TaxTMI 
TaxTMI 
1982 (10) TMI 14
X X X X Extracts X X X X
X X X X Extracts X X X X
....iture involved in a single bill for several items exceeds Rs. 2,500 ? " The enquiry prompted by the question is about the disallowance made by the ITO of two payments made by the assessee under two bills for purchase of commodities effected by the assessee, in the course of its business. The abstract of the two bills, which are found in the statement of the case, are reproduced below: Purchase Bill No. 1814 Dated: 21-1-1970 Quantity Particulars Rate Amount Rs. Rs. 1,000 Resins 200 &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; Total 2,668 ----- Purchase Bill No. 1815 Dated 21-1-1970 Rate Rs. &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; Total 2,518 ----- It will be seen that the payment made for expenditure by way of purchase of the commodities under the first bill was Rs. 2,668. The payment under the other bill was for Rs. 2,518. Both these payments, were admittedly made by the assessee in cash. The ITO, while computing the taxable income of the assessee under the head " Business ", disallowed these two items of payment made by the assessee towards expenditure incurred for purchase of materials. Section 40A(3) of the I.T. Act, 1961, enacts that where an assessee makes a payment in a sum exceeding Rs. 2,500 otherwise than by a crossed cheque or by a crossed bank draft towards any expenditur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness expenditure. If it is made in respect of any such expenditure, then the further question is whether the payment is made by cash or by crossed cheque or bank draft. If it is by cash, then, unless special circumstances are pleaded and established by the assessee in terms of the appropriate saving provisions of the statutory rules, the expenditure will be disallowed on the ground that the payment has not been made by a crossed bank draft or crossed cheque. Even if the payment is made by crossed cheque or bank draft, the expenditure may run the risk of being disallowed for various other reasons which may be germane for purposes of the statutory computation of business income. The assessee's argument which found favour with the Tribunal was that while considering the applicability of s. 40A(3), the aspect of payment should not be considered to be of importance, but the focus of attention must be the size of the expenditure. According to this line of reasoning, if any expenditure, depending on the particular focus of attention, is found to be of quantum less than Rs. 2,500, then the expenditure can never be disallowed in limine under this provision on the ground that it was made ....