Provisions of sec. 40A(3) not applicable if assessee made cash payment for purchase of stock-in-trade: ITAT

  • Blog|News|Income Tax|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 13 June, 2022

stock-in-trade; ITAT

Case Details: Vikrant Happy Homes (P.) Ltd. v. DCIT - [2022] 138 taxmann.com 559 (Pune-Trib.)

Judiciary and Counsel Details

    • Inturi Rama Rao, Accountant Member & S.S. Viswanethra Ravi, Judicial Member
    • Sanket Joshi for the Appellant.
    • M. Jasnani for the Respondent.

Facts of the Case

Assessee-company was engaged in the business of land dealing and development. During the year, it purchased certain lands/plots and made cash payments exceeding the threshold limit prescribed under section 40A(3). During assessment proceedings, the Assessing Officer (AO) made disallowance under section 40A(3) which was further confirmed by the CIT(A).

Aggrieved-assessee filed the instant appeal before the Tribunal.
Before the Tribunal, the assessee contended that all the lands were appearing under the closing stock of the company and no deduction was claimed in respect of purchases for which cash payments were made.

He contended that the provisions of section 40A(3) aren’t attracted towards expenses/purchases when no deduction is claimed. The cash payments were genuine and the provisions of section 40A(3) are not attracted to the genuine cash payments which were identified and acknowledged by the payee. Further, the said cash payments were made keeping in view the business exigency to finalize the deal and to avoid the competitors from snatching the deal.

ITAT Held

The Tribunal held that it is settled law as rightly pointed assessee when there is no deduction no disallowance would follow. In the instant case, the fact remains admitted that the sellers from whom the assessee purchased lands identified the transaction and also acknowledged the cash payments. It shows that the transaction was genuine.

Therefore, there was merit in the contention of assessee that the expenditure incurred in cash forming part of the closing stock for which no deduction had not been claimed while computing the income under the business head, the question of disallowance under section 40A(3) does not arise.

List of Cases Reviewed

List of Cases Referred to

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

One thought on “Provisions of sec. 40A(3) not applicable if assessee made cash payment for purchase of stock-in-trade: ITAT”

Leave a Reply

Your email address will not be published. Required fields are marked *

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied