MINA WOOD INDUSTRIES,MATTANNUR V. ITO , WARD-3, KANNUR

ITA 833/COCH/2024

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Mina Wood Industries, a partnership firm engaged in manufacturing and trading of food items, filed an appeal against the order of the National Faceless Appeal Centre, Delhi, which confirmed the disallowance made by the Income Tax Officer, Ward-3, Kannur. The disallowance was related to a cash payment of Rs. 13,06,452 made to KSEB for electricity charges, which was disallowed under section 40A(3) of the Income Tax Act, 1961. The firm argued that the payment was made to a Kerala government undertaking and thus fell within the exceptions under rule 6DD of the I.T. Rules. The tribunal agreed with this argument, referencing decisions from the Delhi and Gujarat High Courts, and allowed the appeal, deleting the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474735 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Other Referred Cases: CIT v. SRC Aviation P. Ltd. [2013] 37 taxamann.com 308 (Delhi), CIT v. Arvind Mills Ltd. [2014] 52 taxmann.com 475 (Guj)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Section: 143(3); 40A(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI KESHAV DUBEY, JM ITA No. 833/Coch/2024 Assessment Year: 2015-16 Mina Wood Industries .......... Appellant III/656 B, Kallur, Matannur Kannur 670702 [PAN: AAGMF2716D] vs. The Income Tax Officer .......... Respondent Ward -3, Kannur Appellant by: ------- None ------- Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 30.01.2025 Date of Pronouncement: 19.02.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 29.07.2024 for Assessment Year (AY) 2015-16. 2. Brief facts of the case are that the appellant is a partnership firm engaged in the business of manufacturing and trading of food items. The return of income for AY 2015-16 was filed on 22.09.2016 declaring a total income of Rs. 1,93,910/-. Against the said return of income, the assessment was completed by the Income 2 ITA No. 833/Coch/2024 Mina Wood Industries Tax Officer, Ward-3, Kannur (hereinafter called \"the AO\") vide order dated 19.12.2017 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 15,00,360/-. While doing so, the AO made disallowance of Rs. 13,06,452/- invoking the provisions of section 40A(3) of the Act being the amount paid in cash to the Kerala State Electricity Board (KSEB) towards electricity charges. 3. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. When the appeal was called on nobody appeared on behalf of the assessee, despite due service of notice of hearing. The ground of appeal is that the payment is made a Kerala Government undertaking, therefore, falls with the exceptions emanating under rule. 6DD of the I.T. Rules. Therefore, no addition is called for. 6. On the other hand, the learned Sr. DR opposed the contentions of the appellant. 7. The solitary issue that arises for our consideration is whether the CIT(A) was justified in confirming the is u/s. 40A(3) of the Act being payment made to KSEB in cash towards electricity charges. The provisions of section 40A(3) is not absolute. Provisions of section 40 A(3) cannot be read in isolation but should be read with 3 ITA No. 833/Coch/2024 Mina Wood Industries the provisions of rule 6DD of the I.T. Rules. Provisions of rule 6DD enumerates certain exceptions for invoking provisions of section 40A(3). Clause (b) of rule 6DD provides that where the payment is made to the government no disallowance u/s. 40A(3) is to be made. In the present case, the payment is made to state government undertaking, i.e. KSEB, which is considered to be a ‘state’ within the meaning of Article 12 of the Constitution of India and the cash payment made to the state government undertaking cannot be disallowed. In this regard reliance can be placed to the decision of the Hon'ble Delhi High Court in the case of CIT v. SRC Aviation P. Ltd. [2013] 37 taxamann.com 308 (Delhi) and the decision of Hon'ble Gujarat High Court in the case of CIT v. Arvind Mills Ltd. [2014] 52 taxmann.com 475 (Guj). 8. Since the payment in question falls under the exceptions enumerated under rule 6DD, we delete the addition. 9. In the result, appeal of the appellant stands allowed. Order pronounced in the open court on 19th February, 2025. Sd/- Sd/- (KESHAV DUBEY) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 19th February, 2025 n.p. 4 ITA No. 833/Coch/2024 Mina Wood Industries Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin "