Salem v. B.g.subramaniam

DATED : 18.08.2009 CORAM THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLA AND THE HONOURABLE MRS.JUSTICE R.BANUMATHI Tax Case (Appeal) No.766 of 2009 Commissioner of Income Tax Salem .. Appellant -vs- B.G.Subramaniam .. Respondent Memorandum of Grounds of Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, Madras 'D' Bench dated 7.3.2007 made inITA No.1770/Mds/2005 for the assessment year 2002-2003. For Appellant :: Mr.J.Narayanasamy JUDGMENT (Judgment of the Court was delivered by F.M.IBRAHIM KALIFULLA, J). The revenue has come forward with this appeal and the question of law raised is "whether in thefacts and circumstances of the case, the Tribunal was right in holding that no disallowance underSection 40A(3) can be made where the assessee had admittedly made payment exceedingRs.20,000/- other than by way of crossed cheque?" 2. The assessee succeeded before the Commissioner of Income Tax (Appeals). The appeal preferredby the revenue before the Tribunal having been held against the revenue, the present appeal hasbeen filed. 3. We heard Mr.J.Narayanasamy, learned standing counsel for the appellant. The learned counselwould contend that in the facts and circumstances of the case, the contention of the assessee that hewas compelled to deposit the sum in excess of Rs.20,000/- by way of cash at the insistence of the Co-operative Sugar Mill where he purchased the sugar cannot be accepted. 4. The proviso to Section 40A(3) reads as under:- "Provided further that no disallowance under this sub-section shall be made where any payment in asum exceeding twenty thousand rupees is made otherwise than by an account payee cheque drawnon a bank or account payee bank draft, in such cases and under such circumstances as may beprescribed, having regard to the nature and extent of banking facilities available, considerations ofbusiness expediency' and other relevant factors." 5. If we apply the specific stipulations contained in the proviso, we find that it depends upon thenature and extent of banking facilities available, considerations of business expediency and other relevant factors in order to enable an assessee to claim the deductions. In the case on hand, theTribunal has noted that the payments were made at the insistence of the Sugar Mill from where thepurchases were made by the assessee. Purchases were said to have been made from the District Co-operative Sugar Mill, which is a quasi Government concern, and the payments were also made in thebranches of the co-operative banks which were located in the concerned Co-operative Sugar Mill. Insuch circumstances, the conduct of the assessee in having deposited the payment in cash in thebranches located in the Co-operative Sugar Mill at the insistence of the concerned Sugar Mill willsquarely fall under the expression 'considerations of business expediency'. When the Commissionerof Income Tax (Appeals) as well as the Tribunal were convinced of the said position, namely, theapplication of the proviso to Section 40A(3) of the Act, we do not find any question of law, muchlesssubstantial question of law involved in this appeal. The perception of the Commissioner of IncomeTax (Appeals) as well as the Tribunal while applying the proviso to Section 40A(3) was perfectly inorder, which was based on the special circumstances involved in this case. We, therefore, do not findany scope to entertain this appeal. The appeal fails and the same is dismissed. ss To 1. The Income Tax Appellate TribunalMadras 'D' BenchChennai 2. The Commissioner of Income TaxSalem