Cash payment after banking hours and section 40A(3) raised a mixed question of law and fact for reference.

The article discusses disallowance of expenditure under section 40A(3) of the Income-tax Act, 1961 and the assessee's reliance on rule 6DD(j) and Circular No. 220 on mitigating circumstances. It notes that the Tribunal's conclusion involved a mixed question of law and fact, particularly whether exceptional or unavoidable circumstances justified cash payment after banking hours to a representative of the payees. On that basis, a reference was directed on the proposed question, and the Tribunal was required to state the case for the High Court's opinion.

---

---

Issues: Whether the Tribunal's order gave rise to a mixed question of law and fact so as to justify a direction under section 256(2) of the Income-tax Act, 1961, and whether the question relating to payment after banking hours to a representative of the payees should be referred for the opinion of the High Court.

Analysis: The application concerned addition of expenditure disallowed under section 40A(3) of the Income-tax Act, 1961, with the assessee relying on rule 6DD(j) of the Income-tax Rules, 1962 and Circular No. 220 dated 31-5-1977 on mitigating circumstances. The Court found that the Tribunal's order raised a mixed question of law and fact, warranting a reference on whether exceptional or unavoidable circumstances existed for cash payment after banking hours to the representative of the payees.

Outcome: The application was allowed in part and the Tribunal was directed to state the case and refer the question proposed by the Court.

---