Section 40A(3) applies to revenue expenditure, not to capital investment: Delhi HC

 

PCIT Vs Sanskar Homes Pvt. Ltd. (ITA No.4430/DEL/2016)

Facts:

1. M/s Sanskar Homes Pvt. Ltd. purchased floors in a property located in New Delhi, making cash payments totaling Rs. 7.74 crore.

2. The Assessing Officer disallowed this amount under Section 40A(3), which restricts deductions for cash payments exceeding Rs. 20,000.

3. The assessee contended that the property was an investment, not stock-in-trade, and thus, the expenditure was capital in nature, not a revenue expense.

4. The Commissioner of Income Tax (Appeals) [CIT(A)] ruled in favor of the assessee, stating that Section 40A(3) applies to revenue expenditures, not capital investments.

5. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)’s decision.

6. The Revenue appealed to the Delhi High Court under Section 260A of the Income Tax Act.

Hon Delhi HC held as below:

1. No evidence contradicting the assessee’s claim that the property was held as an investment.

2. Section 40A(3) pertains to revenue expenditures and does not apply to capital investments.

3. Consequently, the Revenue’s appeal is dismissed.

 

The copy of the Appellate is as under:

1551957990-4429 & 4430