'fish or fish products' - CBDT clarifies
Representations have been received from various quarters regarding problems being faced by the seafood exporters mainly on account of provisions of Section 40A (3) of the Income tax Act, 1961.
Disallowance of expenditure under the provisions of sub-section (3) of section 40A of the I.T. Act, 1961 is made in the computation of income in a case were a payment or aggregate of payments exceeding twenty thousand rupees is made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft. However, payment otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft exceeding twenty thousand rupees does not attract the disallowance in certain circumstances as prescribed under rule 6DD of the Income-tax Rules, 1962. Such exceptions, inter-alia, refer to payment made to the producer for the purchase of 'fish or fish products' under sub clause (iii) of clause (e) of rule 6DD.
So the CBDT has issued the following clarifications:-
(i) The expression 'fish or fish products' used in rule 6DD (e)(iii) would include 'other marine products such as shrimp, prawn, cuttlefish, squid, crab, lobster etc.'
(ii) The 'producers' of 'fish or fish products' for the purpose of rule 6DD (e) of I.T. Rules, 1962 would include, besides the fishermen, any headman of fishermen, who sorts the catch of fish brought by fishermen from the sea, at the sea shore itself and then sells the fish or fish products to traders, exporters etc.
Board has further clarified that the above exception will not be available on the payment for the purchase of fish or fish products from a person who is not proved to be a 'producer' of these goods and is only a trader, broker or any other middleman, by whatever name called.
CBDT Circular No. 10/2008, Dated: December 5, 2008