TaxTMI 
TaxTMI 
2015 (8) TMI 1076
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....es of the case." 2. Brief facts of the case are that the assessee deals in the wholesale trading of M/s Godfrey Phillips India Ltd. (for short GPI) brands of cigarettes, tea and candy. In respect of book entries in respect of incentives of Rs. 46,30,144/-, the Assessing Officer was of the view that they amounted to cash payments in contravention of provisions of Section 40A(3) of the Income Tax Act, 1961 (in short the Act). Accordingly, the assessee was called on to show cause as to why the corresponding disallowance should not be made. 2.1 The assessee replied that the disallowance is not called for inasmuch as (a) These are only book entries besides amounts have not been claimed as expenditure to attract sec. 40A(3). (b) Only debit no....
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.... which was incurred on promotional schemes of GPI and subsequently reimbursed by the GPI by way of credit note could be disallowed U/s 40A(3) or not. It is, however, noticed that the amount of Rs. 46,30,144/- was not paid to the GPI in cash as such. For example, the AO had alleged that cash of Rs. 9,66,806/-was paid to M/s Godfrey Philips India Ltd. on 28.05.2008. However the AO had issued notice U/s 133(6) to M/s Godfrey Philips India Ltd. and copy of account of the assessee firm in their books of account was also obtained. It was clear on the perusal of said ledger account that the assessee had only issued debit note No. 46 dated 12.05.2008 which was received by them on 17.05.2008. Similarly the AO had alleged that cash of Rs. 2,15,296/- ....
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....s not borne out from the documents/evidences filed by the assessee. I have also perused the payment/receivers list submitted by the counsel of appellant wherein it was merely mentioned that the incentives ranging from Rs. 300/- to Rs. 3500/- were paid to various retailers and nothing was mentioned that the cigarette packets were distributed. At the same time, however it is noticed by undersigned that the amount paid to various retailers/panwalas/shopkeepers was of various small amounts each being less than Rs. 20,000/-. These payments were made not to the GPI but to these small shopkeepers/retailers/panwalas through the sales persons. The GPI had not shown any receipt of the cash from the assessee. It had only issued the credit note in resp....
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.... cash book, it could not be taken that cash was paid to the GPI ignoring the evidence of payment to the individual persons of less than Rs. 20,000/-. The Hon'ble Supreme Court in case of Attar Singh Gurmukh Singh Vs. ITO (199 ITR 667) has held that ITO should take a practical approach to the problem and strike a balance between the direction of the law and the hardship to the assessee. He should not enmesh himself in the technicalities. The object of section 404(3) was not to deprive the assessee of the deduction which he was otherwise entitled to claim. Moreover, the entries in the books of account were not conclusive for determining the nature of transactions. What was more relevant was the substance of the transactions. It was held by th....