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40a(3)

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(Querist)
11 September 2016 Electric bill paid in cash which exceeds Rs. 20,000/- to West Bengal State Electricity Distribution Corporation Ltd.(WBSEDCL) shall be disallowed or not?
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CA R SEETHARAMAN

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CA R SEETHARAMAN (Expert)
11 September 2016 It will not be disallowed being payment for electricity bill.
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nitin

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nitin (Expert)
11 September 2016 Hi Pratick

As per section 40A(3), any expenditure incurred in respect of which payment has been made in a sum exceeding INR 20,000 in a single day otherwise by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction.

However, there are certain exceptions to this law which has been prescribed under rule 6DD of income tax rules. According to one of the exceptions mentioned in rule 6DD, " Section 40A(3) will not be applicable to any payment made to goverment (whether state or central)"

So if the state electricity board is owned by goverment, then section 40A(3) will not be applicable and the payment will be allowed in income tax act,

Thanks
Nitin
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