Forex dealers paid Cash for Purchase of Foreign Currency can be exempt as per 6DD(l): ITAT [Read Order]

The cash paid by the forex dealers for the purchase of foreign currency can be exempt as per 6 DD(1) of the Income Tax Act,1961, the Chennai bench of the Income Tax Appellate Tribunal (ITAT) held as above.

The assessee,Ahmed World Travels Tours & Cargo Pvt.Ltd is engaged in the business of tours and travels operator and also worksas an authorized foreign exchange dealer. The Assessing Officer(AO) noted that the assessee has incurred expenses towards air ticketand hotel expenses in cash abovethe prescribed limit u/s.40A(3)  of the Income Tax Act, 1961 and disallowed total expensesincurred towardsair ticket and hotel expenses amounting to  Rs.22,69,275/- u/s.40A(3) of the Income Tax Act, 1961.

The assessee contended that they had booked an air ticket on behalf of its customers and suchair ticket needs to be booked by paying cash to the airlinesand itcomes under exception as per clause (k) of Rule 6DD of the I.T. Rules, 1962. The CIT(A) confirmed the findings of the AO.The assessee filed a license issued by the Reserve Bank of India to deal with foreign currency in lightof provisions ofclause (l) of Rule 6DD of I.T Rules, 1962, and argued that it needs to make payment in cash for buying foreign currency.

The Assessing Officer observed that the assessee has paid cash for hotel expenses, whereas the assessee claims that it has paid cash for the purchase of foreign currency and expenditure has been incurred in foreign currency by its customers.

The Tribunal held that If the Assessing Officer finds that the assessee being a forex dealer paid cash for the purchase of foreign currency, then comes under the exception provided under clause (l) of Rule 6DD of I.T.Rules, 1962 would be available and the cash payment cannot be disallowed u/s.40A(3) of the Income Tax Act, 1961.

Shri V Durga Rao, judicial member and Shri G Manjunath, accountant member set aside the issue to the AO to reconsider theissue. The appeal filed by the assessee was allowed for statistical purposes.

The appellant was represented by Mr N. Quadir Hoseyn and the respondent was represented by Mr R.L. Banekatti.

To Read the full text of the Order CLICK HERE

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