HIGH COURT OF ALLAHABAD

Evershine Platers

v.

Commissioner of Income-tax

H.L. Gokhale, C. J. and R. K. Agarwal, J.

August 9, 2007

Section 40A(3) of the Income-tax Act, 1961 - Business disallowance - Cash payments exceeding prescribed limits - Assessment year 1992-93 - Whether where assessee was regularly making payments in cash beyond permissible limit to its contractors in a city where banking facilities were available, such payments were not allowable as business expenditure -Held, yes

FACTS

The Assessing Officer made an addition to the assessee’s income by disallowing the payments in cash exceeding the specified limit made by the assessee to its contractors. On second appeal, the Tribunal upheld order passed by the Assessing Officer.

On appeal under section 260A:

HELD

In the instant case, for more than 15 years the payments were made in cash to the contractors in the city of ‘M’ where banking facilities were available. The regular payments could not be made by the assessee such mode otherwise, 40A(3) would be redundant. Therefore, the Tribunal was right in restoring the order of the Assessing Officer. [Para 6]