I . T. . N o. 2 6 7 / KO L . / 2 0 1 4 Assessment year: 2008-2009 Page 1 of 5 IN INCOME TAX APPELLATE TRIBUNAL, KOLKATA B(SMC) BENCH, KOLKATA Before Shri P.M. Jagtap, Accountant Member I.T .A. No. 267/KOL/ 2014 Assessment Year: 2008-2009 M/s. Tirat Pachai Shop/ M/s. Tirat C.S. Shop,......................Appellant P.O. Tirat Kalipahari, Dist. Burdwan-713 3 39 [PAN: AADFT 4483 D1 -Vs.- Income Tax Officer,...............................................................Respondent Ward-1 (3), Asansol, Sahana Apartment, Lower Chelidanga, Asansol-713 304, W.B. Appearances by: Shri V.N . Purohit, FCA, fo r assessee Shri Vijayendra Kumar, JCIT, D.R., for Department Date of concluding th e hearing : Au gust 31, 2016 Date of pronouncing order : October 04, 2016 O R D E R This appeal filed by assessee is directed against order of ld. Commissioner of Income Tax (Appeals), Asansol dated 25.11.2013 and solitary issue involved therein relates to disallowance of Rs.39,48,131/- made by Assessing Officer and confirmed by ld. CIT(Appeals) under section 40A(3) of Act. 2. assessee in present case is partnership firm, which is engaged in business of trading in Country Spirit and Pachwai. return of income for year under consideration was filed by it on 30.09.2008 declaring total income of Rs.13,288/-. As noticed by Assessing Officer during course of assessment proceedings, assessee-firm had made total purchases of Rs.39,48,131/- against which payments were made by way of cash in sums exceeding Rs.20,000/- which had been directly deposited in Bank account of concerned supplier M/s. Asansol Bottling & Packing Co. Pvt. Limited. I . T. . N o. 2 6 7 / KO L . / 2 0 1 4 Assessment year: 2008-2009 Page 2 of 5 According to Assessing Officer, said payments were made by assessee in contravention of section 40A(3) of Income Tax Act, 1961 and since assessee could not explain any exceptional circumstances as specified under Rule 6DD of Income Tax Rules, 1962 for making such payments, he made disallowance of Rs. 39,48,131/- under section 40A(3) for A.Y. 2008-09. 3. disallowance made by Assessing Officer under section 40A(3) in year under consideration was challenged by assessee in appeal filed before ld. CIT(Appeals) and since submission made by assessee in support of its case on issue was not found acceptable by him, ld. CIT(Appeals) proceeded to confirm disallowance made by Assessing Officer under section 40A(3) in year under consideration. Aggrieved by order of ld. CIT(Appeals), assessee has preferred this appeal before Tribunal. 4. I have heard arguments of both sides and also perused relevant material available on record. It is observed that issue involved in this appeal of assessee relating to disallowance under section 40A(3) is squarely covered in favour of assessee by various decisions of this Tribunal. In one of such cases, namely M/s. Amrai Pachwai & C.S. Shop decided by Tribunal vide its order dated 15.01.2014 passed in ITA No. 1251/KOL/2011, payments were made by assessee against purchases made from same party, namely M/s. Asansol Bottling & Packing Co. Pvt. Limited by depositing cash directly in Bank account of said supplier in sums exceeding Rs.20,000/- and disallowance made for same under section 40A(3) was deleted by Tribunal for following reasons given in paragraphs no. 21 & 22 of its order:- 21. We find that M/s. Asansol Bottling & Packaging Co. Pvt. Lt d. is bottling plant cum wareho use under Rule 2(vii) of West Bengal Excise Rules, 2005 with privileg e grant ed u/s 22 of Bengal Excise Act , 1909. At this junct ure, it would be relevant to go into definitio n of warehouse as pro vided under St ate Excise Rules, 2005, as below:- I . T. . N o. 2 6 7 / KO L . / 2 0 1 4 Assessment year: 2008-2009 Page 3 of 5 Warehouse , under Rule 2(vii) of W.B. Excise Rules, 2005, means warehouse for supply of country spirit to ret ail vendo rs, est ablished at convenient pl aces by Commissioner at t he expense of St at e Government , or at expense of person to whom excl usive privilege of supplying o r selling country spirit by wh olesale has been granted under section 22 of Act, or of licensed wholesale vendor of country spirit . above definition makes it clear th at 'warehouse' referred to under Stat e Excise Rules is under direct control and authorit y of Commissioner of St ate Excise because it is est ablish ed by Co mmissioner of St ate Excise and as such is Stat e Government est ablishment . It is also pertinent to note th at expenditure in rel ation to such wareho use is borne by State Government o r by licensee to whom exclusive privilege is granted u/s 22 of Bengal Excise Act , 1909. Hence there could be no doubt that warehouse is established by State Excise Commissioner. Hence it could be safely concluded that wareho use so established by th e St ate Excise Commissioner is State Government establishment. It would also be pertinent to note that said warehouse h as been specifically est ablished for supply of count ry spirit to ret ail vendo rs (assessee h erein) only and not to anybody el se. It would be pertinent to look into definitio n of 'Wholesale licensee" as per Rule 2(viii) of Excise Rules 2005 as below.- Rule 2(viii) - " Wholesale licensee" means wholesale vendo r of count ry spirit to whom licence h as been grant ed in West Bengal Excise Fo rm No. 26. It would be pert inent to look into Section 22 of Bengal Excise Act. 1909 at th is juncture as below:- Section 22 - G rant of exclusive privilege of manufacture and sale of count ry liquor or intoxicating drugs - (1) St ate Go vernment may grant to any person, on such conditions and for such period as it may th ink fit, exclusive privilege - (a) of manufacturing, or supplying by whol esale, o r (b) of manufacturing, and suppl ying by who lesale, or (c) of selling, by whol esale or retail . o r (d) of manufacturing or supplying by wholesale and selling ret ail, or (e) of manufact uring and supplying by wholesale and selling ret ail, I . T. . N o. 2 6 7 / KO L . / 2 0 1 4 Assessment year: 2008-2009 Page 4 of 5 any count ry liquor or intoxicating drug within any specified local area: Provided that public notice sh all be given to intention to grant any such excl usive privilege. and th at any objections made by any person residing within area affected sh all be considered befo re exclusive privilege is granted. (2) No grant ee of any privilege under sub-sectio n (1) shall exercise same unl ess or until he has received license in that beh alf from Collector or Excise Commissioner. Hence it could be safely concluded that M/s. Asansol Bottling & Packaging Co. Pvt Ltd (Bottling Plant ) is warehouse within meaning of Rule 2(vii) of Excise Rules 2005 and said wareho use is Stat e Government est ablish ment , establish ed and cont rolled by Excise Commissioner. It would be relevant to reproduce Rule 6 DD(b) of IT Rules at this juncture;- (b) where payment is made to Go vernment and, under rules framed by it, such payment is required to be made in legal tender. In instant case, assessee (retail vendor) had made cash payments for purchase of count ry spirit by depo siting cash directl y into bank acco unt of M/s ABPL as per Rule 6(2) of Excise Rules 2005 , it has to be construed as payment made to t he State Government authorit y and accordingl y falls under exception pro vided in Rule 6DD(b) of IT Rules. 22. It is not in disput e that M/s Asansol Bottling & Packaging Co. Pvt Lt d have been granted licence to act as wholesaler for supply of country liquor to retail vendo r as per regulations of Excise Depart ment , Government of West Bengal . At t he cost of repetition, we woul d like to state th at said regulation mandated th e payments to be made directly into t he bank account of t he said wholesale licensee by ret ail vendor (i.e assessee herein) fo r st rict and effect ive regulation of count ry liquor and fo r prevention of spurious stocks and black market ing transactions from t he same. Hence it could be safel y concluded th at said wholesale licensee had acted at instance of State Government. Once t his is so , then said wholesale licensee could be const rued as agent of State Go vernment . For sake of convenience, relevant rule is reproduced hereunder: - Rule 6DD(k) - where t he payment is made by any person to his agent who is required to make payment in cash fo r goods o r services on beh alf of such person. I . T. . N o. 2 6 7 / KO L . / 2 0 1 4 Assessment year: 2008-2009 Page 5 of 5 payment made by assessee retail vendor to Principal, Go vernment of West Bengal thro ugh its wholesale agent . relat ionship between assessee (authorized retailer) and Government of West Bengal (the supplier) acting under West Bengal Excise Rules through it s Authorised Wholesaler Licensee (Agent), both defacto and dejure, is one of 'Principal' and 'Agent'. We hold that assessee retail vendo r h ad made payment to said agent (wholesale licensee) would fall under exception pro vided in Rule 6 DD(k) of Rules . 5. As issue involved in present appeal as well as all material facts relevant thereto are similar to case of M/s. Amrai Pachwai & C.S. Shop (supra), I respectfully follow decision rendered by Coordinate Bench of this Tribunal in said case and delete disallowance made by Assessing Officer and confirmed by ld. CIT(Appeals) under section 40A(3) of Act. 6. In result, appeal of assessee is allowed. Order pronounced in open Court on October 04, 2016. Sd/- (P.M. Jagtap) Accountant Member Kolkata, 4 t h day of October, 2016 Copies to : (1) M/s. Tirat Pachai Shop/M/s. Tirat C. S. Shop, C/o. V.N. Purohi t & C o., Chartered Accountants, Diamond Chambers, Unit-III, 4 t h Floor, Su it No. 4G, 4, Chowringhee Lane , Kolkata-700 016 (2 ) Income Tax Officer, Ward-1 (3), Asansol, Sahana Apartment, Lower Chelidanga, G.T. Ro ad, Asansol-7 13 304 (3) Commissioner of Income Tax(Appeals), Asansol; (4) Commissio ner of Income Tax- , (5) Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. M/s. Tirat Pachai Shop/ M/s. Tirat C.S. Shop v. Income Tax Officer, Ward-1(3), Asansol