Sec 40A(3) : Business Expenditure – Disallowance

– Payments in cash in excess of specified limit – Exceptions – Payment to producer of meat – Condition stipulated under rule 6DD satisfied – Further condition provided in CBDT circular on certification by Veterinary Doctor – Cannot be imposed – Payment allowable.

Facts : The assessee exported meat. It purchased raw meat paying cash.

The payment made in cash for purchases in excess of Rs. 20,000.00 were disallowed U/s 40A(3) on the ground that in view of Circular No. 8/2006 issued by CBDT for failure to comply with the condition for grant of benefit under rule 6DD of certification from a veterinary doctor that the person specified in the certificate was a producer of meat and slaughtering was done under his supervision.

The Tribunal held that section 40A(3) provided that no disallowance there under should be made if the payment in cash was made in a manner prescribed under rule 6DD, that the payment made to the producer of meat in cash satisfied such requirement, that neither the Act nor the Rules provided that the benefit would be available only if further conditions set out by the CBDT were complied with and that the scope of rule 6DD could not be restricted or fettered by the circular and allowed the appeal filed by the assessee.

Held : Dismissing the appeal, that the assessee having satisfied the requirements under rule 6DD could not be subjected to disallowance of the deduction of expenditure on purchases in cash of the meat U/s 40A(3) and that the CBDT Circular could not put in new conditions not provided either in the Act or in the Rules.

Pr. CIT Vs Gee Square Exports [2019] 411 ITR 661 (Bom).