TaxTMI 
TaxTMI 
2012 (12) TMI 452
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....her the ITAT erred in confirming the disallowance of expenditure to the tune of Rs.27, 48, 860/- made by the AO under Section 40A (3)?" 4. The brief facts of the case are that the assessee is a mobile railway catering contractor. It serves the passengers on trains and also derives income from two hotels. For the concerned assessment year i.e. AY 2008-09, it declared total income of Rs.13,10,566/-. The matter was selected for scrutiny assessment. The AO noticed that the assessee had purchased goods and supplies to the tune of Rs.27,48,860/- from one M/s Shruti Enterprises, a Mumbai-based concern for providing it supplies in the trains which it serves, i.e., Punjab Mail and Pushpak Express. The assessee had urged that purchases from t....
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....de in view of business expediency. 6. Counsel for the Revenue urged that the object behind Section 40A (3) was public interest and that any payment in excess of Rs.20,000/- had to be made through account payee cheques. A particular business transaction adopted by the assessee or any other did not admit of any exception to this principle. Counsel urged in this context that the case of the assessee was not covered by Rule 6DD (k) and consequently, it could not be argued that supplies would not have been obtained except on cash payments. It was submitted that if cases like the present are permitted and the disallowance is deleted, it would have implications as similar arguments of business expediency would be taken in other cases. 7.....
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....ndays and other public holidays as per detail at page 29, we are of the opinion that this aspect may be checked by the Assessing Officer and if found correct, the disallowance may be reduced by this amount of Rs.7,23,819/-." Section 40A (3) to the extent it is relevant is reproduced below: - "3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. (3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expendit....
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....ent shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely: - XXX XXX XXX (k) Where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such persons." 9. In the present case, the previously noted discussion would reveal that the assessee engages itself in executing catering contracts for Railways in respect of two trains. In those trains, its personnel are deployed for ....