Section 40A(3) covers purchase payments for trading or manufacturing goods, sustaining the income-tax addition.

Section 40A(3) of the Income-tax Act was held to apply to purchase price paid for goods acquired for trading or manufacturing, because the term "expenditure" was construed to include such purchase payments. On that reasoning, the addition made by the Income-tax Officer under section 40A(3) was sustained and could not be deleted. The issue was decided against the assessee and in favour of the Revenue.

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Issues: Whether section 40A(3) of the Income-tax Act, 1961 applied to the purchase price of goods purchased for trading or manufacturing.

Analysis: The word "expenditure" was held to include amounts spent on purchases of goods for trading or manufacturing purposes. On that basis, the addition made by the Income-tax Officer under section 40A(3) could not be deleted.

Conclusion: The question was answered against the assessee and in favour of the Revenue.

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