Disallowance under s 40A(3)

Payments made directly in cash to producers of milk without involvement of chemical or any mechanical process exceeding specified limit cannot be disallowed under s 40A(3) — as held by GujHC in CIT v Gamdiwala Dairy — In favour of: The assessee.

Accounts — Merely because the expenditure pertaining to one branch was accounted in another branch or just because certain sustainable grounds existed for the earlier year’s expenditure to be accounted this year in one branch, resulting in an anomaly in the books of account, the books of account cannot be rejected nor would that permit the AO to make an estimation.

Decided on: 18 October 2011.