TaxTMI 
TaxTMI 
2014 (1) TMI 948
X X X X Extracts X X X X
X X X X Extracts X X X X
....(A) in confirming the disallowance made by the assessing officer u/s. 40A(3) of the Act. 3. The facts relating to the said issue are stated in brief. The assessee, a partnership firm, is a transport contractor undertaking transportation of goods for various organisations thorough vehicles by it. During the year under consideration, the assessee has spent a sum of Rs.4.77 crores towards lorry hire charges. The Assessing Officer examined the expenditure incurred on lorry hire charges during the course of assessment proceedings and noticed that the assessee had paid a sum of Rs.1,06,69,600/- in cash in violation of the provisions of sec. 40A(3) of the Act. 4. After hearing the assessee, the Assessing Officer disallowed the above said amo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts and gains of business or profession under this sub-section. where any payment in a sum exceeding twenty thousand rupees is made otherwise than by an account payee cheque drawn on a bank or account payee bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors". The Ld. Counsel submitted that the above said proviso lists out exemption from the rigours of sec. 40A(3) of the Act on three situations, viz.,:- (a) Nature and extent of banking facilities available. (b) Consideration of business expediency. (c) Other relevant factors. The assessee in the instant case was requi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovisions of sec. 194C also by not deducting tax at source. 10. In the rejoinder, the Ld. Counsel appearing for the assessee submitted that the lorry drivers are treated as agent under the Kerala Sales Tax Act and hence, exemption provided under Rule 6DD(k) shall apply to the assessee. 11. We have heard the rival contentions and carefully perused the record. Admittedly, the assessee has paid lorry freight charges to the tune of Rs. 1,06,69,600/- in cash in violation of provisions of sec. 40A(3) of the Act. The disallowance is prescribed under sec. 40A(3) under a legal fiction and hence the tax authorities have to necessarily comply with it unless it is shown by the assessee that the impugned payments falls within any of the exceptions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax Rules. This contention has been addressed by the Ld. CIT(A) as under: "11.0 The assessee has further stated that his case is covered under Rule 6DD(k). The said Rule is reproduced as under: (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 person." It is clear from the above that only the cash payments made to his agent by a person and that too in a case where the agent is required to make payment in cash for goods and service on behalf of the principal are covered. Lorry driver is not an agent of the assessee. He is employed by the person owning the lorry and receive payments of lorry driver charges (sic. Lorry charges) on behalf of the lorr....