- (1.) By this reference application at the instance of the assessee and at the instance of the Revenue, the following questions, set out at pages 10 and 11 of the paper book, are referred for our opinion : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the payment of market fees to the Market Committee, Sirsa, amounting to Rs. 35,384 is hit by Section 40A(3) of the Income-tax Act, 1961, and hence not allowable as business expenditure in the computation of the assessee's business income for the assessment year 1984-85 ? Whether, on facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) to the effect that provision in respect of liability towards interest amounting to Rs. 41,666 payable to the Government of Haryana on arrears of purchase tax for the assessment year 1984-85 is not hit by the provisions of Section 43B of the Act, 1961 ?" The assessee is a company carrying on business in the purchase and sale of cotton and cotton seeds. It also derives income from interest, dividend and capital gains. The assessment year is 1984-85 and previous year ending is on March 31, 1984. While completing the assessment, the Income-tax Officer has disallowed the payment of market fees where the payments are made in cash to Market Committee, Sirsa (Haryana), by invoking the provisions of Section 40A(3) of the Act.
(2.) The view taken by the Income-tax Officer has been upheld by the Commissioner of Income-tax (Appeals) as well as by the Tribunal. The concurrent finding of the three authorities that the payment which is more than Rs. 2,500 to the Market Committee was in cash. Section 40A(3) provides that where the assessee incurs any expenditure in respect of which pay ment is made, as may be specified in this behalf by the Central Government by a notification in the Official Gazette a sum exceeding Rs. 2,500 otherwise than by a crossed cheque drawn on a bank or by a crossed bank-draft such expenditure would not be allowed as a deduction. However, in certain cases, having regard to the nature and extent of banking facilities available, consideration of business expediency and other relevant factors, if the assessee made the payment in cash, in that case the deduction shall be allowed. In paragraph 6 of the Tribunal's order, the Tribunal found that in this case the assessee has not satisfied the conditions laid down in the Rules. When the assessee has not established his case that there were unavoidable circumstances in the locality, bank facilities were not available or-the payment of cheque was not accepted in business, the claim of the assessee is hit by the provisions of Section 40A(3) of the Act.
(3.) Mr. Khaitan further brought to our notice that the Tribunal has not considered the letter given by the Marketing Committee to the effect that the Committee was not prepared to accept the payment by cheque. The assessee moved the application before the Tribunal. That certificate issued by the Committee has been considered by the Tribunal in the miscellaneous application and found that the certificate issued by the Marketing Committee is an afterthought. In view of this finding of the fact, no interference is called for in the order of the Tribunal.;