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HIGH COURT OF ALLAHABAD
SATISH CHANDRA, B.N. SAPRU, JJ.
Ideal Tannery - Appellant
Versus
Commissioner Of Income-Tax - Respondent
Income-tax Reference 63 of 1974
Decided on : Jan 27, 1978
Section 40A(3) - Expenditure - The court held that payments made to suppliers for the purchase of goods are considered as expenditure within the meaning of Section 40A(3) of the Act. Rule 6DD provides relief from the operation of Section 40A(3) in specific cases.
Fact of the Case:
The court addressed two questions of law regarding the expenditure mentioned under Section 40A(3) and the entitlement to relief under Rule 6DD of the I.T. Rules, 1962.
Finding of the Court:
The court found that payments made to suppliers for the purchase of goods are considered as expenditure under Section 40A(3) and that the assessee was not entitled to relief under Rule 6DD due to failure to establish that the payments were made to the producer.
Issues: The issues involved the interpretation of Section 40A(3) and the entitlement to relief under Rule 6DD of the I.T. Rules, 1962.
Ratio Decidendi: The court's decision was influenced by the interpretation of Section 40A(3) and Rule 6DD, as well as the specific findings of fact regarding the payments made to suppliers and producers.
Final Decision: Both questions were answered in favor of the department and against the assessee, with the department being entitled to costs assessed at Rs. 200.
Satish Chandra, J.
1. TWO questions of law have been referred for our opinion :
"1. Whether, on the facts and in the circumstances of the case, the expenditure mentioned under Section 40A(3) includes expenditure by way of purchases ?
2. Whether, on the facts and in the circumstances of the case, the assessee was entitled to relief under Rule 6DD of the I.T. Rules, 1962 ?"
2. ON the first question, a Bench of this court in U. P. Hardware Store v. CIT [1976] 104 ITR 664 (All) has held that payments made to suppliers for purchase of goods are expenditure within the meaning of Section 40A(3) of the Act. In view of this decision, the first question is answered in the affirmative.
On the second question, Rule 6DD provides relief from the operation of Section 40A(3), inter alia, where the payment exceeding a sum of Rs. 2,500 is made for the purchase of produce of animal husbandry to the producers of such articles. Here the purchases in question were of hides and skins and the finding of the Tribunal is that the assessee had failed to establish that the payments were made to the producer. On that finding of fact the second question is answered in the negative.
3. CONSEQUENTLY, both the questions are answered in favour of the department and against the assessee. The Commissioner will be entitled to costs which are assessed at Rs. 200.
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