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Disallowance of cash payment more than 20000 (Income Tax)

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This query is : Resolved



( Author )
06 May 2011

Dear sir,
If an expense of more than 20000/- is paid by cash by the company's/firm's director/partner, whether this payment will be disallowed. here there is a journal entry only the accounts.

Thanking you.


Ram Avtar Singh

( Expert )
07 May 2011

Yes. no cash payment for any expenditure or purchase more than 20000. only you can purchase capital items and in case of transporter you can pay up to 35000/-


Ranjan Dayal

( Expert )
07 May 2011

As per sec. 40 A (3) of income tax act
"Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure"
if we see the provision, the cash payment is disallowed only when assessee has incurred the expenses in cash, however in this case assesee has made an advance to director of the company and actual cash expenditure is done by the director not by the company i.e.assesee. so in my opinion the same should not we disallowed. I know i am interpreting the provision in the interest of assessee so that i want to know whether we can interpret in this way. i am inviting other expert to please present your view.

thanks


Amol Gopal Kabra (CA,CS,DISA)

( Expert )
08 May 2011

If company is paying an advance in cash and the same is used by director for expenditure in excess of Rs. 20000 then it shall be amounting to mere routing of transaction and the transactions so incurred shall be subject to disallowance u/s 40A(3).
However, if the directors have incurred the expenditure already and not the company is paying them through cheque or bank transfer, then the provisions of this section shall not attract. The expenditure wont be disallowed.


Ashok Asthana

( Expert )
25 May 2011

Please explain the nature of expense. If the amount paid is for travel advance, the same will not be disallowed. The basic question should be rephrased so that one can undrstand the question and crcumstances clearly.


Ashok Asthana

( Expert )
25 May 2011

Please explain the nature of expense. If the amount paid is for travel advance, the same will not be disallowed. The basic question should be rephrased so that one can undrstand the question and crcumstances clearly.


Gajjala Satheesh

( Expert )
26 January 2013

Dear Sir.

One of our Director receiving the daily sales cash amount from the total sales. Where I can show it.

Kindly advise me,

How to pass a Journal for cash received from every day sales.

Which entries I have to follow.


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