1991 (3) TMI 73

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.... Under section 256 (2) of the Income-tax Act, 1961, the following question has been stated for our opinion in pursuance of an order of the Supreme Court: "Whether the amounts spent by the assessee in purchasing goods for the purpose of resale is expenditure within the meaning of section 40A(3) of the Income-tax Act, 1961 ?" A Bench of this court has held in U. P. Hardware Store v. CIT [1976]....

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.... but Mr. Bharatji Agarwal, learned counsel for the assessee, argued that, having regard to the language of sub-section (3) of section 40A, its application must be confined only to deductions claimed under sections 30 to 43A. For a proper appreciation of this submission, it would be appropriate to set out sub-section (3) in so far as it is relevant for our purpose : "40A(3). Where the assessee i....

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....and other relevant factors." Mr. Bharatji Agarwal says that the sub-section applies to any expenditure which is claimed by way of deduction and deductions are dealt with in sections 30 to 43A. The amount spent for purchasing goods for the purpose of resale is not claimed as deduction under any of the provisions contained in sections 30 to 43A and, therefore, he says, that the rule contained in ....

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....rmally, payment under a crossed cheque or crossed bank draft is an assurance of its, genuineness. It obviates an inquiry into doubtful payment. The provision is intended to introduce openness in business transactions. Having regard to this underlying object, we see no reason to restrict the meaning of the expression "expenditure" to deductions provided by sections 28 to 43A alone. The emphasis is ....