Case Law Details
Ayub Ali Vs ACIT (ITAT Jaipur)
The assessee has entered into an agreement with a Government Hospital in Bikaner whereby it operates the MRI and CT Scan machines. The nature of such activities therefore demand a continuous supply of electricity and the assessee cannot risk the life of the patients especially those admitted in emergency cases by not operating these machines for want of electricity. Therefore, we find force in the contention of the ld AR that there was business expediency of making cash payments so that there is no disruption in supply of electricity required to operate the MRI and CT scan machines. Further, we note that it is not in all cases that the payments have been made in cash, rather the assessee has made cheque payments as well during the year. Therefore, it is in only those cases where the cheque payments couldn’t be arranged nearing the due date of payment that the payments have been made in cash.
In the entirety of facts and circumstances of the case and respectfully following the legal proposition laid down by the various Courts and Coordinate Benches referred supra, we are of the view that there is no dispute regarding the identity of state electricity distribution company, the genuineness of the transaction in terms of electricity bills for consumption of electricity by the assessee, and the test of business expediency has also been met in the instant case. Further, as held by the Hon’ble Rajasthan High Court in case of Smt. Harshila Chordia (supra), the consequences, which were to be fall on account of non-observation of sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration. The intent and the purpose for which section 40A(3) has been brought on the statute books has been clearly satisfied in the instant case. Therefore, being a case of genuine business transaction and test of business expediency been satisfied, no disallowance is called for by invoking the provisions of section 40A(3) of the Act. In the result, we hereby direct the deletion of disallowance so sustained by the ld CIT(A) and the ground of appeal is hereby allowed.
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 31.10.2017 for Assessment Year 2012-13 wherein the assessee has taken following grounds of appeal:
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