Admittedly, the assessee had made payments to M/s Pickme Feeds in cash by directly depositing cash in the bank account of M/s Pickme Feeds for supply of poultry feeds to the assessee. The assessee in turn supplies the poultry feeds to various farmers in the rural areas. It is observed that the assessee in terms of his contract is bound to maintain constant and uninterrupted supplies of poultry feeds and also ensure that at no point in time, the farmers are deprived of such material. Apparently, the concerned supplier M/s Pickme Feeds insisted on cash payments for ensuring continuity and timely supplies as could be evident from the letter dated 23.3.2007 of the concerned supplier. These facts are not in dispute. We find that the revenue had not doubted the genuineness of the payments made to the aforesaid party by the assessee.
ITAT was in agreement with the arguments of the Learned AR that the purchase of poultry feeds falls under the exceptions clause provided in Rule 6DD(e) of the Income Tax Rules, 1962. For the sake of convenience, the relevant rule is reproduced here in below:-
6DD(e) Where the payment is made for the purchase of –
(i) agricultural or forest produce ; or
