IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM ITA No.625/JP/14 Assessment Year : 2011-12 M/s Ajmer Food Products Pvt. JCIT, Range-2, Ajmer Ltd. C/o R.N. Agarwal, Sharda Vs. Building, Naya Bazar, Ajmer PAN No. AACCA4735H Appellant Respondent Assessee by : Shri M. Gargieya (CA) Revenue by :Shri R.S. Dagur (Addl.CIT) Date of Hearing : 28.07.2016 Date of Pronouncement : 28/09/2016. ORDER PER SHRI VIKRAM SINGH YADAV, A.M. This is appeal filed by assessee against order of Ld. CIT(A), Ajmer dated 31.07.2914 wherein assessee has taken following grounds of appeal: (1) That on facts and in law Ld. CIT(A) has wrongly confirmed addition of Rs. 45,12,111/- of Project expenses written off. (2) That ld. CIT(A) has erred in confirming addition of Rs. 45,738/- u/s 40A(3). 2. In respect of ground no. 1, brief facts of case are that assessee has claimed Rs. 45,12,111/- as new project expenses written off . AO stated that there was agricultural land at village Ganera, Pushkar in ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer name of Shri Manoj Kumar Sharda, MD of assessee company which was taken on lease by assessee company from year 2007 for developing resort and lease rent was being regularly paid. For constructing resort, change of land was approved by Municipal Council, Pushkar and by Senior Town Planner, Ajmer and hence work was started. However, in year 2010, new rules were made effective and were received from Senior Town Planner stating that new s. 90A for change of land use and regarding road width for resort by Government Authorities. Due to this all, assessee again applied for change of land use as per new s. 90A. Accordingly, expenses incurred of Rs. 45,12,111/- on this project were written off as revenue expenditure. claim of assessee however did not find favour with Assessing officer as well as with ld CIT(A). Hence, present appeal before us. 2.1 We now refer to findings of ld. CIT(A) which is reproduced as under: I have considered contentions of appellant as well as assessment order. It is seen that assessee has claimed to have invested 45,l2,111/- on leased land of director of assessee company for establishing all together new project i.e. Resort. expenses were incurred between years 2006-07 to 2010-11. During all these years, said expenses were being capitalized by assessee and no depreciation etc. was claimed. Due to introduction of new rules for land use and road width for resort by Government Authorities, assessee had to scrap earlier project and applied for change of land use as per new rule i.e. 90A. However, it is apparent that expenses incurred were shown and accepted all along as capital expenses by assessee and in none of years they were claimed as revenue expenses. nature of expenses cannot change in year when said project was scraped. nature of expenses remains same as earlier claimed by assessee from A.Y. 2007-08 to 2011-12. As such, this is capital loss incurred by assessee and said loss is not allowable to set off against income from job work business of assessee. Also, it is not case of assessee that assessee has incurred above expenses as revenue expenses for current business of manufacturing of biscuits of Parle biscuits on job work basis. Accordingly, claim of assessee is not liable to be set off as revenue expenses against above 2 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer business. 2.2 Ld. AR argued matter at length and has submitted through its written submissions as under: 1. Firstly, we strongly rely upon written submissions filed before ld. CIT (A) as under: Your honour here I would like to submit that learned Assistant Commissioner has disallowed expenses on two grounds: 1. That expenses are capital in nature and same were kept in work-in- progress in schedule of assets. and 2. These expenses pertain to various preceding financial year. That Capital expenses are those expenses which were incurred with view to bringing into existence as new asset and for enduring benefit of trade whereas, in case of appellant no new asset came into existence and moreover expenditure incurred previously was of no use due to change of government policy and appellant has to demolish ground work it is revenue expenses or may be taken as business loss which is allowable. I rely on following rulings: CIT vs Priya Village Road Shows Ltd. 332 ITR 594 CIT vs Monnet Industries Ltd. 332 ITR 627 DCIT vs. Assam Asbestos Ltd. 263 ITR 357 Indo Rama Synthetics India Ltd. vs. CIT 333 ITR18 Lake Palace Hotels and Motels Pvt. Ltd. vs. CIT 213 ITR 735 (Raj) Your honour in aforesaid judgment Rajasthan High Court held that dismantling charges incurred by assessee are capital in nature particularly when new construction was done either in year or in succeeding years whereas, appellant has already started new project with amended rules of Rajasthan Govt. Hence this ruling is in favour of appellant. Copies of sanctioned letter and copy of receipt of charges are attached herewith. 3 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer That without prejudice to above total expenses includes expense of Rs. 15,00,000/- are of lease rent which was paid year to year and rent was duly taxed in hands of owner of land year to year. That lease rent paid are revenue expenditure and there is no enduring benefit. I rely on following ruling: Band & Plantations and Ind. Ltd. vs CIT 242 ITR 22. Cit VS BPL Systems and Project Ltd. 227 ITR 779. That as regards second ground I have to submit that although expenses incurred in previous year but due to Government orders which were received this year hence these expenses became bad this year only. Hence are allowable this year. Copy of sanctioned order is attached 2. Expenditure was of revenue nature and not capital: 2.1 At outset it is submitted that entire subjected expenditure, details of which was submitted before authorities below and available at (PB 93), was clearly of revenue nature. basic consideration of deciding whether particular expenditure was capital expenditure, test is that by incurring such expenditure new asset must came into existence or it should result into advantage of enduring nature. However, authorities below have not applied their mind on this aspect. bifurcation of subjected expenditure clearly show that all expenditures like design fees, travelling, garden exp., and misc. exp. were of revenue nature and they did not at all brought any asset into existence nor any advantage of enduring nature. Even civil construction exp. related to construction of boundary wall and some other minor civil construction, which ultimately had to be demolished. Hence, labor & wages incurred were revenue expenditure. This is because of peculiar facts that ultimately because of changed rules and regulations/building bye laws, more particularly relating to resort stood changed which fact has not been denied. assessee feeling compelled had to demolish earlier construction which was no use. 2.2 Under these circumstances subjected expenditure was incurred for purpose of business only. It was neither claimed nor allowed earlier as business expenditure. But since it didn't reached to completion stage, no asset having come into existence capital-work-in-progress had to be written off as such. by incurring such expenditure neither any new asset came into 4 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer existence nor any advantage of enduring nature resulted to assessee nor it was so established. 3.This view finds support from following decision: 3.1 factual matrix involved in case of Binani Cement Ltd. vs. CIT (2016) 380 ITR 0116 (Cal)/(2015) 118 DTR 0061 (Cal) (DPB 1-6), is exactly similar as in our case in as much as in cited case, Tribunal reversed disallowance made by assessing officer holding that when construction/acquisition of new facility is abandoned at stage of work in progress, expenditure does not result in advantage of enduring nature and such expenditure, when written off, has to be allowed u/s 37 of Income Tax Act, 1961 and therefore, our case is directly covered by said decision, wherein, it was held that Business expenditure Allowability Tribunal disallowed expenditure allegedly incurred by assessee for preparation of feasibility study report and capital-work-in-progress in earlier years, which written off during previous year corresponding to assessment year 2002-03 since proposed project was abandoned Held, facts of present case were covered in case of CIT vs. Graphite India Ltd. (1996) 221 ITR 420 (Cal) wherein it was held that expenditure made for construction/acquisition of new facility subsequently abandoned at work-in-progress stage was allowable as incurred wholly or exclusively for purpose of assessee s business Further there would have been no occasion to claim deduction if work-in-progress had completed its course Because project was abandoned work-in-progress did not proceed any further Decision to abandon project was cause for claiming deduction Said decision was taken in relevant year It can therefore be concluded that expenditure arose in relevant year Assessee s appeal allowed Conclusion: Expenditure made for construction/acquisition of new facility subsequently abandoned at work-in-progress stage is allowable as incurred wholly or exclusively for purpose of assessee s business. 3.2 Similarly, in CIT Vs. Graphite India Ltd. (1996) 221 ITR 420) (Cal) (DPB 7-11), when dispute was that whether Tribunal was justified in holding that expenditure incurred for assessee s proposed petro-chemical project was revenue expenditure and to be allowed as deduction, it was held that: 5 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer So far as question no.4 is concerned, Tribunal recorded finding that assessee spent amount of Rs.56,665 as project expenditure. expenditure represented fees paid to Engineering India Ltd. in connection with petro- chemical project report. amount was paid by assessee in order to explore possibility of setting up of petro-chemical project which could provide captive plant for manufacture of raw material at assessee s own factory which would help assessee in getting continuous supply of raw material even during periods of acute shortage. In fact, project did not materialize. Income-tax Officer as well as Commissioner of Income-tax (Appeals), therefore, held that expenditure was capital in nature. However, Tribunal found that expenditure did not result in bringing into existence any capital asset of enduring in nature. Tribunal further found that decision of Calcutta High Court in case of Hindusthan Aluminium Corporation Ltd. v. CIT [1986] 159 ITR 673 was applicable and following that decision held that expenditure was allowable as incurred wholly and exclusively for purpose of assessee s business. Therefore, Tribunal deleted disallowance. case relied upon by Tribunal was subsequently followed in case of Asiatic Oxygen Ltd. v. CIT [1991] 190 ITR 328 (Cal). This court in said case reiterated view taken in Hindusthan Aluminium Corporation Ltd. s case [1986] 159 ITR 673 (Cal). According to us, question no. 4 in this reference stands concluded by aforementioned two decisions. We, accordingly, answer question no.4 in affirmative and in favour of assessee and against Revenue. 3.3 In Dalmia Jain & Co. vs. CIT (1971) 81 ITR 754 (SC) it was held that In deciding whether particular expenditure is capital or revenue in nature, what courts have to see is whether expenditure in question was in curred to create any new asset or was incurred for maintaining business of company. If it is former, it is capital expenditure. If it is latter, it is revenue expenditure. 3.4 In CIT vs. Pioneer Engg. Syndicate (1988) 38 Taxman 151 (Mad) it was held that It would not be enough to merely ascertain whether particular expenditure has resulted in any advantage of enduring character. advantage must be in commercial sense and, further, it must be in capital field. If there is payment made on ground of commercial expediency and if such payment does not result in acquisition of any capital asset or enduring benefit, 6 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer merely because such payment is made to get rid of liability which is much larger, outgoing amount cannot be considered as capital in nature. 4.Past history distinguishable and not binding: 4.1 In earlier years expenditure incurred was kept under head work in progress, which is neither of revenue nature nor of capital nature but it was awaiting completion and thereafter was to be allocated. It was not case of revenue that assessee has shown such expenditure to be Capital-Work In Progress. Therefore, their allegation that in past assessee had been showing such expenses to be of capital nature and no depreciation was claimed, is nothing but was misconception on their part. On completion, when new asset could be brought in to existence, all these expenses would have been allocated under proper heads. Otherwise also, there is no estoppel against statue. 4.2 Case law which support that there is no estoppels, are as under: 4.2.1 In CIT vs. Escorts Auto Components Ltd. (2010) 323 ITR 0011/34 DTR 0280 (P&H) wherein it was held that Business expenditure Capital or revenue expenditure Expenditure on expansion of existing business Assessee had incurred expenditure on diversification and expansion of new product range including acquisition of machinery to aid such expansion Merely because assessee has declared by giving note in its original return that it was expenditure pertaining to new project and is of capital in nature, AO could not have treated same as capital expenditure Moreover, finding of Tribunal that expenditure incurred was revenue expenditure and/or for business purpose, has not been challenged, nor there is any challenge to finding that no capital asset has come into existence Expenditure was therefore allowable as revenue expenditure 4.2.2 In CIT vs. Usha Iron & Ferro Metal Corpn. Ltd. (2008) 296 ITR 0140 (Del) wherein it was held that Business expenditure Capital or revenue expenditure Expenditure on establishment of unit for manufacturing raw material Assessee engaged in manufacture of CTD bars, incurring expenditure on establishment of steel melting shop for manufacture of billets used as raw material for manufacturing 7 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer CTD bars, same was for expansion of existing business, hence revenue expenditure Fact that assessee had treated amount as capital expenditure in its books would not bind it No substantial question of law arise. 4.2.3 In Avery India Ltd. vs. CIT (1993) 199 ITR 745 (Cal) it was held that Whether or not expenditure is revenue expenditure or capital expenditure does not depend on admission of assessee 5.The expenses incurred for purpose of same business: 5.1 authorities below have also raised objection that subjected expenditure was not incurred for purpose of business. ld. CIT(A) has held that such expenditure could not have been given benefit of set off against income from job work business of assessee. However, authorities below have not appreciated settled legal position in as much as it was case of complete interconnection, interlacing and interdependence between old business biscuit division and new business of Resort. law is well settled that if there exist interconnection, interlacing and interdependence AO has not made out that Biscuit division was entirely separate from Resort. Infact, both these divisions are under same management-control (there was common board of directors) both divisions. Further, there were common funds and both are financially interconnected. accounting was common. All these facts are clearly evident from Audited Balance Sheet. 5.2.1 Further Hon ble Rajasthan High Court in case of Maharaja Shri Umaid Mills Ltd. vs. CIT (1989) 175 ITR 72 (Raj)/(1988) 68 CTR (Raj) 187 had occasion to deal with this issue. There also expenditure incurred in obtaining survey and feasibility report for setting up polyethylene plant for manufacturing packing material was treated as revenue expenditure as new venture was interconnected and formed part of existing business. 5.2.2 In ACIT vs. Gravis Foods Pvt. Ltd. (2015) 44 CCH 0560 (Mum Trib) in para 12 it was held Interlacing of accounts, management and control: It was settled proposition in law that so long as there exists interlacing of control & 8 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer management, interlacing of accounts etc, no new business is said to have been set up. In instant case, none of these tests are cleared. AO has not made out that Mawa division was entirely separate from points of above and it is unconnected to ice-cream divisions. Actually, both these divisions are under same management-control and are financially interconnected. In that sense, CIT(A) had not applied his mind to said settled legal propositions. 5.2.3 In CIT vs. Monnet Industries Ltd. (2011) 332 ITR 0627/(2008) 16 DTR 0307 it was held that: Business expenditure Interest on borrowed capital Amount borrowed for setting up new plant Tribunal found as fact that there was common board of directors of assessee company controlling ferro alloys plant as well as newly set up sugar plant, funds for two plants were common and marketing of final products of both divisions was carried out under supervision and control of same set of executives at head office Thus, ferro alloys plant and sugar plant were in same fold of business fact that loan or capital borrowed has been used for purchase or in connection with bringing into existence capital asset or not, has no impact in determining whether interest paid on borrowed capital ought to be allowed under s. 36(1)(iii) As long as loan is taken or capital is borrowed for purposes of business which has already commenced, assessee is entitled to claim deduction of interest paid thereon In view of finding of Tribunal, it cannot be said that assessee had not commenced its business and hence, interest has to be capitalized Therefore, interest was paid by assessee on borrowed capital for purposes of business and was rightly allowed as deduction under s. 36(1)(iii) Held: Tribunal found as fact that there was common board of directors controlling ferro alloys plant as well as sugar plant which operated from head office located at Delhi, funds for two plants were common and hence, there was intermingling and interlacing of funds as also fact that even though two divisions were geographically located at different sites, marketing of final products was carried out under supervision and control of same set of executives at head office. Thus, there is no difficulty in holding that sugar plant and ferro alloys plant were in same fold of business. 9 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer 5.2.4 In Jay Engineering Works Ltd. vs. CIT (Del) (2009) 311 ITR 0405/ (2008) 166 Taxman 0115 it was held that nature of new business is not decisive test for determining whether or not there is expansion of existing business. nature of business could be distinct. What is of importance is that control of both ventures, existing venture as well as new venture, must be in hands of one establishment or management or administration. place of business of existing business and new business may not be in close proximity. However, funds utilised for management of both concerns must be common as reflected in balance sheet of company. control over two units is in hands of same management and administration. There is no doubt on this score and in fact, annual report of assessee makes reference to project at Hyderabad. There can be no dispute from facts that have been placed on record that new venture was managed from common funds and there is necessary unity of control leading to interconnection, interdependence and interlacing of two ventures such that it can be said that fuel injection equipment project is only extension of existing business of assessee and, therefore, expenditure incurred by assessee on this project is revenue expenditure. 5.2.5 In Indo Rama Synthetics (I) Ltd. vs. CIT (2011) 333 ITR 0018/(2009) 32 DTR 0322 (Del), wherein exactly on similar facts and circumstances it was held that expenditure incurred was in nature of salary, wages, repairs, maintenance, design and engineering fee, travelling and other expenses of administrative nature. Indubitably, in normal course, these expenses would be treated as revenue expenditure. unit, which appellant proposed to set up, had inextricable linkage with existing business of appellant. proposed business was not individual business but vertical expansion of present business. Thus, test of existing business with common administration and common fund is clearly met. Since project was abandoned, no new asset also came to be created. authorities below adopted wrong approach by not treating expenditure as revenue expenditure only because unit was to be set up in Karnataka, which was geographically at distance from existing unit. Indo Rama Synthetics (I) Ltd. vs. Dy. CIT (2009) 31 DTR (Del)(Trib) 42 set aside; CIT vs. Priya Village Roadshows Ltd. (2010) 228 CTR (Del) 271 and CIT vs. Monnet Industries Ltd. (2009) 221 CTR (Del) 266 : (2008) 16 DTR (Del) 307 followed; Veecumsees vs. CIT (1996) 133 CTR (SC) 500 : (1996) 220 ITR 185 (SC) relied on. 10 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer 6. subjected expenditure was rightly claimed as revenue exp in this year in facts of present case and this aspect is also directly covered by case of Graphite (Supra) wherein, it was held: 11. Following judgment in case of Gajapathi Naidu (supra) question to be asked is when did expenditure claimed by way of deduction arise? There would have been no occasion to claim deduction if work- in-progress had completed its course. Because project was abandoned work-in-progress did not proceed any further. decision to abandon project was cause for claiming deduction. decision was taken in relevant year. It can therefore be safely concluded that expenditure arose in relevant year. 7. Lease paid is revenue expenditure: 7.1 Further there can be least doubt that annual lease paid totaling to Rs. 15,00,000/- by assessee this year and in past, is revenue expenditure. Such expenditure does not bring into any new asst into existence nor any advantage of enduring nature and hence fully allowable u/s 37(1) of Act. Even where, assessee made attempt to claim depreciation on expenditure incurred on leasehold land by taking help of Explanation 1 to s. 32(1), same was denied in case of CIT vs. TVS Lean Logistics Ltd (2007) 293 ITR 0432/212 CTR 0536 (Mad). 3. ld DR is heard who has relied on order of lower authorities. 4. We have heard rival contentions and perused material available on record. During year under consideration, assessee has claimed amount of Rs. 45,12,111/- as new project expense written off in its profit and loss account. expenses relates to development of resort on piece of land taken on lease at village Ganera, Pushkar. work of constructing resort was started in year 2007 after seeking necessary change in land use and other approvals by Municipal Council Pushkar and by Senior Town Planner, Ajmer. During year under consideration, there were policy changes introduced by Govt. authorities in terms of change of land use and width of road etc. Consequent to such changes in govt. Policy, appellant had to abandoned existing project. Therefore, decision was taken during year to write off expenses of Rs. 45,12,111/- which have been incurred right from year 2007 onwards and reflected in 11 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer books of accounts under head work in progress . said expenditure relates to lease rent, design fees, travelling expenses, garden expenses as well as expenses relating to construction of boundary wall and some other minor civil construction works. In above factual matrix, question that arises for consideration is whether assessee is eligible to claim said expenditure in respect of resort being developed which is being abandoned at stage of work in progress due to change in govt. policy regulating developments of such resort. Given that resort has been abandoned at stage of work in progress, expenditure incurred has not resulted in creation of any new asset(s) or has not resulted into advantage of enduring nature in hands of assessee. Even looking at nature of expenditure except for expenditure relating to construction of boundary wall and some other minor civil construction work, all expense are in nature of revenue expenditure. Even in respect of expenditure relating to construction of boundary wall, it is more in nature of temporary construction which has been done by assessee and which ultimately had to be demolished. decision of Hon ble Kolkata High Court in case of Benani Cement Ltd. (supra) and Graphite India Ltd. (supra) directly supports case of assessee. Further, in respect of whether there is complete inter connection, interlacing and interdependence between biscuit division and new business relating to development of resort, ld. AR has submitted that both these divisions are under same management control, having common funds and financially and economically are interconnected. said facts remain uncontroverted before us. decision of Hon ble Delhi High Court in case of Jay Engineering Works Ltd. (supra) directly supports case of assessee wherein it was held that nature of new business is not decisive test for determining whether or not there is expansion of existing business. nature of business could be distinct. What is of importance is that control of both ventures, existing venture as well as new venture, must be in hands of one establishment or management or administration. place of business of existing business and new business may not be in close proximity. However, funds utilized for management of both concerns must be common as reflected in balance sheet of company. control over two units is in hands of same management and administration. Further, decision of Hon ble Rajasthan High court in case of Maharaja Shri Umaid Mills (supra) also supports case of assessee. In light of above and given facts that decision to abandon project was taken during year due to change in govt. Policy, expenses 12 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer relating to resort which have been written off in books of accounts have been rightly been claimed by assessee as revenue expenditure. In light of above, ground taken by assessee is allowed. 4. Now, coming to ground no 2, AO observed that assessee had made cash payment of Rs. 25,328/- to shri Dattar Singh on account of wrapper cutting charges and Rs. 20,410 for purchase of spare parts to Techmech Electricals and disallowed same u/s 40A (3) of Act. 4.1 In first appeal, ld. CIT(A) confirmed addition holding that assessee has made payment of Rs. 25,328/- and Rs. 20,410/- on 15.11.2010 and 18.05.2010 in cash in violation of provisions of S. 40A (3) of I.T. Act. assessee has not shown how assessee s case is covered under Rule 6DD as per which in excess of 20,000/- can be allowed. circumstances cited by assessee do not fall under exceptions mentioned in rule 6DD I.T. Rules. Accordingly, addition made by AO is confirmed. 4.2 ld AR submitted that he strongly rely upon written submissions filed before ld. CIT (A) (PB 144-148) which is reproduced as under: Here I would like to submit that appellant paid Rs. 25,328/- in cash to Shri Datar Singh because party insisted to give amount in cash hence appellant paid in cash in ordinary course of business and for purpose of business. That similarly appellant purchased spare parts from M/s Techmech Electrical, Delhi for Rs. 20,410/- in cash. That appellant don t have any bank account in Delhi and out stationed parties do not accept cheques. That in view of above mentioned facts addition of Rs. 45,738/- is uncalled for and requires to be debited. 13 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer 4.3 ld AR further submitted that in case of Anupam Tele Services vs. ITO (2014) 88 CCH 035 (Guj)(DPB 12-20) Hon ble Gujarat HC, followed decisions in case of Attar Singh Gurumukh Singh vs. ITO (1991) 191 ITR 667 (SC) holding that said decision did not eliminate consideration of business expediencies. It was held that where there were peculiar facts wherein payee insisted upon cash payment only, and following decision in case of Harshila Chordia vs. ITO (2008) 298 ITR 349 (Raj)(DPB 21-28), it was held that in such case rigors of Sec.40A(3) of Act must be lifted and ITAT erred in solely relying upon rule 6DD(r) by which they founded subjected payment was not covered. In case of Harshila Chordia (Supra), it was observed that exceptions contained in rule 6DD are not exhaustive and that said rule must be interpreted liberally. In present case also, admitted facts are that identity and existence of payees and genuineness of transactions, are not at all disputed, however it was only because of insistence of seller, assessee has to pay in cash to Datar Singh, whereas in second case appellant didn't have any bank account at Delhi, place where payment was made and payee insisted on cash payments. These facts are not denied. Though contended before CIT(A) but was not judiciously appreciated. 4.5 genuineness of transaction as well as identity of payee are not disputed. Further, appellant has explained business expediency of making cash payments to both parties which has not been controverted by Revenue. Following decision of Gujarat High Court in case of Anupam Tele Services (supra) and Rajasthan High Court in case 14 ITA No. 625/.JP/14 Ajmer Food Products, Ajmer vs. JCIT, Rane-2, Ajmer of Harshila Chordia (supra), addition of Rs 45,738 under section 40A(3) is deleted. In result appeal filed by assessee is allowed. Order pronounced in open court on 28/09/2016. Sd/- Sd/- (KUL BHARAT) (VIKRAM SINGH YADAV) Judicial Member Accountant Member Jaipur Dated:- 28/09/2016 Copy of order forwarded to: 1. Appellant- Ajmer Food Products Pvt. Ltd, Ajmer 2. Respondent- Jt. CIT Range-2, Ajmer 3. CIT Ajmer 4. CIT(A)-Ajmer 5. DR, ITAT, Jaipur 6. Guard File (ITA No.625 /JP/2014) By order, Assistant. Registrar 15 M/s Ajmer Food Products Pvt. Ltd. v. JCIT, Range-2, Ajmer