Commissioner of Income Tax vs B.G. Subramaniam

F.M. Ibrahim Kalifulla, J.—The revenue has come forward with this appeal and the question of law raised is ""whether in the facts and

circumstances of the case, the Tribunal was right in holding that no disallowance u/s 40A(3) can be made where the assessee had admittedly made

payment exceeding Rs. 20,000/- other than by way of crossed cheque?

The assessee succeeded before the Commissioner of Income Tax (Appeals). The appeal preferred by the revenue before the Tribunal having

been held against the revenue, the present appeal has been filed.

We heard Mr. J. Narayanasamy, learned standing counsel for the appellant. The learned Counsel would contend that in the facts and

circumstances of the case, the contention of the assessee that he was 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.

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 a sum exceeding twenty thousand rupees is made

otherwise than by an account payee cheque drawn on a bank or account payee bank draft, in such cases and under such circumstances as may be

prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency'' and other relevant factors.

If we apply the specific stipulations contained in the proviso, we find that it depends upon the nature 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, the

Tribunal has noted that the payments were made at the insistence of the Sugar Mill from where the purchases 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 the branches of the co-operative banks which were located in the concerned Co-operative Sugar Mill. In such circumstances, the

conduct of the assessee in having deposited the payment in cash in the branches located in the Co-operative Sugar Mill at the insistence of the

concerned Sugar Mill will squarely fall under the expression ''considerations of business expediency''. When the Commissioner of Income Tax

(Appeals) as well as the Tribunal were convinced of the said position, namely, the application of the proviso to Section 40A(3) of the Act, we do

not find any question of law, muchless substantial question of law involved in this appeal. The perception of the Commissioner of Income Tax

(Appeals) as well as the Tribunal while applying the proviso to Section 40A(3) was perfectly in order, which was based on the special

circumstances involved in this case. We, therefore, do not find any scope to entertain this appeal. The appeal fails and the same is dismissed.