S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits -Cash payment exceeding prescribed limit -Purchase of land-Amount not claimed as expenditure-No disallowance permissible-Addition deleted-Stamp duty value difference is less than 10%-Amendment made in section 50C(1) of the Act by inserting third proviso by Finance Act, 2018, with effect from April 01, 2018 is curative and retrospective- Disallowance deleted. [S. 40(a)(ia), 43CA, 50C]
The assessee, a builder and developer, purchased agricultural land for ₹77 lakhs, out of which ₹21,55,000/- (AY 2013–14) and ₹23,73,000/- (AY 2014–15) were paid in cash at the request of the vendors. The AO invoked section 40A(3) and disallowed the cash payments. The assessee contended that the land was shown as fixed asset/stock and no deduction of the impugned payment was claimed in the Profit & Loss account. The CIT(A) confirmed the addition relying on various High Court decisions holding that section 40A(3) applies even to purchase of goods and irrespective of genuineness. On appeal, the Tribunal held that section 40A(3) applies only where expenditure is otherwise allowable under sections 30 to 38. Since the assessee had not claimed the impugned payment as expenditure while computing business income, no disallowance could be made. Accordingly, the addition under section 40A(3) was deleted. In AY 2014–15, addition of ₹35,000/- on account of difference between stamp duty value and sale consideration was deleted following the view that the tolerance band amendment is curative and retrospective. (ITA Nos. 625 & 626/Nag/2024, dt. 24-02-2026. (AY. 2013-14, 2014-15)
Shri Ganesh Builders Ltd. v. DCIT (Nag.)(Trib.) www.itatonline.org.
[Coram : Hon’ble Shri Pawan Singh, JM & Hon’ble Shri Khettra Mohan Roy, AM]