Disallowance under section 40A(3) whether attracted due to genuineness of payments

Facts:

Assessee, a film distributor himself, had rendered agency activity to promote the release of two movies produced by Reliance Big Entertainment for two other movie distributors. As the date of release of the movie was fixed he was forced to pay in cash the monies collected on behalf of his distributors to Reliance Big entertainment and to the producers. These cash payments were subjected to section 40A(3) disallowance by lower tax authorities. On higher appeal to ITAT, assessee's plea were, that the payments were neither income nor expenditure as it was monies belonging to the distributors which was being paid to the movie producers/releasers and since there was no issue on bonafide aspect of payments no disallowance under section 40A(3) was warranted bereft the fact that rule 6DD did not contain any specific provision to this effect nonetheless the proviso to section 40A(3) itself covered business expediencies.

Held in favour of the assessee accepting both their reasoning.

Applied : 

Geo Connect Ltd. v. DCIT in ITA No. 2896/Del/2018 dated 29-08-2022 : 2022 TaxPub(DT) 6185 (Del-Trib).

Case: T. Rajendran v. Asstt. CIT 2023 TaxPub(DT) 2472 (Chen-Trib)