The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) in M/s Savitri Devi v. DCIT held that there is no violation of the Income Tax Rules in making cash purchase of Alcohol Liquor for human consumption from authorized distributor of the State Government.
The sole grievance of the appellant was that the Assessing Officer has made an addition on account of cash purchase violating the Section 40A(3) of the Income Tax Act, 1961.
Before the Tribunal, the assessee contended that the cash purchase of alcohol liquor for human consumption from a authorized distributor of Government of Uttar Pradesh is covered by the Rule 6DD(b) of IT Rules, 1962 and such payments were made to an agent of Government of Uttar Pradesh.
The Tribunal noticed that the issue on hand is covered by the order of co-ordinate bench of this Tribunal wherein it was held that cash payments made to an agent of Government is covered by exception provided under Rule 6DD(b) of IT Rules, 1962.
Relying on the findings of the co-ordinate bench of Kolkata Tribunal, the ITAT observed that the Government of Uttar Pradesh appointed M/s Saraya Distillery, Sadar Nagara, Gorakhpur, U.P. as its agent and the entire payments i.e. impugned amount paid to the said agent is to be treated as if paid to Government of U.P and as such said cash payment are covered by the Rule 6DD(b) of IT Rules, 1962.
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