Civil Appeal No 5047 NT of 1985
From the Judgment and Order dated 177
1985 of the Allahabad High Court in Sales Tax Revision No of 1985
Madan Lokur for the Appellant
Ashok K Srivastava for the Respondent
Ms DH Brothers Pvt Ltd a registered dealer under the UP Sales Tax Act is engaged in the sale of machinery including sugarcane crushers
After coming into force of the Uttar Pradesh Sales Tax Act 1948 hereinafter called the Act  the State Government issued a notification dated June 7 1948 exempting agricultural implements from the levy of sales tax
Thereafter fresh notifications were issued from the time to time
The relevant notification dated November 141980 enumerated the Agricultural implements as under Agricultural implements worked by human or animal power including Khurpi Dibbler Spade Hansla Sickle Garden Knife Axe Gandasa Chaff Cutters Shears Seca teurs Rake Shovel Ploughs Water lifting leather buckets Pur and Mhot Rahat and persian whell Chain Pump Harrows Hoes Cultivators Seed Drills Threshers Shellers Winnowing fans Paddy weeders Gardenfork Lopper Belcha Bill Hook Double edge KudaliFork garden Hatchet Bill Hook Single edge Hay Bailer Bund formers Scrappers Levellers or Levelling Karahas Yokes crop yield Judginghoops Hand sprayers Hand dust ers Animal driven vehicles including carts having pneumatic tyre wheels crow bars sugarcane Planters and accessories attach ments and spare parts of these agricultural implements
The assessee invoked the jurisdiction of Commissioner Sales Tax Uttar Pradesh under Section 35 of the Act claim ing that the Kohlu meant for extracting juice from sugarcane was an agricultural implement within the above quoted noti fication and as such was exempt from levy of Sales Tax
The Commissioner by his order dated December 31 1983 decided the question against the assessee
The assessee filed appeal against the said order before the Sales Tax Tribunal
Luc know Bench under Section 10 of the Act
The Tribunal upheld the findings of the Commissioner and dismissed the appeal
Thereafter the assessee preferred a revision petition under Section 11 of the Act before the Allahabad
High Court
The High Court relying on its earlier decision in Bharat Engi neering and Foundry Works vs 426 The UP Government 1963 14 STC 262 dismissed the revision petition
In that case the question for considera tion before the High Court was whether cane crushers are agricultural implements within the meaning of the words agricultural implements  as mentioned in the Government Notification  and hence exempt from UP sales tax
 The question was answered in the negative on the following reasoning Cane crushers and boiling pans are used only in the manufacture of gur from sugarcane
Sugarcane is an agricultural produce and the process which results in the production of sugarcane is undoubtedly agriculture but the production of gur from sugarcane is a manufac turing process and not an agricultural proc ess
The agricultural process comes to an end with the production of sugarcane and when gur is subsequently being prepared it is manufac turing process that commences
Merely because sugarcane is an agricultural produce anything that is done to it after it is product is not necessarily a continuation of the agricultural process
It cannot be doubted that agricultur al produce can the subjected to a manufactur ing process merely because gut is produced out of sugarcane which is an agricultural produce the process of preparing gut does not become an agricultural process 
An agricultural implement is an implement that is used in agriculture any implement that is used after the agricultural process comes to an end and a manufacturing process commences is not an agricultural implement
 The High Court in Bharat Engineering case relied upon the following observations of this Court in Commissioner of Income tax West Bengal Calcutta vs Raja Benoy Kumar Sahas Roy Agriculture is the basic idea underlying the expressions agricultural purposes  and agricultural operations  and it is pertinent therefore to enquire what is the connotation of the term agriculture 
As we have noted above the primary sense in which the term agriculture is understood is agar field and cultracultivation ie the cultivation of the field and if the term is understood only in that sense agriculture would be restricted only to cultivation of the 427 land in the strict sense of the term meaning thereby tilling of the land sowing of the seeds planting and similar operations on the land
They would be the basic operations and would require the expenditure of human skill and labour upon the land itself
There are however other operations which have got to be resorted to by the agriculturist and which are absolutely necessary for the purpose of effec tively raising the produce from the land
They are operations to be performed after the produce sprouts from the land eg weeding digging the soil around the growth removal of undesirable undergrowths and all operations which foster the growth and preserve the same not only from insects and pests but also from depradation from outside tending pruning cutting harvesting and rendering the produce fit for the market
The latter would all be agricultural operations when taken in conjunc tion with the basic operations above de scribed and it would be futile to urge that they are not agricultural operations at all   It is clear from the above quoted observations of this Court that the agricultural process comes to an end when the crop is harvested and is brought home for marketing or for further processing
In the present case the agricultural process finishes when sugarcane is harvested
Preparation of gur from sugarcane is not the continuation of the agricul tural process
While giving meaning to an item in a taxing statute the Courts should give it a meaning as intended by the framers of the statute by looking at the various items mentioned in a particular group
The items in one group should be consid ered in a genderic sense
The notification dated November 14 1980 includes various items under the head agricultural implements
It is no doubt correct that the said definition cannot be confined to the various implements specifically mentioned therein
The definition being inclusive it has a wider import and any other implement which answers the description of an agricultural implement can be included in the definition
A bare reading of the notification however shows that all the implements mentioned by name after the word including  are by and large those which are used for cultivation of land and other operations which foster the growth and preserve the agricultural produce
None of these implements can be worked after the agricultur al process in respect of a crop comes to an end
Therefore the intention of the framers of the 428 notification could only be to limit the general words in the notification to the implements of the same kind as are specified therein
We are therefore of the view that on the plain reading of the notification the sugarcane crushers do not come within the definition of agricultural imple ments
It has been brought to our notice that from 1985 onwards the State Government has specifically exempted sugarcane crushers from the levy of sales tax
We dismiss the appeal with no order as to costs
GN Appeal dis missed


Summary:
The assesses in these appeals have made payments in cash exceeding a sum of Rs2500 for some of the purchases of stock in trade
So while computing the income of the asses sees under the head profits and gains of business the assessing authority disallowed deduction on account of such payments held to be in contravention of the terms of section 40A3 of the Income Tax Act 1961 read with the Rule 6DD of the Income Tax Rules 1962
The assessees have challenged the same
So in the in stant case the question under consideration before this Court is i the validity of section 40A3 of the Act ii the applicability of section 40A3 to payments made for acquiring stock in trade
Originally section 40A3 required payments in respect of expenditure which exceeded Rs2500 to be made by a crossed cheque or crossed bank draft and by the Amending Act 1987 to remove hardships to smaller assessees the said amount has been raised to Rs I0000 Section 40A3 begins with a non obstante clause so the legislature has made it clear that the provisions of section 40A3 are overriding and operate inspite of any thing to the contrary contained in any other provisions of the Act relating to the computa tion of income under the head profits and gains of business or profession
Sub section 3 empowers the assessing authority to disallow as deduction of any expenditure in respect of which payment is made in cash exceeding Rs 10000 otherwise than by a crossed cheque or crossed bank draft
Rule 6DD of Income Tax Rules 1962 provides for cases and circumstances in which payment of a sum exceeding Rs 10000 may be made otherwise than by crossed cheque or by a crossed demand draft
The assessees challenged on the ground that provisions of section 406 40A3 intend to restrict the business activities
Dismissing the appeals and Special Leave Petition the Court HELD That section 40A3 must not be read in isolation or to the exclusion of Rule 6DD
This section must be read along with the Rule 6DD and if read together it is clear that the provisions of the section are not intended to restrict the business activities
It only empowers the assessing officer to disallow the deductions claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft
The same is insisted only to enable the assessing authority to ascertain whether it was out of the income from disclosed sources and even the terms of section 40A3 are not absolute
Considerations of business expediency and other relevant factors are not excluded since it is open to the assessee to furnish the circumstances under which the payment was not practicable or would have caused genuine difficulty to the payee
Rule 6DD provides that an assessee can be exempted from the require ment of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule
Thus section 40A3 and Rule 6DD are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chance to use black money for business transac tions
Moreover while interpreting a taxing statute the Court cannot be oblivious of the proliferation of black money which is in circulation in our country Thus any restraint intended to use or create black should not be regarded as curtailing the freedom of trade or business
409G 410E The term expenditure as per section 40A3 means all outgoings including the expenditure incurred for purchasing the stock in trade
Since to determine the gross profits the value of the stock in trade has to be taken into account
So payments can be disallowed if they are made in cash in the sums exceeding the amount specified under section 40A3 and also not provided for exemption under Rule 6DD
Thus section 40A3 is attracted to payments made for acquiring stock intrade and other materials
410G 411A Sajowanlal Jaiswal vs CIT Orissa UP Hardware Store vs CIT  Allahabad Ratan Udyog vs ITO Allahabad PR Textiles vs CIT Kerala Kerala CIT vs Kishan Chand Maheswari Dass P  H Kanti Lal purshottam  Co vs CIT Raj CIT vs New Light Tin Mfg Co P  H Fakri Automobiles vs CIT Raj 407 Venkata Satayanarayana Timber Depot vs ITR AP
and Akash Films vs CIT Karnataka approved
CIT vs Hardware Exchange  reversed