Tribunal held that the assessee was doing the business in remote areas and the amounts were paid for making labour charges and for making certain purchases, where, it was very difficult to make payment through banking channels. The proviso attached to sub-section (3) of S. 40A is to rescue the assessee from the rigour of disallowance under S. 40A(3). Thus no disallowance can be made. As regards of payment of machine charges, the AO is directed to verify whether the payment is less than Rs 20000 per day and decide the matter. (AY.2008-09)
Debjyoti Dutta v. ITO (2020)77 ITR 17(SN) (Cuttack)(Trib.)
S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits–Cash paid for labour charges and purchases-Business in a remote area-Disallowance is held to be not valid-Machine hire charges–less than Rs. 20000 per day–AO is directed to verify and decide. [S. 40(a)(ia)]