The word "expenditure" used in Section 40A(3) of the Income-tax Act, 1961, does not cover expenditure on purchase of stock-in-trade.

M.R.Sharma, J.

1. The petitioner is a registered firm deriving income from the sale of ghee, sugar, maida, etc. During the financial year 1971-72, the petitioner purchased ghee from M/s. Amrit Banaspati Company, Rajpura. The value of this purchase aggregated to Rs. 54,13,342. This amount was paid to the supplier company on as many as 189 occasions during the year under reference. The payment also included the payment of Rs. 4,47,000 in cash on 15 occasions. On each occasion, the payment exceeded the sum of Rs. 2,500. According to the assesses, these payments were so made on urgent demands made by the company. The ITO noticed these payments and in view of the provisions of Section 40A(3) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), declined to accept the explanation given by the assessee and included them in its taxable income.

2. The assessee went up in appeal, which was disposed of by the AAC on November 30, 1973. Two points were raised before him. One was whether the money spent on the purchase of ghee fell within the definition of the word "expenditure" or not. The second point was whether the ingredients of r. 6DD(j) of the I.T. Rules, 1962 (hereinafter referred to as "the Rules"), stood satisfied in the facts and circumstances of this case. The AAC decided both the points in favour of the assessee. On the second point, he observed as under :

" 5. I have carefully considered the arguments made on behalf of the appellant. In my opinion, urgent demands from M/s. Amrit Banaspati Co. Ltd., Rajpura, for cash payments after banking hours and the payments made by the firm in cash in view of its reputation and non-charging of interest by the supplier company constituted exceptional circumstances for the appellant-firm to make payment in cash. "

3. The revenue went up in appeal before the Income-tax Appellate Tribunal, Chandigarh Bench (hereinafter referred to as " the Tribunal "), The Tribunal affirmed the finding arrived at by the AAC on the first point and reversed his finding on the second point. Even in these findings, the assessee was not burdened with the payment of income-tax. Both the parties applied for a point of law to be referred to this court for its opinion. The application filed by the revenue was allowed and the following point of law was referred to this court for its opinion :

" Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the word expenditure used in Section 40A(3) of the Income-tax Act, 1961, does not cover expenditure on purchase of stock-in-trade ? "

4. The application filed by the assessee was, however, dismissed. The assessee has filed I.T. Case No. 66 of 1976 against the decision of the Tribunal and has prayed that the same be directed to refer the following point of law to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the respondents case was not covered by the exception provided in Clause (j) of Rule 6DD of the Income-tax Rules, 1962?"

5. The reference and the application filed by the assessee are being disposed of by this judgment.

6. As far as Income-tax Reference No. 60 of 1976 is concerned, the question of law involved therein stands concluded against the assessee in view of the Division Bench judgments of this court reported as CIT v. New Light Tin Manufacturing Company [1980] 121 ITR 229, CIT v. Kishan Chand Maheshwari Dass [1980] 121 ITR 232 and CIT v. Grewal Group of Industries [1977] 110 ITR 278. Mr. Sibal, learned counsel for the assessee, has contested the correctness of these judgments, but we, as members of a Bench of co-ordinate jurisdiction, are unable to differ from the view taken in these cases. The question of law referred therein is, therefore, decided in the negative, i.e., in favour of the revenue and against the assessee.

7. In I.T. Case No. 66 of 1976, it has been submitted by Mr. Sibal that the AAC had taken thre