Cash payments to state govt co. for rent & electricity allowed as legal tender exception; pervasive state control test applied.

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....Disallowance u/s 40A(3) was challenged regarding cash payments made towards godown rent and electricity charges to a State Government undertaking. Applying the tests laid down in Som Prakash Rekhi case, the undertaking was held to be a State Government Company with deep and pervasive control by the State. The term "legal tender" was interpreted as currency of a state used as money. Since payments were made in Indian currency to the undertaking, considered an arm of the State Government, it was held that the exception u/r 6DD(b) of Income Tax Rules, 1962 would apply, saving the payments from disallowance u/s 40A(3). The electricity charges paid to the said undertaking were covered by this exception. Assessee's appeal was allowed.....