The brief facts of the case are that the assessee has made payment in cash otherwise than by an account payee cheque drawn on a bank or account payee bank draft in excess of twenty thousand rupees aggregating in a single day in contravention of section 40A(3) of the Act. Since the assessee has incurred expenditure otherwise than an account payee cheque exceeding Rs. 20,000/-, no deduction shall be allowed in respect of such expenditure. Hence, an amount of Rs.1,86,628/- is disallowed under section 40A(3) of the Income-tax Act, 1961 and added back to the total income of the assessee.
The ld. CIT(A) confirmed the action of the AO.
We have heard the rival contentions and perused the facts of the The disallowance was made by the AO for the cash payment made to JVVNL on various dates more than Rs.20,000/- for electricity bills. Now the payment made is a payment made to the government or otherwise where the ld. CIT(A) has held that JVVNL is a company incorporated under the Companies Act. In this regard it was submitted by the assessee that Government of Rajasthan established Rajasthan Electricity Regulatory Commission in January 2000 vide which JVVNL was declared to be an authorised and accorded body of Government of Rajasthan. The AO failed to understand that only the production and supply of power vested in private hands but not distribution of power.
The AO has not considered the business expediency and transactions are genuine and bonafide, since cheque payments normally take two to three days in clearance and therefore this aspect was not considered by any authorities below. The ld. Counsel for the assessee also relied upon the decision of High Court of Rajasthan at Jodhpur in S.B. Civil Writ Petition No.7239/2017 in the case of Surender Kumar Vyas and Others, where it has been held by the Hon’ble Court vide para 32 to 35 that Nigam will come within preview of Department of Government of Rajasthan. The relevant findings in paras 32 to 35 of the Hon’ble Court are reproduced hereinbelow:
“32. This Court has also observed that the appointment orders contain the nomenclature of Jodhpur Vidyut Vitaran Nigam Limited as a Government of Rajasthan undertaking and the reflections are amply clear. This Court also finds that the redressal mechanism of the Energy Department includes the present corporations and for all administrative and other purposes, the corporation has been included as a limb of the Energy Department.
33. It is pertinent to mention here that the petitioners have already qualified on merits and the only reluctance on the part of the respondents was to administer the 12.5% reservation available to the ministerial staff for the Department of Government of Rajasthan upon the petitioners.
34. Though, it is true that the separate corporation has been formed making it a separate legal entity but for seeing the implication the Sub-Rule (iii) of Rule 6 of the Rules of 1963, this Court has to determine as to whether the Nigam will come within the purview of Department of Government of Rajasthan for the purpose of such reservation or not and the answer to it is that in the broader definition of Department of State of Rajasthan shall include the employees of Nigam as they for the all practical purposes are discharging public duties as the employees of any of the Department of State Government.
35. The Sub Rule (iii) of Rule 6 of the Rules of 1963 while mentioning the term Department of Government, cannot be construed strictly only upon the technically declared employee of the Department of the Government of Rajasthan and has to include all the limbs of State of Rajasthan, who practically are discharging the same functions whether it is in the reformative area, productive area and distributive area or any other administrative functions which are in the present case being discharged by the Nigam.”
In the facts and circumstances of the present case present payment of electricity bills to JVVNL is held to be the payment made to the government for the purpose of section 40A(3) of the Income-tax Act and therefore said section 40A(3) cannot be invoked and no addition is called for and additions so made and confirmed by the ld. CIT(A) is directed to be deleted.
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