TaxTMI 
TaxTMI 
1978 (10) TMI 5
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....of Ahmedabad are not covered by rule 6DD(j)(i) and (ii) of the Income-tax Rules, 1962 ?" The following question has been referred at the instance of the Revenue. "Whether the Tribunal was right in law and on facts in holding that the payments of Rs. 9,791 made to M/s. Yogeshchandra & Co. of Bombay are covered by rule 6DD(j)(i) and (ii) of the Income-tax Rules, 1962 ?"' The facts leading to these two references are as follows: "We are concerned with assessment year 1970-71. The assessee is a registered firm which derives income from a spinning mill. It purchases cotton waste and manufactures yarn which is used in manufacturing rough clothes, mats, carpets, etc. At the time of the assessment, the Income-tax Officer, while scrutinisin....
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....n facts, the assessee's contention that M/s. Manubhai & Co., were not prepared to accept cheques from the assessee-firm could not be accepted and it, therefore, disallowed the claim for Rs. 48,939. As regards payments made to M/s. Yogeshchandra & Co., the Tribunal found that all along in the past as well as during the year under appeal, the payments, past as well as during the year under appeal, were made only in cash and therefore the explanation put forth by the assessee had some merit. The Tribunal again took the fact into consideration that Yogeshchandra & Co. was a Bombay party and their insistence on cash payments in the light of the facts stated by the assessee could not be ruled out. The Tribunal therefore held that the payments mad....
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....cy and other relevant factors. It may be noted here that in February 1969, the Central Government specified, by notification in the Official Gazette, that 31st March, 1969, was the specified date under section 40A(3). Rule 6DD of the Income-tax Rules, 1962, provides for cases and circumstances in which payment in the sum of Rs. 2,500 may be made otherwise than by crossed cheque or a crossed bank draft and the rule says that no disallowance under sub-section (3) of section 40A shall be made where any payment in sum exceeding two thousand five hundred rupees is made otherwise than by crossed cheque drawn on a bank or by crossed bank draft in the cases and circumstances specified therein, namely: "(j) in any other case, where the assessee s....
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....ment by way of crossed cheque/draft and the purchaser's business interest would suffer due to non-availability of goods otherwise than from this particular seller ; or (v) The seller, acting as a commission agent, is required to pay cash in turn to persons from whom he has purchased the goods ; or (vi) Specific discount is given by the seller for payment to be made by way of cash," The circular makes it clear that these are merely illustrative instances of cases in which rule 6DD(j) would be applicable. The circular also points out that the requirements of rule 6DD(j) can be satisfied if a letter to the above effect is produced in respect of each transaction falling within the categories listed above from the seller giving full par....