TaxTMI 
TaxTMI 
2024 (7) TMI 947
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....llowance is-unjustified and be deleted. 2. That under the facts and the law, the learned CIT (Appeals) erred in maintaining disallowance of u/s.40A(3) made by AO for cash payments of Rs. 3,63,642/- towards Electricity Charges, for running cold storage plant at Raipur, paid to Chhattisgarh Electric Power Distribution Company Limited. Prayed that Head Office is at Ambikapur and cold storage plant is at Raipur, at Raipur there is no bank account of appellant, therefore, payment of electricity expenses was made in cash, the disallowance is unjustified and be deleted." 2. Succinctly stated, the assessee HUF had e-filed its return of income for A.Y.2018-19 on 30.09.2018, declaring an income of Rs. 6,16,570/-. The return of income filed by the assessee was processed as such u/s. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act. 3. Assessment was, thereafter, framed by the A.O. vide his order passed u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act determining the income of the assessee at Rs.20,00,230/- after, inter alia, making the following additions/disallowances: - Sr. No. Particulars Amount 1. Disallow....
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....A in respect of godown charges and electricity charges paid by way of cash exceeding of Rs. 10,000/-. In the facts and circumstances the additions of Rs. ,63,642/- and Rs. 3,84,000/- on account of electricity charges and godown rent. are sustained. The grounds of appeal taken by the appellant are partly allowed. In the result, Appeal is partly allowed." 5. The assessee, being aggrieved with the order of the CIT(Appeals), has carried the matter in appeal. 6. I have heard the ld. Authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by Ld. AR to drive home his contentions. 7. Apropos the disallowance of the godown rent of Rs. 3,84,000/- u/s. 40A(3) of the Act, I have thoughtfully considered the issue in hand in the backdrop of the contentions of the ld. authorized representatives of both parties. The Ld. A.R submitted that the payment towards godown rent was made with respect to the following godowns that the assessee had taken on rent from the following parties: Sr no- Name of landlord Location of godown Rent per m....
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.... was owned by the Government of Chhattisgarh; therefore, the said amount could not have been subjected to the rigors of Sec. 40A(3) of the Act. Alternatively, it was submitted by the Ld. AR that as the genuineness of the aforesaid expenditure incurred by the assessee has not been doubted by the department, therefore, the same on the said count also could not have been disallowed u/s. 40A(3) of the Act. 10. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the orders of the lower authorities. 11. Apropos the claim of the Ld. AR that no disallowance of the assessee's claim was called for with respect to the aforesaid expenses, viz., (i) godown rent; and (ii) electricity charges, for the reason that the A.O has not doubted the genuineness of the expenses incurred by the assessee, I am unable to persuade myself to subscribe to the same. As the specific instance where the applicability of Section 40A(3) of the Act would stand suspended, has specifically been carved out by the legislature in all its wisdom in Rule 6DD of the Income Tax Appellate Tribunal Rules, 1962, therefore, the claim of the Ld. AR that in case the genuineness of the expenditure has not been....
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....ter, at Para 15 of its judgment, it had categorically observed that while arriving at the aforesaid conclusion, it had wrongly referred to the pre-amended Rule 6DD. Accordingly, the Hon'ble High Court had observed that Rule 6DD had, thereafter, been amended vide Notification dated 10.10.2018 by the Ministry of Finance (Department of Revenue), CBDT. Backed by the aforesaid facts, the Hon'ble High Court observed that as it had pronounced the judgment in the open court, it was not open for it to examine the effect of the amendment to Rule 6DD. As the Hon'ble High Court in the aforesaid case, had admittedly observed that while disposing off the appeal for A.Y.2009-10, it had by mistake referred to the earlier pre-amended provision, i.e., that appliable up to 10.10.2008, therefore, the said judicial pronouncement would by no means assist the case of the assessee before me. In fact, the aforesaid judgment of the Hon'ble High Court in the case of Gurdas Garg Vs. Commissioner of Income Tax (supra) supports my aforesaid conviction that Section 40A(3) of the Act would only not be applicable in a case/situation as has been explicitly carved out in Rule 6DD and not otherwise. 15. Thus, in ter....
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....sgarh Electric Power Distribution Company Limited, a public sector undertaking owned by the Government of Chhattisgarh, which, as per him, was to be considered as an arm of the State Government that had received the payment in legal tender, i.e., in Indian currency, would by virtue of the exception carved out in Rule 6DD(b) of the Income Tax Rules, 1962 be saved from the disallowance contemplated in Sec. 40A(3) of the Act? 19. Before proceeding any further, I deem it fit to cull out the provisions of sub- section (3) of section 40A of the Act, which reads as under: "(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure." However, the legislature, in all its wisdom, had carved out certain exceptions in Rule 6DD of the Income Tax Rules, 1962, wherein payments towards certain expenses, though made not as per the mandate of the provisions of section 40A(3) of the Act, would still be saved from the disallowance therein contemplated. ....
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....h inclusive and not exclusive, included, viz. (a). the Government and Parliament of India; (b). the Government and the Legislature of each of the States; (c). all local and other authorities within the territory of India; and (d). all local and other authorities under the control of the Government of India. Observing that the term "other authorities" used in Article 12 was neither defined in the Constitution of India nor in any other statute, the Tribunal had drawn support from the interpretation of the said term by the Hon'ble Supreme Court in the case of Som Prakash Rekhi Vs Union of India, AIR 181 SC 212, wherein the Hon'ble Apex Court had culled out certain tests for determining as to when a corporation should be said to be an instrumentality or agency of the Government, which read as under : "1. If the entire share capital of the corporation is held by the Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of the Government. 2. Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. 3. Whether the Corporation enjoys monopoly status which is St....