Please advice some creditor want cash payment (Deposit in Bank for example in SBI ) in advance for supply of material. After getting payment they will supply the material. The company needed material on urgent basis. Can company deposit cash amount more than 20000/- in Bank A/c of Creditor for getting supply of material.
No, the company cannot deposit cash in account of creditor to purchase raw material.
Section 40A(3) covers any expenditure, hence it covers purchases as well.
you can deposit Rs. 20000/- but not Rs. 20001/- or above on a single day.
[60(3) 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.61
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