| Case ID |
d6e08fe7-f9c1-46ff-afa4-a7b4549b29e7 |
| Body |
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| Case Number |
Income-tax Reference No.237 of 1981 |
| Decision Date |
Sep 10, 1997 |
| Hearing Date |
|
| Decision |
The Income-tax Appellate Tribunal ruled that the payments made by the assessee for the purchase of raw materials were allowable as deductions. The Tribunal found that the purchases were made under exceptional circumstances, which justified the cash payments exceeding Rs.2,500 without a crossed cheque or bank draft. The finding was supported by an affidavit from a partner of the commission agent, confirming that cash payments were insisted upon during the transaction. The decision of the Tribunal was affirmed by the Allahabad High Court, highlighting the importance of considering the context of financial transactions in business operations. |
| Summary |
This case involves the interpretation of Section 40A(3) of the Income Tax Act, 1961, concerning the deductibility of business expenses. The assessee, M/s. Creative Engineering Pvt. Ltd., engaged in manufacturing brass utensils, sought to deduct payments made for raw materials purchased through a commission agent. The payments totaled Rs.1,26,583 and were made in cash, exceeding the threshold of Rs.2,500, which typically requires a crossed cheque or bank draft. The Assessing Officer disallowed the deduction, asserting that the payments violated the provisions of the Income Tax Act. However, the Appellate Tribunal overturned this decision, recognizing that the circumstances of the transaction warranted the cash payments due to the commission agent's insistence on immediate payment. This case underscores the significance of understanding exceptional circumstances in the application of tax laws and the importance of evidence presented in tax disputes. Keywords: Income Tax Act, Business Expenses, Deductibility, Cash Payments, Exceptional Circumstances. |
| Court |
Allahabad High Court
|
| Entities Involved |
M/s. Creative Engineering Pvt. Ltd., Lahore
|
| Judges |
OM PRAKASH,
R.K. GULATI
|
| Lawyers |
Mr. Hashim Aslam Butt,
Mr. Hassan Mabroor
|
| Petitioners |
M/s. Creative Engineering Pvt. Ltd., Lahore
|
| Respondents |
The CIR, RTO, Lahore,
THE C.I.T., RAWALPINDI,
APPELLATE TRIBUNAL INLAND REVENUE, LAHORE BENCH, LAHORE
|
| Citations |
2000 SLD 424,
2000 PTD 3060,
(1999) 235 ITR 11
|
| Other Citations |
Not available
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
40A(3)
|