2020 (9) TMI 322

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....y to observe, the appeal was earlier fixed for hearing on 16.01.2020. Learned counsels appearing for the parties were heard at length and the hearing was closed. However, due to the extraordinary situation arising out of the pandemic COVID-19 leading to nationwide lockdown, the order could not be finalized and pronounced. By the time little bit of normalcy returned and the institution started functioning in a limited scale, considerable time has elapsed. Therefore, it was felt necessary to put the appeal for clarification so that learned counsels appearing for parties would get a fair chance to make further submissions, if any, for enabling the Bench to decide the appeal. Accordingly, appeal was heard again on 07.08.2020 and in course of he....

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....xplanation from the assessee regarding the proposed disallowance and examining it, the Assessing Officer ultimately disallowed the amount of Rs. 31,53,902, under section 40A(3) of the Act. Though, the assessee contested the aforesaid disallowance before the first appellate authority, however, the disallowance made by the Assessing Officer was confirmed. 4. The learned Authorised Representative submitted, the provisions of section 40A(3) of the Act would not be applicable to the expenditure incurred in cash in foreign currency as it refers to expenditure incurred in rupees and not in foreign currency. He submitted, even otherwise also, Income Tax Act has jurisdiction over India and cannot be applied outside territory of India. He submitte....

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....n currency and not in any other foreign currency. He submitted, what is meant by not exceeding an amount of Rs. 20,000 is cash expenditure equivalent to Rs. 20,000. He submitted, if the assessee's contention is accepted, then it would have been impossible to mention the currencies of all the countries in the provision. Therefore, the provision of section 40A(3) of the Act cannot be interpreted in a purely literal sense. He submitted, the contention of the assessee that provisions of section 40A(3) of the Act is not applicable to expenditure incurred in cash in foreign countries is actually misplaced as there is no such restriction in the said provision. Further, he submitted, the provision of rule 6DD would also not be applicable to the ass....

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.... not be allowable, unless, it is paid through account payee cheque or account payee bank draft. The mention of the word "rupee" in section 40A(3) cannot be interpreted in a limited or narrow sense to mean only cash expenditure incurred in rupee. What the expression means is expenditure incurred exceeding the particular amount in rupee terms. Therefore, even if the expenditure is incurred in cash and in foreign currency, still the provision of section 40A(3) would be applicable if it exceeds the specified quantum in rupee term. Therefore, merely because the expression "rupee" has been mentioned in section 40A(3) of the Act, it would not debar applicability of the provision to the expenditure incurred in cash in foreign currency. 8. It wou....

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.... in our humble view, could not have been the intention of the legislature while enacting section 40A(3) of the Act, as, the provision would otherwise suffer from the vice of discrimination 9. Insofar as the contention of the learned Authorised Representative that the provisions of the Act would be applicable only to the territory of India and not to the expenditure incurred abroad, we are unable to accept the same. Undisputedly, the expenditure incurred in cash has been booked in India by debiting to the profit and loss account, that too, in rupee terms. Therefore, the Assessing Officer has all the powers to examine the allowability of such expenditure under the provisions of the Act while making assessment of the assessee. That being th....

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....otal expenditure claimed. Though, the assessee contested the aforesaid disallowance before the first appellate authority, however, learned Commissioner (Appeals) confirmed the disallowance made by the Assessing Officer. 13. The learned Authorised Representative submitted, the disallowance has been made purely on ad-hoc basis without any sound reasoning. Thus, he submitted, the expenditure claimed by the assessee should be allowed in full. 14. The learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 15. We have considered rival submissions and perused the material on record. A perusal of the assessment order reveals that the Assessing Officer has disallowed 10%....