TaxTMI 
TaxTMI 
1975 (2) TMI 5
X X X X Extracts X X X X
X X X X Extracts X X X X
...." For the assessment year 1970-71, M/s. P. R. Textiles, Thodupuzha, a registered firm for the purpose of the I.T. Act, 1961, filed a return disclosing an income of Rs. 12,835. While examining the accounts of the assessee, the ITO found that the assessee had paid in cash to M/s. K.N.G. Brothers, Ernakulam, Rs. 4,000 on June 6, 1969, and to M/s. Neelakanta Iyer, Vaikom, Rs. 36,840 on various dates in cash towards the sale consideration for the purchase of textile goods. According to the ITO the above sums represented " expenditure" falling with in the expression " any expenditure " occurring in s. 40A(3) of the I.T. Act, 1961, and the above sums were disallowed as items of expenditure and the income of the assessee was determined as Rs. 53....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s in Navnit Lal C. Javeri v. K. K. Sen, AAC [1965] 56 ITR 198 (SC) and in Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66 (SC). We do not find these decisions helpful for the purpose of determining the question before us. Section 40A briefly stated deals with expenses or payments not deductible in certain circumstances and the provisions of the section shall have effect notwithstanding anything to the contrary contained in any other provision of the Act relating to the computation of income under the head " Profits and gains of business or profession ". This section occurs among the group of sections starting with s. 14 in Chap. IV dealing with computation of total income under the various heads of income and relates to the 4th men....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... paid out or away and is something which is gone irretrievably. Expenditure, which is deductible for income-tax purposes, is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure." Money has actually been given away no doubt towards the cost of the material purchased is admitted. So, if the ordinary meaning of the expression of the word " expenditure " is applied, s. 40A(3) would prevent reckoning of expenditure over Rs. 2,500 unless the payment was in the manner provided by the sub-section. The normal rule in interpreting any statute or any section of a statute and this is the rule that must be applied is that the expres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d " Gross profit transferred to P/L A/c. -------- --------- Rs. Rs. " --------------------------------------------------------------------------------------------------------------------------------------------------- Herein we find on the left hand side the expression " Gross profit transferred to profit and loss account ". It is evident from the form that gross profits are arrived at by deducting from what has been received by sales less returns the amounts expended towards purchase and other allied items of expenditure. It may be that, if it is the above form adopted in accounting that gave encouragement to counsel for raising the contention that unless the amounts expended towards the purchase of goods dealt with by an as....