M/S. R.G.S. TRANSPORTS,ARIYALUR vs. ITO, WARD -IV (2), TRICHY

PDF · subscribers
ITA 1919/CHNY/2019Status: DisposedITAT Chennai12 February 2020AY 2010-113 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 40A(3) was not warranted. It considered the assessee's business nature and the genuine business reasons for making cash payments on Sundays and at night when banks were closed.

What were the facts?

The assessee, a transport contractor, made cash payments exceeding Rs. 20,000 for lorry hire charges. The AO disallowed these expenses under Section 40A(3) for not being made through account payee cheques. The CIT(A) dismissed the assessee's appeal.

What were the issues?

Whether cash payments exceeding Rs. 20,000 for lorry hire charges, made due to genuine business exigencies, are disallowable under Section 40A(3).

Which sections of the Income-tax Act were involved?

Section 40A(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A ” BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN

Hearing: 19.11.2019Pronounced: 12.02.2020

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

1.

The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-1, Trichy in 14/CIT(A)-1/TRY dated 03.05.2019 for assessment year 2010-11.

2.

M/s. RGS Transports, the assessee, is a firm engaged as a contractor for transporting cement for Madras Cement Ltd., by engaging lorries on hire. While making the assessment for assessment year 2010-11, the AO made a disallowance u/s. 40A(3) stating that it has incurred expenditure exceeding Rs. 20,000/- otherwise than by an A/c payee cheque drawn on a bank or by account payee bank draft in a single day. Aggrieved, the assessee filed an appeal before the CIT(A).

The Ld. CIT(A) dismissed the appeal. Aggrieved against that order, the assessee filed this appeal.

3.

The Ld. AR submitted that the assessee was acting as an agent and hence as per Rule 6DDK, he could not be held liable u/s. 40A(3).

As per Form 3CD, the assessee has mentioned to be a “forwarding agent lorry transporter”. The assessee was mainly handling the work of M/s. Ramco Cements Ltd, who had appointed the assessee as a forwarding agent. The assessee pleaded before the lower authorities that 40A(3) would not be applicable to assessee. Further, some of the hire charges were required to be paid on Sundays and many a times in night when the banks were closed and hence the assessee had a genuine business reasons to make the impugned payment in cash.

Though the Ld. CIT(A) recorded the finding that it has noticed that all transport operators are generally acting as agents for various parties while sending/procuring goods, however, he dismissed the appeal

:-3-: 40A(3) will apply to assessee who is acting as an agent. Per contra, the Ld. DR supported the orders of the lower authorities.

4.

We heard the rival submissions. It is clear from the above that the assessee was a contractor for transporting cement for Madras Cement Ltd by engaging lorries for hire. It is pleaded that the impugned payments were made on Sundays and many a times late in the nights when the banks were closed for the genuine business reason and it was required to be done as an agent, which is covered under Rule 6DDK. Considering the nature of assessee’s business, we are of the view that the disallowance made by the AO is not warranted and hence allow the corresponding grounds of the assessee’s appeal.

5.

In the result, the assessee’s appeal is allowed.

Order pronounced on Wednesday, 12th February, 2020 at Chennai.

More judgments on Section 40A(3)

All 3,278 judgments and leading authorities on Section 40A(3) →

Recent GST High Court judgments

Search GST case law →