High Court recognizes suppliers as producers under rule 6DD(f)(ii) and disallows payments disallowance under section 40A(3).

The High Court of Calcutta allowed the petition for condonation of delay in filing the application (C.A. No. 867 of 2008). It upheld the Tribunal's decision recognizing suppliers of hides and skins as producers under rule 6DD(f)(ii), stating that processing by suppliers qualifies them as producers. The Court rejected the disallowance of payments to suppliers under section 40A(3), finding the transactions genuine. The appeal (I.T.A. No. 186) was dismissed as no substantial question of law was involved, with parties instructed to act on a xerox signed copy of the order.

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Issues:
1. Condonation of delay in filing the petition.
2. Interpretation of rule 6DD(f)(ii) regarding the status of suppliers of hides and skins as producers.
3. Disallowance under section 40A(3) for cash payments made to suppliers.

Analysis:
1. The High Court of Calcutta, comprising of Pinaki Chandra Bose and Sankar Prasad Mitra JJ., perused the petition for condonation of delay and found the grounds satisfactory, thereby condoning the delay in filing the application. The application, being C.A. No. 867 of 2008, was allowed (para. 1).

2. The Tribunal had previously held that suppliers of hides and skins are to be recognized as producers, granting them the benefit under rule 6DD(f)(ii). The Tribunal's decision was based on the fact that the suppliers processed the hides and skins before selling them to tanneries. The Court upheld the Tribunal's decision, emphasizing that processing by suppliers qualifies them as producers under the rule. The Court rejected the contention that the suppliers were not directly connected to live animals, stating that the plain reading of the rule includes hides and skins as products of animal husbandry. The Court further ruled that the Assessing Officer was unjustified in disallowing payments made to these suppliers under section 40A(3), as the genuineness of the transactions and the suppliers' status as producers were not in dispute (para. 2).

3. The Court concluded that no substantial question of law was involved in the matter, leading to the dismissal of the appeal (I.T.A. No. 186). The parties were instructed to act on a xerox signed copy of the order, and an urgent certified copy of the order would be provided upon application (paras. 3-5).

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