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Judgment
Heard on question of admission.
In the appeal preferred by the Revenue the question raised is whether the Tribunal was justified in law in confirming the order of CIT(A) deleting the additions made by the AO u/s 40A(3) of the IT Act.
It is not in dispute that the Assessee was a contractor and collecting the royalty and payment had been made to the contractor who had collected the royalty on behalf of the State. The AO disallowed 20 per cent of the amount as the payment exceeded Rs. 20,000; payment to the extent of Rs. 61,77,445 was made in cash. Explanation of the Assessee in this regard was that during the year the Assessee had paid Rs. 64,00,384 as royalty to the State Government and as per policy of the State Government, royalty is collected by the contractor on behalf of the Government and payment to the Government falls under Rule 6DD(b) and therefore, no disallowance of Rs. 12,35,490 could have been made by the AO u/s 40A(3) of the IT Act.
Order has been affirmed by the Income Tax Appellate Tribunal (for short "Tribunal" hereinafter). Dissatisfied with the order, the appeal has been preferred by the Revenue.
Shri R.B. Mathur, counsel appearing on behalf of the Revenue has submitted that a huge amount of royalty was paid by way of cash, whereas it was necessary to pay it by cheque. Thus, the AO had rightly disallowed 20 per cent of the amount.
After hearing counsel appearing on behalf of the Revenue, we are of the opinion that the amount was paid to the contractor which was collected on behalf of the State Government as such no disallowance could have been made in view of Rule 6DD(b). The Government has granted contract to collect the royalty to the contractor. The payment was made to the contractor not in individual capacity, but on behalf of the Government of Rajasthan, hence, no disallowance under Rule 6DD(b) could have been made.
In our opinion CIT(A) and Tribunal have not committed any illegality in passing the orders.
No substantial question arises in the instant appeal. Consequently, the Income Tax appeal is hereby dismissed.