ACIT, CHENNAI V. Enterprising Enterprises, CHENNAI

ITA 1106/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58126 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI; K E B RENGARAJAN JR STAN
• Section: 43B; 40A(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1090/MDS/2010 (ASSESSMENT YEAR : 2 007-08) M/S. ENTERPRISING ENTERPRISES, 9, 50 TH STREET, ASHOK NAGAR, CHENNAI-600 083. PAN:AAAFE0195N VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS RANGE III, CHENNAI. (APPELLANT) (RESPONDENT) & ITA NO.1106/MDS/2010 (ASSESSMENT YEAR : 2 007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS RANGE III, CHENNAI. VS. M/S. ENTERPRISING ENTERPRISES, 9, 50 TH STREET, ASHOK NAGAR, CHENNAI-600 083. PAN:AAAFE0195N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PHILIP GEORGE REVENUE BY : SHRI ANIRUDH RAI, CIT DR & SHRI K.E.B.RENGARAJAN, JR. STANDING COUNSEL DATE OF HEARING : 29 TH FEBRUARY, 2012 DATE OF PRONOUNCEMENT : 16 TH MARCH, 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THESE TWO CROSS APPEALS FILED BY THE ASSESSEE AND T HE REVENUE ARE AGAINST THE ORDER OF CIT(A)-VIII, CHEN NAI DATED 26.04.2010 RELATING TO THE ASSESSMENT YEAR 2007-08 . SINCE ITA NOS.1090 & 1106/MDS/2010 2 BOTH THE APPEALS ARE ARISING OUT OF THE COMMON ORDE R, THE SAME ARE TAKE UP TOGETHER FOR ADJUDICATION. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT ONE MR. P.RAMA RAO HAD TAKEN QUARRY AT ONGOLE ON LEASE FROM THE GOVERNMENT OF ANDHRA PRADESH. SINCE HE WAS NOT IN A POSITION FOR EXCAVATION, SALES ETC. OF THE GRANITE, HE EXECUTED IRREVOCABLE POWER OF ATTORNEY IN FAVOUR OF M/S. ENT ERPRISING EXPORTERS REPRESENTED BY ITS PARTNER MR. K.NATARAJA N. IRREVOCABLE POWER OF ATTORNEY WAS EXECUTED BY MR. P .RAMA RAO ON 26 TH APRIL, 1990. IT WAS MUTUALLY AGREED BETWEEN THE PARTIES THAT ALL FINANCIAL LIABILITIES ARISING OUT OF QUARRY BUSINESS VIZ. TAX LIABILITIES ETC. WILL BE PAID BY M/S. ENTERPRISING EXPORTERS. HOWEVER, M/S. ENTERPRISING EXPORTERS COULD NOT CARRY ON THE EXCAVATION ON ITS OWN. THER EFORE, IT INDUCTED M/S. ENTERPRISING ENTERPRISES I.E. THE A SSESSEE TO THE BUSINESS. M/S. ENTERPRISING ENTERPRISES WAS A PARTNERSHIP FIRM. DURING THE COURSE OF BUSINESS NEITHER M/S. EN TERPRISING EXPORTERS NOR THE ASSESSEE PAID SALES TAX LIABILIT IES RELATING TO THE QUARRY BUSINESS WHICH M/S. ENTERPRISING EXPO RTERS HAD AGREED TO PAY. AS SUCH, SALES-TAX DEPARTMENT RAISE D ITA NOS.1090 & 1106/MDS/2010 3 SUBSTANTIAL DEMANDS IN THE NAME OF MR. P.RAMA RAO . MR. P.RAMA RAO PAID STATUTORY LIABILITY AND THEREAFTER FILED A SUIT FOR RECOVERY IN THE COURT OF DISTRICT JUDGE AT ONGO LE. MR. P.RAMA RAO FILED SUIT FOR RECOVERY OF ` 1,47,38,445/- ALONG WITH INTEREST AGAINST M/S. ENTERPRISING EXPORTERS, ITS TWO PARTNERS, M/S. ENTERPRISING ENTERPRISES (ASSESSEE ) & ITS TWO PARTNERS. DURING PENDENCY OF THE SUIT, MR. P.RAMA R AO ENTERED INTO AN AGREEMENT ON 10.04.2007 WITH THE DE FENDANTS I.E. ENTERPRISING EXPORTERS AND ENTERPRISING ENTERP RISES. IT WAS MUTUALLY AGREED THAT BOTH THE PARTNERSHIP FIRMS WOULD PAY ` 90 LAKHS TOWARDS FULL AND FINAL SATISFACTION OF TH E SUIT CLAIM. IN TERMS OF THE MUTUAL AGREEMENT BETWEEN THE PARTIES A JOINT STATEMENT WAS MADE IN THE COURT AND THE SUIT WAS DISMISSED IN TERMS OF THE JOINT MEMO FILED BY THE P ARTIES ON 18.04.2007. THE ASSESSEE PAID THE ENTIRE AMOUNT OF ` 90 LAKHS TO DISCHARGE THE LIABILITY AS PER AGREEMENT ( SUPRA). 3. THE LEARNED D.R. SUBMITTED THAT MR. P.RAMA RAO H AD EXECUTED IRREVOCABLE POWER OF ATTORNEY IN FAVOUR OF M/S. ENTERPRISING EXPORTERS. THE ASSESSEE WAS NOT PARTY TO THE ITA NOS.1090 & 1106/MDS/2010 4 SAID ATTORNEY, NOR ANY AGREEMENT WAS EXECUTED BETWE EN THE ASSESSEE AND M/S. ENTERPRISING EXPORTERS, THEREFOR E, THE ASSESSEE WAS NOT LIABLE TO PAY THE LIABILITY OF MR. P.RAMA RAO. HE CONTENDED THAT THERE WAS NO CONTRACTUAL LIA BILITY ON THE PART OF THE ASSESSEE TO PAY THE STATUTORY LIABI LITY OF MR. P.RAMA RAO. HE FURTHER CONTENDED THAT THE LEARNED C IT(A) HAS ERRED IN RELYING UPON THE PROVISIONS OF SECTION 43B AND HAS ERRED IN ALLOWING ` 45 LAKHS I.E. ONE HALF OF THE AMOUNT ALLEGED TO HAVE BEEN PAID BY THE ASSESSEE IN TERMS OF THE AGREEMENT DATED 10.04.2007. PAYMENT OF DEMAND RAISE D BY SALES TAX DEPARTMENT IS A STATUTORY LIABILITY FOR S HRI P.RAMA RAO BUT NOT FOR ASSESSE. THE ASSESSEE NEVER RECEI VED ANY DEMAND NOTICE FROM THE SALES TAX DEPARTMENT TO MAKE ANY PAYMENT. THE LEARNED D.R. SUBMITTED THAT AS PER THE CASE OF ASSESSE, OUT OF COURT SETTLEMENT WAS ENTERED WITH MR. P.RAMA RAO ON 18.04.2007 I.E. AFTER THE END OF FINA NCIAL YEAR 2006-07. SINCE THE LIABILITY DID NOT CRYSTALIZE DU RING THE PREVIOUS YEAR, IT IS NOT ALLOWABLE AS DEDUCTION WHI LE COMPUTING THE PROFITS OF THE PREVIOUS YEAR RELEVAN T TO ASSESSMENT YEAR 2007-08. THE LEARNED D.R. FURTHER S UBMITTED ITA NOS.1090 & 1106/MDS/2010 5 THAT EVEN IF IT IS PRESUMED THAT THE ASSESSEE WAS L IABLE TO PAY AS CONTRACTUAL LIABILITY SINCE THE SUIT WAS FILED A GAINST SIX DEFENDANTS I.E. M/S. ENTERPRISING EXPORTERS AND ITS TWO PARTNERS, M/S. ENTERPRISING ENTERPRISES AND ITS TW O PARTNERS, STILL THERE WAS NO REASON FOR THE CIT(A) TO ALLOW O NE HALF OF THE AMOUNT TO THE ASSESSEE. AT THE MOST 1/6 TH OF THE LIABILITY IS ALLOWABLE. 4. THE SECOND GROUND ON WHICH THE LEARNED D.R. ASS AILED THE ORDER OF THE LEARNED CIT(A) WAS THAT THE LEARNE D CIT(A) ALLOWED CASH PAYMENTS MADE BY THE ASSESSEE. THE CAS H PAYMENTS WERE DELIBERATELY SPLIT IN A MANNER TO KEE P THEM LESS THAN ` 20,000/- EACH TO CIRCUMVENT THE PROVISIONS OF SECTION 40A(3). INVARIABLY ALL SUCH PAYMENTS IN CAS H WERE MADE TO THE GROUP CONCERNS. THE INTENTION OF THE AS SESSEE WAS TO WINDOW DRESS THE ACCOUNTS TO SHOW THAT THERE WAS NO APPARENT CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3). SUCH PAYMENTS WERE TO THE TUNE OF ` 1,85,64,000/-. HE SUBMITTED THAT LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF ` 37,12,800/- MADE BY ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE AC T. IN ORDER ITA NOS.1090 & 1106/MDS/2010 6 TO SUPPORT HIS CONTENTION, THE LEARNED D.R. RELIES UPON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT REPORTED AS 207 CTR 428(MAD) AND ALSO THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF R.S.NAYYAR REPORTED AS 290 ITR (AT) 371. 5. ON THE OTHER HAND, THE LEARNED A.R. SUBMITTED T HAT THE ASSESSEE WAS LIABLE TO MAKE PAYMENT OF STATUTORY LI ABILITY OF MR. P.RAMA RAO IN TERMS OF THE MUTUAL AGREEMENT DAT ED 10.04.2007 PLACED AT PAGES 42 & 43 OF THE PAPER BOO K. HE FURTHER CONTENDED THAT MR. P.RAMA RAO IN AN AFFIDAV IT BEFORE DISTRICT JUDGE STATED THAT DEFENDANT NO.1 I.E. M/S. ENTERPRISING EXPORTERS AND DEFENDANT NO.4 I.E. M/S . ENTERPRISING ENTERPRISES (ASSESSE) ARE SISTER CONCE RNS AND THEIR LIABILITY UNDER THE SUIT AGREEMENT IS ACCEPTE D AS ONEROUS, WITH JOINT AND SEVERAL LIABILITIES BY ALL OF THEM. THE AFFIDAVIT OF MR. P.RAMA RAO IS PLACED AT PAGES 10 T O 19 OF THE PAPER BOOK. HE SUBMITTED THAT THE ASSESSEE HAS BEE N TAKING THE BENEFIT OF QUARRY BUSINESS AND HAS BEEN ENJOYIN G THE PROFITS FROM THE BUSINESS. THE PROFITS OF THE BUSIN ESS WERE ITA NOS.1090 & 1106/MDS/2010 7 DULY REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSES SEE. HE ADMITTED THAT ALTHOUGH THERE WAS NO WRITTEN AGREEME NT BETWEEN THE ASSESSEE AND M/S. ENTERPRISING EXPORTE RS BUT IT WAS MUTUALLY AGREED BETWEEN THEM THAT THE EXCAVAT ION AND OTHER INCIDENTAL ACTIVITIES FOR SALE, TRANSPORTATI ON ETC. OF GRANITE WILL BE UNDERTAKEN BY THE ASSESSEE. IT WAS IN THESE TERMS THAT MR. P.RAMA RAO HAD FILED SUIT FOR RECOVE RY AGAINST M/S. ENTERPRISING EXPORTERS AS WELL AS THE ASSESSEE . THE ASSESSEE HAD ADMITTED THE LIABILITY IN THE CIVIL SU IT. SINCE THE ASSESSEE HAD ENJOYED THE BENEFITS FROM THE QUARRY B USINESS, THE ASSESSEE PAID THE AMOUNT OF ` 90 LAKHS TOWARDS FULL AND FINAL SETTLEMENT OF THE CLAIM OF MR. P.RAMA RAO IN CIVIL SUIT. THE LIABILITY OF THE DEFENDANTS IN THE SUIT WERE JO INT AND SEVERAL. THE LEARNED A.R. MADE STATEMENT AT THE BAR THAT M/S. ENTERPRISING EXPORTERS HAVE NOT CLAIMED THE PAYMENT OF ` 90 LAKHS IN THEIR BOOKS OF ACCOUNT. THE LEARNED A.R. F URTHER SUBMITTED THAT THE ASSESSEE MADE PROVISION IN THE YEAR IN WHICH THE LIABILITY HAD ARISEN BY VIRTUE OF CIVIL S UIT. THE LIABILITY WAS CONTINGENT AT THE END OF ACCOUNTING YEAR WHICH CRYSTALLIZED ON 18.04.2007. THE ENTIRE AMOUNT OF ` 90 LAKHS ITA NOS.1090 & 1106/MDS/2010 8 WAS PAID BY THE ASSESSEE IN SIX MONTHS STARTING FRO M APRIL, 2007 TO SEPTEMBER, 2007 I.E. BEFORE THE DUE DATE OF FILING OF RETURN. 6. AS REGARDS SEVERAL CASH PAYMENTS OF LESS THAN ` 20,000/- TO GROUP CONCERNS IS CONCERNED, THE LEARNE D A.R. SUBMITTED THAT THE PROVISIONS OF SECTION 40A(3) REF ERS TO SINGLE PAYMENT AND NOT AGGREGATE OF PAYMENTS. IN SUPPORT O F THIS CONTENTION, HE RELIED UPON THE JUDGEMENT OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KOTHARI SA NITATION & TILES P.LTD., REPORTED AS 282 ITR 117(MAD). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GON E THROUGH THE RECORDS. THE ASSESSEE HAS ASSAILED THE ORDER OF THE LEARNED CIT(A) PRIMARILY ON TWO GROUNDS:- 1. THE LEARNED CIT(A) HAVING HELD THAT SECTION 43B OF THE ACT HAS NO APPLICATION, OUGHT TO HAVE DELETED THE ENTIRE DELETION. 2. THE CIT(A) OUGHT TO HAVE DELETED THE ENTIRE ADDITION AFTER HAVING HELD THAT IT PERTAINS TO ASSESSMENT YEAR 2007-08. 8. THE REVENUE IN CROSS APPEAL HAS CHALLENGED THE O RDER OF THE LEARNED CIT(A) ON THE FOLLOWING GROUNDS:- ITA NOS.1090 & 1106/MDS/2010 9 1. THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` 1,47,38,445/- MADE BY THE ASSESSING OFFICER TOWARDS THE CLAIM UNDER RENT, RATES AND TAXES. 2. THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` .37,12,800/- MADE BY THE ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SECTION 40A(3 ) OF THE INCOME TAX ACT. 9. THE CONTENTION OF THE LEARNED A.R. THAT THE ASSE SSEE HAS PAID LIABILITY OF MR. P.RAMA RAO TO THE TUNE OF ` 90 LAKHS IN TERMS OF THE AGREEMENT TOWARDS FULL AND FINAL SA TISFACTION OF HIS CLAIM IS ACCEPTED, AS IT IS THE CASE OF THE ASS ESSEE HIMSELF THAT HE HAS BEEN TAKING THE BENEFIT OF QUARRY BUSIN ESS AND HAVE BEEN SHOWING THE PROFITS ARISING OUT OF THE BU SINESS IN ITS BOOKS OF ACCOUNT. THE LEARNED D.R. HAS NOT BEEN ABLE TO CONTROVERT THE ADMISSION OF THE ASSESSE. M/S. ENTER PRISING EXPORTERS HAS NOT MADE ANY PROVISION OR CLAIM IN RE SPECT OF THIS EXPENDITURE FOR WHICH THE ASSESSEE HAS PROVIDE D IN THEIR FINANCIAL STATEMENT FOR THE YEAR ENDING 31.03.2007. THE ASSESSEE HAS FURNISHED BEFORE THE LEARNED CIT(A) FI NANCIAL STATEMENT OF M/S. ENTERPRISING EXPORTERS FOR THE Y EAR ENDED ON 31.03.2007 TO SHOW THAT THE AMOUNT CLAIMED BY TH E ASSESSEE HAS NOT BEEN TAKEN INTO CONSIDERATION AT ALL. ITA NOS.1090 & 1106/MDS/2010 10 MOREOVER, THE LEARNED A.R. STATED AT THE BAR THAT N O PART OF THE AMOUNT CLAIMED AS EXPENDITURE ON ACCOUNT OF PAY MENT IN FULL AND FINAL SETTLEMENT OF SUIT CLAIM IS SHOWN IN THE BOOKS OF ACCOUNTS OF M/S. ENTERPRISING EXPORTERS. AS REGARDS THE ALLOWABILITY OF THE EXPENDITURE IN THE PREVIOUS YEA R RELEVANT TO ASSESSMENT YEAR 2007-08 IS CONCERNED, THE LEARNED C IT(A) IN HIS ORDER HAS RIGHTLY HELD THAT THE ASSESSEE HAS MA DE A PROVISION BY APPLYING ACCOUNTING STANDARD (AS4) IS SUED BY ICAI. ALTHOUGH THE ASSESSEE HAD MADE A PROVISION FO R ` 1,47,38,445/- BUT THEY OUGHT TO HAVE RESTRICTED THE SAME TO ` 90 LAKHS WHICH WAS ULTIMATELY SETTLED UPON. THE SAI D AMOUNT HAS BEEN PAID ON VARIOUS DATES BETWEEN APRIL, 2007 TO SEPTEMBER, 2007. THE ACCOUNTS OF THE FIRM HAS BEEN FINALIZED AND THE RETURN OF INCOME HAS BEEN FILED DURING OCTO BER, 2007. 10. THE CONTENTION OF THE LEARNED D.R. THAT SINCE THE SUIT WAS FILED AGAINST SIX PERSONS, YET THE COMMISSIONER HAS ALLOWED ONE HALF OF THE EXPENDITURE TO THE ASSESSEE HAS NO FORCE, AS THE FIRM AND ITS PARTNERS ARE NOT TWO SEP ARATE ENTITIES. AS OBSERVED BY THE CIT(A) THAT THE ASSE SSING ITA NOS.1090 & 1106/MDS/2010 11 OFFICER HAS ALREADY AGREED IN PRINCIPLE THAT THIS I S AN ALLOWABLE EXPENDITURE AND THE LEARNED CIT(A) HAS ALSO ALLOWED 50% OF THE AMOUNT SETTLED BETWEEN THE PARTIES BY WAY OF OU T OF COURT SETTLEMENT, WE ARE OF THE VIEW THAT SINCE THE ENTIR E AMOUNT HAS BEEN PAID BY THE ASSESSEE, THE ASSESSEE IS ENTI TLED FOR ENTIRE AMOUNT OF ` .90 LAKHS AS AN EXPENDITURE FOR THE ASSESSMENT YEAR 2007-08. HOWEVER, IT IS MADE CLEAR THAT IF ANY AMOUNT TOWARDS THE CONTINGENT LIABILITY IN QUES TION ARISING OUT OF THE SETTLEMENT BETWEEN THE PARTIES IS CLAIME D EITHER BY M/S.ENTERPRISING EXPORTERS OR ANY OF ITS PARTNERS TO THAT EXTENT THE EXPENDITURE SHALL BE DISALLOWED TO THE ASSESSEE . 11. THE CIT(A) HAS RELIED ON THE PROVISIONS OF S ECTION 43B. THE PROVISIONS OF SECTION 43B ARE NOT APPLICAB LE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. PROVIS IONS OF SECTION 43B(A) APPLIES IN CASE OF STATUTORY LIABILI TY I.E. ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS O R FEE ETC. IN THE INSTANT CASE, THE LIABILITY OF THE ASSESSEE IS NOT STATUTORY. AT THE MOST IT CAN BE TERMED AS CONTRACT UAL. THEREFORE, THE PROVISIONS OF SECTION 43B(A) CANNOT BE APPLIED IN THE CASE IN HAND. ITA NOS.1090 & 1106/MDS/2010 12 12. THE SECOND GROUND OF APPEAL OF THE REVENUE IS W ITH REGARD TO THE DELETION OF DISALLOWANCE OF ` 37,12,800/- MADE BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SE CTION 40A(3) OF THE ACT. AS PER THE UNAMENDED PROVISIONS OF SECTION 40A(3)(A) WHERE THE ASSESSEE INCURS ANY EX PENDITURE IN RESPECT OF WHICH PAYMENT IS MADE IN A SUM EXCEED ING TWENTY THOUSAND RUPEES OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPEN DITURE. AMENDMENT TO THE ABOVE SUB-SECTION WAS MADE WITH EF FECT FROM 1.4.2009. THUS, FOR THE ASSESSMENT YEAR 2007-0 8, UNAMENDED PROVISIONS OF SUB-SECTION WOULD APPLY. T HE LEARNED CIT(A) WHILE DEALING WITH THE ISSUE HAS SPE CIFICALLY AVERRED THAT HE HAS GONE THROUGH THE ENTIRE LEDGER ACCOUNTS AND AFTER PERUSING THE SAME, HE HAS COME TO THE CON CLUSION THAT THE ASSESSEE HAS MADE PAYMENTS IN CASH AND THR OUGH BANK. THE CASH PAYMENT DOES NOT EXCEED ` 20,000/- AT ANY INSTANCE. HE FURTHER RELIED UPON THE JUDGEMENT PAS SED BY THE ITA NOS.1090 & 1106/MDS/2010 13 HONBLE MADRAS HIGH COURT IN THE CASE OF MOHAMMAD DHURABUDEEN IN TAX CASE NO.885 OF 2007 DATED 11.07. 2007. 13. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF ` 37,12,800/-. AS PER UNAMENDED PROVISIONS OF SECTION 40A(3), IT ONLY SP ECIFIES THE LIMIT OF ` 20,000/- PER TRANSACTION AND DOES NOT PUT ANY RESTRICTION WITH REGARD TO NUMBER OF TRANSACTIONS I N A DAY. WE FIND AS NONE OF THE TRANSACTIONS EXCEED ` 20,000/-, THEREFORE, THE PROVISIONS OF SECTION 40A(3) ARE NOT ATTRACTED IN THIS CASE. WE FIND THAT THE CASE OF THE ASSESSEE IS SQUARELY C OVERED BY THE DIVISION BENCH JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KOTHARI SANITATION & T ILES P.LTD., REPORTED AS (2006) 282 ITR 117(MAD), WHEREIN THE HO NBLE HIGH COURT CAME TO THE CONCLUSION THAT SECTION 40A (3) OF THE INCOME TAX ACT, 1961, ONLY SAYS THAT THE AMOUNT EXC EEDING THE PRESCRIBED LIMIT SHOULD NOT BE PAID EXCEPT BY W AY OF CHEQUE DRAWN ON A BANK OR BY A CROSS BANK DRAFT AND , IF IT EXCEEDS THAT AMOUNT, THEN 20 PERCENT OF THE EXPENDI TURE SHALL NOT BE ALLOWED AS DEDUCTION. IT DOES NOT SAY THAT T HE AGGREGATE OF THE AMOUNTS SHOULD NOT EXCEED THE LIMI T. THE ITA NOS.1090 & 1106/MDS/2010 14 WORDS USED ARE IN A SUM I.E., A SINGLE SUM. THERE FORE, IRRESPECTIVE OF ANY NUMBER OF TRANSACTIONS, WHERE T HE AMOUNT DOES NOT EXCEED THE LIMIT, THE RIGOUR OF SECTION 40 A(3) WILL NOT APPLY. THE AMOUNT SHOULD NOT EXCEED ` 20,000/-. THAT APART, PRACTICALITY OF THE PAYMENT HAS ALSO TO BE JUDGED F ROM THE POINT OF VIEW OF A BUSINESSMAN. RESPECTFULLY FOLL OWING THE DECISION OF THE HONBLE MADRAS HIGH COURT CITED ABO VE, WE UPHOLD THE DECISION OF THE LEARNED CIT(A) ON THIS I SSUE AND DISMISS THE GROUND RAISED BY THE REVENUE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE FAILS AND THE SAME IS DISMISSED, WHEREAS THE APPEAL OF THE ASSESS EE IS ALLOWED FOR THE AFOREMENTIONED REASONS. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2012. SD/- SD/- ( ABRAHAM P.GEORGE) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 16 TH MARCH, 2012. SOMU COPY TO: (1) APPELLANT ( 4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.