Provisions of section 40A(3) doesn’t apply to payment made to a cottage industry

DCIT Vs Smt. A. Gandhimathi (ITAT Chennai)

ITAT Chennai held that payment towards purchase of wet grinders and accessories were mainly made to a cottage industry and accordingly such payment is not hit by the provisions of section 40A(3) as payment made to a cottage industry is excluded under rule 6DD(F) of the Income Tax Rules.

Facts-

The assessment of the assessee was completed u/s.143(3) by making addition of Rs.33,52,296/-. Thereafter, a search and seizure operation u/s.132 of the Act, was conducted in the case of M/s.Butterfly Gandhimathi Appliances Ltd. (M/s. BGAL) and during the course of search, it was found that the assessee was a major supplier of wet grinders and spare parts to M/s.BGAL.

Consequent to survey, notice u/s.153C was issued calling for return of income. In response, the assessee had filed her ROI admitting total income of Rs.78,17,460/-.

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