had made thepurchases of crearn from two companies calledM/s. Heritage Foods India (P) Ltd., and M/s. CannemaraDairy Products Pvt. Ltd. It is on record that these twocompanies had in turn purchased milk from the cattlefarmers. Question for consideration is whether cashpa5ments made to these two companies can be termed aspayments made to a cultivator, grower or producer of dairyproduce or products. On the facts before us it is evidentthat these two companies are purchasers of intermediariesfrom the actual farmers, namely, milk which is processedinto cream which in turn is purchased by the appellant forthe purpose of converting cream into butter and ghee andthereafter selling in the market. The two compaliescannot be said to be a cultivator or grower or producer ofmilk or cream which are undoubtedly dairy products. In/ [tl:e ][circumstances, ][any ][payment ][made ][to ][the ][t$,o]compalies would not be a payment made to a cultlvator orgrower or producer of a dairy product so as to bring the cash tran:;action within the mischief of Rule [6DD(f)(ii) ][of]the Rules. If that be the position, no fault can be [found]with the 'ien, taken by the Tribunal in affirming [the]disallou,anr:e made by the assessing oflicer [as ][confirmed ][by]crT(A). 20. In vi,:w of our above finding, it may not be necessalyfor us trr an s\\'er the second question so framed.Nonetheler;s, we find from the assessment order thatassessing ,rfficer had considercd each individual paymentmade bv t:re appellant excceding Rs.20,OO0.0O and not thesum tota. of the pa-\'ment. Relevant portion of theassessment order reads as under: " 13. While examining the hrm's books of account forthe F.Y 20OO-OI, it is found that the firm has mainpurclrases from two companies M/s. Heritage Foods &M/s. [tJannemara ]Dairy. Thc firm is making pa1mentsto th( sc two limited companies by way of cash andcheqrre. The total cash payments exceedingRs.2C,O0O/ for each time uill attract provisions u/s40A(l; of the Income Ta-x Act, During the year underconsirteration the total cash payments exceedingRs.2C, 000/- on each tirnc is worked out atRs.42 7 2.9251 towards M / s C:urnemara Dairy Products\Pvt. Ltcl., and Rs.5, 19,0.50/- tou,ards M/s HeritageFoodr; (lndia) l\t. Ltd. Tlic cash pavments exceedingI?s.2[ t)OO/- is nlso worked out arnd arrived the above / amounts and attached to the audit report submittedalong with return of income. 14. Accordingly a show cause notice was issued tothe frrm on 12-O3-2OO4, stating the facts that the firm ismaking cash payments towards its purchases from M/sCannemara Dairy Products Pvt. Ltd., and M/s HeritageFoods (I) Ltd., which exceeding Rs.20,0OO/-. As perincome tax provisions u/s 40A{3), if the assessee madepayments in excess of Rs.2O,00O/- by way of cash whichattracts disallowance of 2oo/o on such payments. In theAudit report submitted along with return of income, itwas a-lso mentioned that the assessee-hrm has madecash payments during the financial year 2OO0-01,exceeding Rs.2O,OOO/- to the parties M/s CannemaraDairy Products Pvt. Ltd., and M/s Heritage Foods (i)Ltd., to the extent of Rs.42,72,9251- and Rs.5,19,050/-respectively. 15. lt is clear that the hrm is making cash paSrmentsto the Limited Companies. cven these companies havetheir own bank accounts. There is no necessit5r for thisfirm to make paymcnts in cash when both the partieshave bank accounts. As per Income Tax Rules it isclearly mentioned in Rule 6DD that certain exemptions., have been givcn to the assessee's in certaincircumstances for clarming exemption on cash [pa5rments]exceeding Rs.20,OOO/ [-.] 16. In t1-e present circumstances the assessee-firm isnot eligible for cxcmption on payment of cash exceedingRs.2O,OOO/ Hence. 2ooio of such cash [pa)rments]exceeding Rs.20,0OO/ - is proposed for disallowance." I Fa \\ '21. Ir-r tht: above factual backdrop, it lvas rea1ly notnecessar]' l',rr the Tribunal to have held that incurring ofexpenditurr: by the assessee was above Rs.20,000.00 andsplitting th,, payment into smaller amounts would not takethe case out of the mischief of Section 4OA(3) of the Act.Br: that as it mav, such observation of the Tribunal rvouldrezrllv not nrake any materia.l difference to the fact scenarioon the basi -- of u,hich the question has been proposed. 22. ln the circumstances, both the questions areansnered ,gainst the assessee and in favour ol the reVen Lte ')4". 1'l.rc a1:,peal is accordingly dismissed. Misce..aneous applications pending, if any, shall stancl closer:. However, there shall be no order as to costs. Sdi-B.S.CHIRANJEEVIJorNrfEGISTRAR //TRUE COPY// SECTION OFFICER One Fair Copy to tlre Hon'ble [The Chief ][Justice ][Ujjal Bhuyan](For His LordshiPs Kind Perusal)AndOne Fair Copy to tl-e Hon'ble Sri Justice [C.V' ][Bhaskar ][Reddy](For l'lis Lordships Kind Perusal) To, 1. The Income Tax [Appelldte Tribunal, A- Bench, ][Hyderabad.] 2. The Commi:;sioner of lncome [Tax (Appeals) ]-V, [Hyderabad.] 3 \8 LR Copie:; 4. The Under Ilecretary, Union of lndia [Ministry of Law, Justice ][and]Company Aifairs, New Delhi 22. ln the circumstances, both the questions areansnered ,gainst the assessee and in favour ol the reVen Lte ')4". 1'l.rc a1:,peal is accordingly dismissed. Misce..aneous applications pending, if any, shall stancl closer:. However, there shall be no order as to costs. Sdi-B.S.CHIRANJEEVIJorNrfEGISTRAR //TRUE COPY// SECTION OFFICER One Fair Copy to tlre Hon'ble [The Chief ][Justice ][Ujjal Bhuyan](For His LordshiPs Kind Perusal)AndOne Fair Copy to tl-e Hon'ble Sri Justice [C.V' ][Bhaskar ][Reddy](For l'lis Lordships Kind Perusal) To, 1. The Income Tax [Appelldte Tribunal, A- Bench, ][Hyderabad.] 2. The Commi:;sioner of lncome [Tax (Appeals) ]-V, [Hyderabad.] 3 \8 LR Copie:; 4. The Under Ilecretary, Union of lndia [Ministry of Law, Justice ][and]Company Aifairs, New Delhi 5. The Seciet;r-y, [Telangana ][High ][Court Advocates ][Association' ][Library,]High Court l:,uildings HYderabadl:,uildings HYderabadHigh Court l:,uildings HYderabadl:,uildings HYderabad High Court l:,uildings HYderabadl:,uildings HYderabad6 One CC to [Sri Karthik Ramana ][Puttamreddy, ][Advocate ] 7. One CC to Sri [J. ][V. ][Prasad, ] [for ][lncome Tax ][Department ]IOPUC]8. Two 6P Qelries \ \Y\ HIGH COUR"I| DATED:0911112022 t,.R. COPY TO BE NIARKED::-ii'l S'ln r{:JUDGMENTo15 DEI [, ][:2](:;z.i'ITTA.No.75 r:rf 2006 DISMISSINCi THE APPEALWITHOUT CIf,STSn[p]