CHANCHAL DOGRA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THOUGH this income-tax appeal was admitted on a large number of questions of law formulated by the appellant, at the time of hearing we find that only the following questions of law arise for decision in this case :

(2.) TO appreciate the rival contentions, it would be apposite to refer to S. 40A(3) of the IT Act and r. 6DD of the IT Rules, as they stood at the relevant time :

(3.) WITH due respect, we are not at all in agreement with the law laid down by the Gauhati High Court. In this behalf, we may mention that a number of other High Courts, namely, the Orissa High Court in Sajowanlal Jaiswal vs. CIT 1976 CTR (Ori) 204 : (1976) 103 ITR 706 (Ori), Allahabad High Court in U.P. Hardware Store vs. CIT (1976) 104 ITR 664 (All) and Ratan Udyog vs. ITO (1977) 109 ITR 1 (All), Kerala High Court in P.R. Textiles vs. CIT (1980) 121 ITR 237 (Ker), Punjab & Haryana High Court in CIT vs. New Light Tin Mfg. Co. (1980) 14 CTR (P&H) 143 : (1980) 121 ITR 229 (P&H), Rajasthan High Court in Fakri Automobiles vs. CIT (1986) 52 CTR (Raj) 59 : (1986) 160 ITR 504 (Raj) and Patna High Court in CIT vs. Ram Chand Gobind Prasad (1987) 61 CTR (Pat) 198 : (1985) 156 ITR 766 (Pat), took the view that under s. 40A(3) money spent on purchase of stock-in-trade also amounted to expenditure. We are in agreement with all the High Courts other than Gauhati High Court and are of the considered opinion that even when moneys are paid/spent for purchase of stock-in-trade then also the provisions of S. 40A(3) will apply since this amounts to expenditure. Accordingly, the first question is answered against the assessee and in favour of the Revenue.