Doshi Vijaykumar Motilal, Pune V. Income-tax Officer,

ITA 74/PUN/2014

• Counselvise Citation: 7424514 RSA 2014
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: MRS DEEPA KHARE
• Keywords: Application of stay; Cost of acquisition
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.74/PN/2014 (ASSESSMENT YEAR : 2008-09) DOSHI VIJAYKUMAR MOTILAL, PROP. SANDESH VIJAY DOSHI, CINEMA ROAD, BARAMATI, PUNE 413 102. PAN : ABAPD9075F . APPELLANT VS. INCOME TAX OFFICER, WARD 5(4), PUNE. . RESPONDENT SA NO.31/PN/2014 (ITA NO.74/PN/2014) (ASSESSMENT YEAR : 2008-09) DOSHI VIJAYKUMAR MOTILAL, PROP. SANDESH VIJAY DOSHI, CINEMA ROAD, BARAMATI, PUNE 413 102. PAN : ABAPD9075F . APPELLANT VS. INCOME TAX OFFICER, WARD 5(4), PUNE. . RESPONDENT ASSESSEE BY : MRS. DEEPA KHARE DEPARTMENT BY : MR. S. P. WALIMBE DATE OF HEARING : 06-06-2014 DATE OF PRONOUNCEMENT : 10-06-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 26.11.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 06.12.2010 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2008-09. ITA NO.74/PN/2014 SA NO.31/PN/2014 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- 1. THE LEARNED CIT-A ERRED ON FACTS AND IN LAW IN MAKING A DISALLOWANCE OF RS.54,79,648/- U/S.40A (3) OF THE I NCOME TAX ACT 1961. 2. THE LEARNED CIT-A ERRED IN NOT APPRECIATING THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE NOT APPLICABLE IN RESPECT OF PAYMENTS WHICH ARE MADE THROUGH THE BANK ACCOUNT IN AXIS BANK LTD THROUGH ATM AS THE CREDITOR HAS WITHDRAWN FROM THE SAID ACCOUNT THROUG H ATM AND THEREBY NO CASH PAYMENT IN INVOLVED. 3. THE LEARNED CIT-A ERRED IN NOT APPRECIATING THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE NOT APPLICABLE IN RESPECT OF PAYMENTS WHICH ARE MADE BY WAY OF DIRECT DEPOSIT INTO THE BANK ACC OUNT OF THE CREDITOR WHICH AMOUNTS TO PAYMENT THROUGH BANKING CHANNEL ONLY. 3. ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUND S OF APPEAL BUT THE SOLITARY DISPUTE RELATES TO A DISALLOWANCE OF RS.54 ,79,648/- MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 40A(3) OF THE ACT. 4. IN BRIEF, THE RELEVANT FACTS ARE THAT IN THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT APART FROM CARRYING OUT BUSINESS ACTIVITY IN GRAINS AND GROCERY, ASSESSEE HAD ALSO C ARRIED OUT SALE OF MOBILE RECHARGE VOUCHERS ON A WHOLESALE BASIS. IT WAS STA TED BEFORE THE ASSESSING OFFICER THAT MOBILE RECHARGE VOUCHERS WERE BEING PU RCHASED FROM M/S AIRCARE ENGINEERS (I) PVT. LTD.. ON A PERUSAL OF THE DETAI LS FURNISHED, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD MADE PAYMENTS TO TH E SAID CONCERN OF RS.54,79,648/- WHICH WAS IN VIOLATION OF THE PROVIS IONS OF SECTION 40A(3) OF THE ACT. BEFORE THE ASSESSING OFFICER, ASSESSEE CONTEN DED THAT THE SALE PROCEEDS OF THE MOBILE RECHARGE VOUCHERS WERE BEING DEPOSITE D IN CASH IN HIS SAVINGS BANK ACCOUNT MAINTAINED WITH BARAMATI BRANCH OF THE AXIX BANK LTD. AND THE CORRESPONDING PURCHASE COSTS WERE RECOVERED BY M/S AIRCARE ENGINEERS (I) PVT. LTD., PUNE BY MAKING CASH WITHDRAWALS THROUGH ATM CENTRES USING THE ATM CARD OF THE APPELLANTS SAVING BANK ACCOUNT. I N SUPPORT, ASSESSEE ALSO FURNISHED BEFORE THE ASSESSING OFFICER, A CONFIRMAT ION FROM M/S AIRCARE ENGINEERS (I) PVT. LTD., PUNE, CONFIRMING THAT THE PAYMENTS TOWARDS SALE ITA NO.74/PN/2014 SA NO.31/PN/2014 PROCEEDS OF MOBILE RECHARGE VOUCHERS FOR SALES MADE TO THE APPELLANT WERE BEING RECEIVED BY THEM THROUGH HIS ATM CARD. IN TH IS MANNER, ASSESSEE SOUGHT TO CONTEND BEFORE THE ASSESSING OFFICER THAT THE TRANSACTIONS WERE CARRIED OUT THROUGH BANKING CHANNELS AND THEREFORE PROVISIONS OF SECTION 40A(3) OF THE ACT WERE NOT ATTRACTED IN RESPECT OF SUCH TRANSACTIONS. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE PLEA AND HELD THAT ASSESSEE HAD MADE PAYMENTS IN RESPECT OF EXPENDITURE TOWARDS PURCHASE OF MOBILE RECHARGE VOUCHERS IN EXCESS OF RS. 20,000/- OTHERWI SE THAN BY WAY OF CROSS PAYEE CHEQUE OR CROSS BANK DRAFT; AND, THEREFORE SU CH PAYMENTS, AMOUNTING TO RS.54,79,648/-, WERE HIT BY THE PROVISIONS OF SE CTION 40A(3) OF THE ACT. ACCORDINGLY THE ASSESSING OFFICER DISALLOWED A SUM OF RS.54,79,648/- BY INVOKING SECTION 40A(3) OF THE ACT. 5. THE CIT(A) HAS ALSO SUSTAINED THE ADDITION, AGAI NST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. BEFORE US, THE LEARNE D COUNSEL FOR THE ASSESSEE, REITERATED THE PLEA THAT THE PAYMENTS WERE RECEIVED BY M/S AIRCARE ENGINEERS (I) PVT. LTD., PUNE BY USING THE ATM CARD OF ASSESS EES SAVING BANK ACCOUNT AND THUS THE PAYMENT WAS BY WAY OF BANKING CHANNELS AND IT COMPLIES WITH THE REQUIREMENTS OF SECTION 40A(3) OF THE ACT. HOW EVER, SHE HAS ALSO MADE A PRELIMINARILY OBJECTION TO THE EFFECT THAT IN THE T RANSACTIONS OF THE PRESENT TYPE, SECTION 40A(3) OF THE ACT HAS NO APPLICABILITY; AND , IN SUPPORT A REFERENCE HAS BEEN MADE TO THE DECISION OF THE COCHIN BENCH OF TH E TRIBUNAL IN THE CASE OF S. RAHUMATHULLA VS. ACIT, (2010) 127 ITD 440 (COCHI N). 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS OPPOSED THE PLEA OF THE ASSESSE E BY PLACING RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THE PRESENT CASE, ASSESSEE IS AN INDIVIDUAL WHO HAS UNDERTAKEN DEALINGS IN MOBILE ITA NO.74/PN/2014 SA NO.31/PN/2014 RECHARGE VOUCHERS ON A WHOLESALE BASIS. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE MADE PURCHASES OF MOBILE RE CHARGE VOUCHERS FROM M/S AIRCARE ENGINEERS (I) PVT. LTD., PUNE FOR A TOT AL SUM OF RS.62,23,541/-. AS PER THE ASSESSING OFFICER, PAYMENTS TO THE EXTENT O F RS.54,79,648/- MADE BY THE ASSESSEE TO M/S AIRCARE ENGINEERS (I) PVT. LTD. , PUNE TO EFFECT THE AFORESAID PURCHASES, WERE IN CONTRAVENTION OF SECTI ON 40A(3) OF THE ACT. NOTABLY, SECTION 40A(3) OF THE ACT PRESCRIBES THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF AN EXPENDITURE FOR WHICH PAYM ENT IS MADE TO THE OTHER PERSON OTHERWISE THAN BY WAY OF AN ACCOUNT PAYEE CH EQUE DRAWN ON A BANK ON AN ACCOUNT PAYEE BANK DRAFT, IN ALL CASES WHERE THE AMOUNT EXCEEDS RS.20,000/-. THE CASE OF THE REVENUE IS THAT THE P AYMENTS OF RS.54,79,648/- MADE BY THE ASSESSEE TO M/S AIRCARE ENGINEERS (I) P VT. LTD., PUNE ARE MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR AN ACCOUNT PAYEE BANK DRAFT, AND THEREFORE, THE AFORESAID SUM IS DISALLOWABLE IN TERMS OF SECTION 40A(3) OF THE ACT. 8. IN THIS CONTEXT, THE DECISION OF THE COCHIN BENC H OF THE TRIBUNAL IN THE CASE OF S. RAHUMATHULLA (SUPRA) HAS BEEN RELIED UPO N BY THE APPELLANT BEFORE US. IN THE CASE BEFORE THE COCHIN BENCH, ISSUE REL ATED TO INVOKING OF SECTION 40A(3) OF THE ACT IN THE CASE OF ASSESSEE WHO WAS, INTER-ALIA ENGAGED IN DEALING IN BSNL AND OTHER TELEPHONE CARDS. THE PAY MENTS MADE BY THE ASSESSEE TOWARDS PURCHASES OF TELEPHONE CARDS WERE BY WAY OF CASH WHICH WAS SOUGHT TO BE DISALLOWED BY THE ASSESSING OFFICE R BY INVOKING SECTION 40A(3) OF THE ACT. THE COCHIN BENCH OF THE TRIBUNA L, BY FOLLOWING ITS EARLIER DECISION IN THE CASE OF VODAFONE ESSAR CELLULAR LTD . VS. ACIT, (2009) 32 SOT 280 (COCHIN), CAME TO CONCLUDE THAT IN SUCH LIKE TR ANSACTIONS, THERE WAS ONLY A RELATIONSHIP OF A PRINCIPAL AND AGENT AND THEREFORE , THERE WAS NO QUESTION OF ANY PURCHASE BEING EFFECTED BY THE LATTER AND ACCOR DINGLY THE BENCH CONCLUDED THAT THERE WAS NO QUESTION OF ALLOWANCE O F ANY EXPENDITURE IN RESPECT OF PURCHASES QUA WHICH THE PROVISIONS OF SE CTION 40A(3) OF THE ACT ITA NO.74/PN/2014 SA NO.31/PN/2014 COULD APPLY, IRRESPECTIVE OF THE MODE OF PAYMENTS. THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS RELEVANT :- 4.1 WE WOULD FIRSTLY DEAL WITH THE CASE LAW CITED BY THE ASSESSEE, AS IF ITS CASE IS COVERED BY THE PRINCIPLES LAID DO WN THERE-UNDER, IT WOULD STAND TO SUCCEED. IN THE CASE OF EASTERN CONDIMENTS PVT. LTD. (SUPRA), THE ASSESSEE FOUND FAVOUR WITH THE HON'BLE JURISDICTIONAL HIGH C OURT IN VIEW OF THE PROVISION OF RULE 6DD(J) OF THE RULES, WHICH PROVIDED THAT WH ERE THE ASSESSEE SATISFIED THE ASSESSING OFFICER THAT THE PAYMENT(S) COULD NOT BE MADE BY CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK DRAFT DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES OR BECAUSE THE PAYMENT IN THE MANNER AFORESAID WAS NOT PRACTICAL, OR WOULD HAVE CAUSED GENUINE DIF FICULTY TO THE PAYEE, HAVING REGARD TO THE NATURE OF THE TRANSACTION AND THE NEC ESSITY FOR EXPEDITIOUS SETTLEMENT THEREOF, ALSO FURNISHING EVIDENCE TO THE LATTER'S SATISFACTION AS TO THE GENUINENESS OF THE PAYMENT AND THE IDENTITY OF THE PAYEE, THE ASSESSING AUTHORITY HAD THE DISCRETION TO ALLOW THE EXPENDITU RE, EVEN WHERE THERE WAS AN APPARENT VIOLATION OF THE PROVISION, SO THAT THE RE VENUE'S APPEAL CONTESTING THE ORDER OF THE TRIBUNAL STOOD DISMISSED BY THE HON'BL E COURT. AT THIS STAGE, IT WOULD BE RELEVANT TO POINT OUT TH AT SECTION 40A(3) HAS UNDERGONE MATERIAL CHANGES VIDE AMENDMENTS PER THE FINANCE ACT, 1995 W.E.F. 1/4/1996 AND FINANCE ACT (NO.2), 1996 W.E.F. 1/4/19 97. VIDE THE SAID AMENDMENTS, FIRSTLY, THE THRESHOLD LIMIT QUA EACH I NDIVIDUAL PAYMENT, I.E., FOR THE APPLICABILITY OF THE SECTION, STOOD ENHANCED FR OM RUPEES TEN THOUSAND TO TWENTY THOUSAND. SECONDLY, THE EXTENT OF DISALLOWAN CE UNDER THE SECTION, WHICH WAS EARLIER MANDATED AT 100% OR THE WHOLE OF THE IM PUGNED EXPENDITURE, STOOD RESTRICTED TO A FRACTION (20%) THEREOF. RULE 6DD OF THE RULES, SPECIFYING THE SAVING CIRCUMSTANCES, THE EXISTENCE OF WHICH WOULD ESCHEW APPLICATION OF THE SECTION, STOOD ALSO AMENDED; THE EXTANT CLAUSE (J) CONCERNING ITSELF WITH THE PAYMENT OF SALARY TO AN EMPLOYEE WORKING ON A SHIP UNDER CERTAIN DEFINED CIRCUMSTANCES. THE SAME, CLEARLY, HAS NO BEARING TO THE EARLIER CLAUSE (J), OR RELEVANCE TO THE ASSESSEE'S CASE. CIRCULAR (# 717 D ATED 14/8/1995) ISSUED BY THE CBDT, EXPLAINING THE AMENDMENTS EFFECTED VIDE F INANCE ACT, 1995, INCLUDING TO S. 40A(3) OF THE ACT, CLARIFIED THAT W ITH THE BANKING SERVICES HAVING TAKEN ROOT EVEN IN RURAL AREAS, THE ACCENTUATING CI RCUMSTANCES PROVIDING EXCEPTION TO THE RIGOUR OF S. 40A(3) IN GENUINE AND BONA FIDE CASES PER R. 6DD(J) WAS NO LONGER CONSIDERED UTILITARIAN OR NECESSARY. BESIDES, THE PROVISION R/W R. 6DD(J) HAD GIVEN RISE TO SUBSTANTIAL LITIGATION ARI SING OUT OF THE INTERPRETATION AND SCOPE OF THESE PROVISIONS. PERHAPS, THE LEGISLATURE WAS OF THE VIEW THAT IT WAS DIFFICULT TO ESTABLISH THE MITIGATING CIRCUMSTANCES OF THE PAYMENTS, SO THAT WHERE THE GENUINENESS IS NOT IN DOUBT, IT WOULD SUF FICE IF A FRACTION THEREOF IS DEEMED AS AN INFLATION IN THE CLAIMED EXPENDITURE W ITH REFERENCE TO THE MODE OF ITS PAYMENT, AND DISALLOWANCE EFFECTED ON THAT BASI S. THE SAME THUS IMPACTS THE CHARACTER OF THE DISALLOWANCE OR OF THE PROSCRI PTION MANDATED THEREBY INASMUCH AS THE GENUINENESS OF THE PAYMENT WAS NO L ONGER IN ISSUE OR RELEVANT FOR THE PURPOSE OF THE DISALLOWANCE, WHICH , AS AGAINST THE ENTIRE PAYMENT EARLIER, STOOD RESTRICTED TO A FRACTION THE REOF. THE AMENDED EXTANT LAW, THUS, IS CAST MORE AS AN ABSOLUTE RULE; THE EXCEPTI ONAL CIRCUMSTANCES HAVING BEEN ENLISTED UNDER RULE 6DD, AND IS IN THE NATURE OF A DEEMING SECTION, WITH THE LAW PRESCRIBING DISALLOWANCE WITH REFERENCE TO THE MODE OF PAYMENT OF THE CONCERNED EXPENDITURE RATHER THAN WITH REFERENCE TO THE EXPENDITURE ITSELF, DEEMING AN INFLATION THEREIN WHERE THE PAYMENT IS N OT AFFECTED PER THE PRESCRIBED MODE, WHILE THE GENUINENESS OF THE PAYME NT, WHERE IMPUGNED, WOULD WARRANT DISALLOWANCE OF THE ENTIRE EXPENDITUR E. IN FACT, PER A SUBSEQUENT AMENDMENT TO THE SECTION, THE PRESCRIBED MODE GETS FURTHER NARROWED DOWN TO ITA NO.74/PN/2014 SA NO.31/PN/2014 ACCOUNT PAYEE BANKING INSTRUMENTS ONLY, WHICH WOULD FACILITATE TRACKING OF THE PAYMENT TO ANY EXTENT. REFERENCE IN THIS CONTEXT MA Y BE PROFITABLY MADE TO THE ORDER BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE C ASE OF ITO VS. KENARAM SAHA & SUBHASH SAHA, 301 ITR (AT) 171 (KOL.) (SB) W HEREIN IT WAS HELD AS UNDER: 'HELD, THAT ONCE THERE IS PAYMENT OF ANY EXPENDITUR E IN VIOLATION OF SECTION 40A(3), THE ASSESSEE CAN ESCAP E THE DISALLOWANCE UNDER THE SAID SECTION ONLY IF THE ASSESSEE'S CASE FALLS WITHIN THE AMBIT OF ANY OF THE CLAUSES OF RULE 6DD. THE MATTER WAS REQUIRED TO BE EXAMINED WHETHER THE ASSESSEE'S CASE FELL UNDER ANY SPECIFIC CLAUSE. NEITHER HAD THE ASSESSEE PROPERLY CLAIMED N OR HAD THE ASSESSING OFFICER EXAMINED THE CASE WITH REFERENCE TO THE RELEVANT RULE. THE ORDERS OF THE AUTHORITIES BELOW WERE TO B E SET ASIDE AND THE MATTER RESTORED TO THE ASSESSING OFFICER TO ALLOW A DEQUATE OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE NECESSARY EVIDENCE I N SUPPORT OF ITS CLAIM AND READJUDICATE THE MATTER IN ACCORDANCE WIT H LAW'. THE ASSESSMENT YEAR UNDER REFERENCE IN THE CASE OF EASTERN CONDIMENTS PVT. LTD. (SUPRA), AS ALSO RAMADITYA INV ESTMENTS PVT. LTD. (SUPRA), WAS 1992-93 AND, THUS, THE HON'BLE COURTS WERE DEALING WITH THE PROVISION AS IT STOOD PRIOR TO THE SAID AMENDMENTS. IN THE CITED CASES, THE ASSESSEES FOUND FAVOUR WITH THE COURTS ON THE GROUN D OF GENUINENESS OF PAYMENT AND THE PECULIAR CIRCUMSTANCES OF THE TRADE , WHICH STOOD ESTABLISHED WITH REFERENCE TO THE SAVING CLAUSE OF RULE 6DD, AS CLAUSE (J) IN THE CASE OF EASTERN CONDIMENTS PVT. LTD. (SUPRA). 5. IN VIEW OF THE DECISION BY THE TRIBUNAL IN THE C ASE OF VODAFONE ESSAR CELLULAR LTD. (SUPRA), WHICH WE HAVE SOUGHT TO EXPLAIN VIDE PARA 4.4 OF THIS ORDER, WE ARE OF THE CLEAR VIEW TH AT THE PROVISION OF SECTION 40A(3) WOULD NOT BE APPLICABLE IN THE FACTS AND CIR CUMSTANCES OF THE CASE. THE EARLIER PART OF THE ORDER, WHICH SUGGESTS OTHER WISE, IS ON THE PREMISE THAT THE TRANSFER OF THE CARDS BY THE SERVICE-PROVIDER TO THE ASSESSEE- DISTRIBUTOR REPRESENTS THE LATTER'S PURCHASE THEREO F, AND THUS, AS BEING ONLY AN EXPENDITURE INCURRED BY IT IN THE NORMAL COURSE OF ITS BUSINESS, MEETING THE ARGUMENTS OF THE OPPOSING PARTIES AND THEIR RES PECTIVE CASES AS MADE BEFORE US. THE SAME IS DE HORS THE AFORE-SAID DECIS ION BY THE TRIBUNAL, WHICH STANDS RENDERED FOLLOWING THE DECISIONS BY THE HON' BLE JURISDICTIONAL HIGH COURT AND THE HON'BLE APEX COURT ON AN ASPECT OF TH E MATTER WHICH IS INTEGRAL TO THE ISSUE UNDER CONSIDERATION. FURTHER, AS EXPLAINED EARLIER, ONCE THE TRIBUNAL FOUND THE RELATIONSHIP BETWEEN TH E FRANCHISEE-DISTRIBUTOR AND THE SERVICE-PROVIDER TO BE ONE OF PRINCIPAL AND AGENT, THERE IS NO QUESTION OF ANY PURCHASE BY THE LATTER, AND THE I NCOME ARISING THERETO IS ONLY IN THE NATURE OF A COMMISSION OR REMUNERATION AGAINST SERVICES RENDERED. AS SUCH, THERE IS NO QUESTION OF ALLOWANC E OF ANY EXPENDITURE IN RESPECT OF PURCHASES QUA WHICH SECTION 40A(3) CO ULD APPLY, IRRESPECTIVE OF THE MODE OF PAYMENT THEREOF. THE ASSESSEE SUCC EEDS ON GROUNDS (A) TO (G) OF ITS APPEAL. 9. FOLLOWING THE RATIO OF THE AFORESAID DECISION OF OUR CO-ORDINATE BENCH AND IN THE ABSENCE OF ANY DECISION TO THE CONTRARY BROUGHT OUT BY THE REVENUE, WE HEREBY HOLD THAT THERE IS NO SCOPE FOR INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT IN THE FACTS AND CIRCUMST ANCES OF THE PRESENT CASE. ITA NO.74/PN/2014 SA NO.31/PN/2014 THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER BY INVOKING SECTION 40A(3) IN THE PRESENT CASE IS MISPLACED. 10. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTAT IVE HAS REFERRED TO THE DISCUSSION MADE BY THE CIT(A) IN PARA 5.2 AND 5.2.1 OF THE ORDER TO SAY THAT THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF S. RAHUMATHULLA (SUPRA) IS INAPPLICABLE TO THE CONTROV ERSY IN THE PRESENT APPEAL. FIRSTLY, AS PER THE CIT(A), SECTION 40A(3) OF THE A CT REFERS TO ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS MADE AND IT DOES NOT DIFFERENTIATE WITH THE NATURE OF PURCHASE OR THE GOODS TRADED OR EXCHANGED . THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE NATURE OF EXPENDITURE IS NOT A DETERMINING FACTOR TO CONSIDER THE APPLICATIO N OF SECTION 40A(3) OF THE ACT. THEREFORE, EVEN IF THERE WAS A RELATIONSHIP O F THE PRINCIPAL AND AGENT BETWEEN THE ASSESSEE AND THE ULTIMATE SERVICE PROVI DER OF MOBILE SIM CARDS, IT WOULD NOT MAKE A DIFFERENCE TO THE INVOKING OF S ECTION 40A(3) OF THE ACT. IN OUR VIEW, THE AFORESAID ASPECT OF THE MATTER HAS BE EN APPROPRIATELY DEALT WITH BY THE COCHIN BENCH OF THE TRIBUNAL, WHERE RELIANCE HAS BEEN PLACED ON THE JUDGEMENT OF THE HONBLE KERALA HIGH COURT IN THE C ASE OF BPL MOBILE CELLULAR LTD. (SUPRA) WHEREIN THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF BSNL (SUPRA) WAS FOLLOWED AND IT WAS HELD THAT THE VALUE OF SIM CARDS, RECHARGE COUPONS, ETC. DO NOT REPRESENT SALE OF GOO DS BUT WAS ONLY A SERVICE RENDERED BY THE SERVICE PROVIDER WHICH WAS LIABLE T O SERVICE TAX. FOLLOWING THE AFORESAID VIEW, THE COCHIN BENCH OF THE TRIBUNA L HELD THAT THE DISTRIBUTOR OR THE FRANCHISEE IS ALL THE TIME ACTING ONLY FOR AND ON BEHALF OF THE SERVICE PROVIDER AS A PART OF THE SERVICE CHAIN, AND THUS T HE PAYMENTS MADE INTER-SE THE CHAIN ONLY RESULT IN COMMISSION INCOME. THE RE LEVANT PORTION OF THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL HAS BE EN EXTRACTED IN THE EARLIER PARAS, WHICH CLEARLY SHOWS THAT THE AFORESAID OBJEC TION RAISED BY THE REVENUE HAS BEEN FOUND TO BE UNTENABLE. WE ALSO HOLD SO. ITA NO.74/PN/2014 SA NO.31/PN/2014 11. FURTHER, AS PER THE CIT(A) IN THE PRESENT CASE THE PURCHASE OF THE MOBILE RECHARGE VOUCHERS ARE NOT EFFECTED FROM THE ULTIMATE SERVICE PROVIDER BUT FROM ANOTHER CONCERN WHO IS EITHER A FRANCHISEE OR A DISTRIBUTOR OF THE SERVICE PROVIDER. IN OUR CONSIDERED OPINION, THE AFORESAID FACT-SITUATION WILL NOT MAKE A DIFFERENCE TO THE NATURE OF THE RELATION SHIP, WHICH HAS BEEN BROUGHT OUT BY THE COCHIN BENCH OF THE TRIBUNAL, IN A TRANSACTION INVOLVING THE SUPPLY OF MOBILE RECHARGE VOUCHERS. THUS, WE DO NO T FIND ANY REASONS TO UPHOLD THE AFORESAID PLEA OF THE REVENUE. LASTLY, IT IS BROUGHT OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT IN THE PRE SENT CASE THE ENTIRE ACTIVITY RELATING TO THE PURCHASE AND SALE OF MOBIL E RECHARGE VOUCHERS WAS NOT DISCLOSED BY THE ASSESSEE AT THE TIME OF FILING OF THE RETURN OF INCOME, BUT IT WAS FOUND ONLY DURING THE COURSE OF ASSESSMENT PROC EEDINGS. THIS ASPECT OF THE MATTER ALSO, IN OUR VIEW, WOULD NOT EFFECT THE DETERMINATION OF THE TOTAL INCOME OF THE ASSESSEE, WHICH HAS TO BE MADE AS PER THE APPLICABLE LEGAL POSITION; AND, THEREFORE HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WHICH ARE AKIN TO THOSE CONSIDERED B Y THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF S. RAHUMATHULLA (SUPRA), IT HAS TO BE HELD THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE INAPPLI CABLE IN RESPECT OF IMPUGNED TRANSACTIONS. IN VIEW OF THE AFORESAID DISCUSSION, WE HEREBY SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO DELETE THE DISALLOWANCE OF RS.54,79,648/- MADE BY INVOKING SECTION 40A(3) O F THE ACT. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 13. IN VIEW OF THE FACT THAT THE APPEAL OF THE ASSE SSEE HAS BEEN DISPOSED- OFF, THE STAY APPLICATION NO.31/PN/2014 FILED BY TH E ASSESSEE BECOMES INFRUCTUOUS AND IS HEREBY DISMISSED. ITA NO.74/PN/2014 SA NO.31/PN/2014 14. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLO WED AND THE STAY APPLICATION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 10 TH JUNE, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE