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