Broad meaning of "expenditure" under section 40A brings stock-in-trade purchases within disallowance for excess cash payments.

The expression "expenditure" in section 40A was construed broadly and not as limited to overhead expenses under sections 30 to 43A. Payments for purchase of raw materials or stock-in-trade in the course of manufacturing or trading were treated as expenditure, so cash payments above the statutory limit were liable to disallowance. The Tribunal's narrower view was rejected because it conflicted with an earlier binding decision of the same HC. The question was answered in favour of the Revenue and against the assessee.

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Issues: Whether the price paid for raw materials or stock-in-trade in the course of manufacturing or trading business falls within the expression "expenditure" in section 40A of the Income-tax Act, 1961.

Analysis: The expression "expenditure" was held to be of wide import and not confined to overhead expenses covered by sections 30 to 43A. Payments made for purchases of stock-in-trade were treated as falling within that expression, and cash payments exceeding the statutory limit were held liable to disallowance. The view taken by the Tribunal was rejected in light of the binding earlier decision of the same Court.

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

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