T.S.DOABIA, J. - (1.) AN application preferred by the Revenue in which prayer was made that questions of law as formulated by the Revenue be referred to this Court stands rejected. It is in these circumstances a petition has been preferred in terms of S. 256(2) of the IT Act, 1961. The Revenue wants the following questions of law to be referred to this Court : "1. Whether, on the facts and in the circumstances of case, the Tribunal was justified in law in confirming the deletion of addition of Rs. 8,93,827 made by the AO under S. 40A(3) of the IT Act, 1961 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that there existed exceptional and unavoidable circumstances necessitating the payment in cash, whereas the fact is it is practice with the assessee to make payment in cash to the sellers of empty bottles with whom the assessee has a long business dealing ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal has not failed to appreciate that the assessee has never proved before the AO that the payments in cash were made due to unavoidable and exceptional circumstances? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the deletion of addition of Rs. 61,431 made by the AO under S. 37(3A) of the IT Act, 5. Whether, on the facts and in the circumstances of the case, the Tribunal has not failed to appreciate that the expenses which were restricted under S. 37(3A) of the IT Act, 1961, were of such a nature as could help to promote the sales of the assessee and, thus, fall within the meaning and scope of S. 37(3A) of the IT Act, 1961 ?"
(2.) A perusal of the questions of law which have been formulated and which have been quoted above makes it apparent that the determination of the questions of law depends upon the appreciation of factual position. Therefore, to say that the question of law would arise may not be correct appreciation of the legal position. This is one aspect of the matter. The other aspect of the matter on merits be examined.
(3.) THE Tribunal while deciding the matter before it has confirmed the deletion of an amount of Rs. 8,93,827 from the income of the assessee. This amount was included in the assessable income on account of the provisions of S. 40A(3) of the Act. The AO had expressed an opinion that a payment exceeding Rs. 2,500 was made on a single day, therefore, these were required to be added in the assessable income. It was observed that these payments were made in breach of S. 40A(3) of the Act. This view expressed by the assessing authority was reversed by the appellate authority. Resort was had to r. 6DD of the Rules. It was held that taking into consideration the nature of the business of the assessee, the payments beyond Rs. 2,500 could be made in cash and these were held protected by the provisions of rule referred to above.;