Julius Ruben Vs ACIT (ITAT Cochin)
Income Tax Appellate Tribunal (ITAT), Cochin Bench, has set aside a disallowance of ₹6,55,605 made under Section 40A(3) of the Income-tax Act, 1961, in the case of Julius Ruben vs. Assistant Commissioner of Income-tax (ACIT) for the assessment year 2015-2016. The Tribunal ruled that the provisions of Section 40A(3) are not applicable to cash payments made for the acquisition of capital assets when no revenue deduction has been claimed.
The case originated from a rectification order passed by the Assessing Officer (AO) under Section 154 of the Act. The assessee, Mr. Julius Ruben, operating a proprietorship concern named Rocky Transport and Crane Services, had filed his return of income for AY 2015-16, which was initially accepted after a complete scrutiny assessment under Section 143(3).
Subsequently, the AO issued a rectification order disallowing ₹6,55,650, citing a contravention of Section 40A(3) due to cash payments made for the purchase of capital assets. The AO contended that these payments, despite being for capital assets, fell under “any expenditure” as per Section 40A(3). The assessee argued that since no deduction for these capital expenditures was claimed in the computation of taxable income, Section 40A(3) should not apply. This argument was rejected by the AO.
