Wow sir, thanks for the judgement....!

Abdu's case is still treated as landmark.... nice to get a case in favour of assessee.. but i just came across a post in a site that RULE 6DD HAS BEEN MODIFIED so this IS NOT VALID!!!

Can anyone please confirm? i cant get the judgement anywhere!

Correct citation - Sri Renukeswara Rice Mills v. ITO (2005) 93 ITD 263 (Bang.)

Thanks again....

i wanna ask that under rtgs lakhs of rupees are transfered in accounts so how can the above be disallowed

i does not full case. bt summary of this case like this.

Section 40A(3)  of the Income-tax Act, 1961, read with rule 6DD of the Income-tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limits - Assessment year 1998-99 - Assessee-rice mill purchased rice from regional market yard and made payment directly in bank account of concerned agent by depositing cash under a challan to ensure that payee alone received payment and origin and conclusion of transaction was traceable - Whether said payment was not a direct payment to payee but only to credit of bank account without payee actually receiving cash and, therefore, such payment was not in violation of section 40A(3), warranting disallowance - Held, yes - Whether since assessee paid amount to agent licensed to operate in market yard, who, in turn, was required to pay to cultivator, indirectly, assessee paid for purchase of agricultural produce to cultivator through agent, and, thus, a combined reading of clauses (f) and (l) of rule 6DD would take away transaction in question from clutches of section 40A(3) - Held, yes

i wanna ask that under rtgs lakhs of rupees are transfered in accounts so how can the above be disallowed

Dear Shamita,

I'ts clear that the payment is for WRAP Audit, an expenditure.  Thus it attracts disallowance under section 40 A(3).  And also the transaction is not falling  under Rule 6DD exceptions.Implies to be disallowed.

Originally posted by : kirti nagpal
	i wanna ask that under rtgs lakhs of rupees are transfered in accounts so how can the above be disallowed

 RTGS takes place between banking channels. Here the debtor is depositing cash in the bank account of the creditor. So it does not take place through banking channels.

Originally posted by : kirti nagpal
	i wanna ask that under rtgs lakhs of rupees are transfered in accounts so how can the above be disallowed

 RTGS takes place between banking channels. Here the debtor is depositing cash in the bank account of the creditor. So it does not take place through banking channels.

Originally posted by : kirti nagpal
	i wanna ask that under rtgs lakhs of rupees are transfered in accounts so how can the above be disallowed

 RTGS takes place between banking channels. Here the debtor is depositing cash in the account of the creditor. So it is not the same and hence should be disallowed

thanks aditya sir

From the reading of Sec. 40A(3) and Rule 6DD, it looks that cash deposited directly into the creditors's account more than Rs. 20,000 is disallowed.

But in Smt. Harshila Chordia v ITO [2008] 298 349 (Raj.), Rajasthan High Court held that the primary objective of enacting sec. 40A(3) in its original incarnation was two fold, firstly putting a check on trading transactions with a mind to evade the liability to tax on income earned out of such transaction and secondly to inculcate banking habits amongst the business community. Rule 6DD(j) has to be liberally construed and ordinarily where the genuineness of the transaction and payment and identities of the receiver were established, the requirements of the rule 6DD(j) must be deemed to have been satisfied.

In the given query, identities of both the parties are established and the transaction is genuine as TDS has also been deducted for the job work done by the party. So, I feel such payments shouldn't be disallowed.
 

K V Abdu's case has gone against assessee in 2009 before the hon'ble kerala High Court!

Just FYI.