COMMISSIONER OF INCOME-TAX Vs. PEHLAJ RAI DARYANMAL

JUDGEMENT

(1.) Under Section 256(2) of the Income-tax Act, 1961, the Tribunal has stated the following question :

(2.) The assessee is a registered firm dealing in timber. While scrutinising the accounts for the previous year relevant to the assessment year 1970-71, the Income-tax Officer found that the assessee has made payments for purchase of timber to the extent of Rs. 28,565 to various parties in cash exceeding Rs. 2,500. The assessee admitted that these payments were made at Kanpur. The Income-tax Officer felt a doubt about the identity of the recipients of the said amount. Accordingly, he disallowed the deductions and added back the said amount to the assessee's income. On appeal, however, the Appellate Assistant Commissioner opined that the payments made for purchase of forest produce are exempt from the operation of Section 40A(3) by virtue of Rule 6DD(f)(i) of the Income-tax Rules. Accordingly, he allowed the appeal. The Revenue carried the matter in appeal to the Tribunal which dismissed the same agreeing with the opinion of the Appellate Assistant Commissioner, whereupon the present reference was obtained.

(3.) It is found by the authorities under the Act as well as by the Tribunal that these payments were made not directly to producers of forest produce but to brokers or timber suppliers, as the case may be. It is in the light of this fact that the question of law referred herein has to be gone into. The assessee's case is that the words "cultivator, grower or producer" occurring at the end of Clause (f) qualify only the words occurring in the immediately preceding sub-clause, namely, Sub-clause (iv), and not all the four sub-clauses. For a proper appreciation of this contention, it would be appropriate to set out Sub-section (3) of Section 40A and Rule 6DD(f) in so far as they are relevant :