40A(3) exceptions
This query is : Resolved
08 July 2023
Sir, If I pay rs. 10 lakh to a farmer to purchase agriculture produce in a day. Is it allowed?
Will the purchase be disallowed as expense or not.
Will the purchase be disallowed as expense or not.
08 July 2023
Any cash sale of an amount of Rs. 2 lakh or more by a cultivator of agricultural produce is prohibited under section 269ST.
08 July 2023
Certain exceptions provided in rule 6DD, under which expenditure, even exceeding Rs. 20,000/Rs. 35,000 shall be allowed as deduction, even though the payment or aggregate of payments made to a person in a day is not made by an account payee cheque/draft.
These exceptions are as follows-
a) Where the payment is made to-
i. The Reserve Bank of India or any banking company;
ii. The State Bank of India or any subsidiary bank;
iii. Any co-operative bank or land mortgage bank;
iv. Any primary agricultural credit society or any primary credit society;
v. The Life Insurance Corporation of India;
b) Where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in a legal tender;
c) Where the payment is made by:-
i. any letter of credit arrangement through a bank;
ii. a mail or telegraphic transfer through a bank;
iii. a book adjustment from any account in a bank to any other account in that or any other bank;
iv. a bill of exchange made payable only to a bank;
v. the use of electronic clearing system through a bank account;
vi. a credit card;
vii. a debit card.
d) Where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee;
e) Where the payment is made for the purchase of-
i. agricultural or forest produce; or
ii. the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or
iii. fish or fish products; or
iv. the product of horticulture or apiculture,
to the cultivator, grower or producer of such articles, produce or products;
f) Where the payment is made for the purchase of products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;
g) Where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town;
h) Where any payment is made to an employee of the assessee or the hire of any such employee, or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heirs does not exceed fifty thousand rupees;
i) Where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of Sec. 192 of the Act, and when such employee-
i. is temporarily posted for a continuous period of fifteen days or more in place other than his normal place of duty or on a ship; and
ii. does not maintain any account in bank at such place or ship;
j) Where the payment is required to be made on a day on which the banks are closed either on account of holiday or strike;
k) Where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;
l) Where the payment is made by an authorized dealer or a money changer against purchase of foreign currency or travelers cheques in the normal course of his business.
So, considering exemption under rule 6DD sub sec. e(i), the expense cannot be disallowed.
These exceptions are as follows-
a) Where the payment is made to-
i. The Reserve Bank of India or any banking company;
ii. The State Bank of India or any subsidiary bank;
iii. Any co-operative bank or land mortgage bank;
iv. Any primary agricultural credit society or any primary credit society;
v. The Life Insurance Corporation of India;
b) Where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in a legal tender;
c) Where the payment is made by:-
i. any letter of credit arrangement through a bank;
ii. a mail or telegraphic transfer through a bank;
iii. a book adjustment from any account in a bank to any other account in that or any other bank;
iv. a bill of exchange made payable only to a bank;
v. the use of electronic clearing system through a bank account;
vi. a credit card;
vii. a debit card.
d) Where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee;
e) Where the payment is made for the purchase of-
i. agricultural or forest produce; or
ii. the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or
iii. fish or fish products; or
iv. the product of horticulture or apiculture,
to the cultivator, grower or producer of such articles, produce or products;
f) Where the payment is made for the purchase of products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;
g) Where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town;
h) Where any payment is made to an employee of the assessee or the hire of any such employee, or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heirs does not exceed fifty thousand rupees;
i) Where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of Sec. 192 of the Act, and when such employee-
i. is temporarily posted for a continuous period of fifteen days or more in place other than his normal place of duty or on a ship; and
ii. does not maintain any account in bank at such place or ship;
j) Where the payment is required to be made on a day on which the banks are closed either on account of holiday or strike;
k) Where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;
l) Where the payment is made by an authorized dealer or a money changer against purchase of foreign currency or travelers cheques in the normal course of his business.
So, considering exemption under rule 6DD sub sec. e(i), the expense cannot be disallowed.
08 July 2023
CA Seetharaman ji I really dont care about the cultivator, he is ready to accept cash, Will I be in trouble or not for giving cash for purchasing agriculture produce to a farmer.
08 July 2023
Yes, for payment in cash 2 lacs and above. 100% penalty payable.
08 July 2023
CA R Seetharaman ji, please clarify, the exception of the payment of cash above Rs. 2lakh is coverd in 6DD for the assessee, and 269ST is applicable on "Farmer" for accepting cash. SO, here the assessee comes clean? Only the farmer is liable for the penalty. Please clarify.
08 July 2023
Yes, you are right the exception of the payment of cash above Rs. 2lakh is coverd in 6DD for the assessee, and 269ST is applicable on "Farmer" for accepting cash.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Opting our of sec 44AD
- TDS on Purchase of Immovable Property by NRI from NRI
- Capital gain from sale of house property
- INTEREST APPLICABLE ON ITC REVERSAL PORTION
- Current Account Opening for Sole Proprietorship with Udyam Certificate - Zero Turnover
- Regarding TDS Applicability For Director Remuneration
- Multiple trade mark
- Before GSTAT- APL-02 Vs APL-04
- Annual return in Gst
- FORM 26A APPLICABILITY
- GST on rental income_Composition
- GST Treatment of Insurance Commission for Existing GST Holder
- Cash gift by grand mother to her grand daughter
- Tax amount diff in Gstr1 and 3B in tax compare reports
- Tds on GST in connection with sale to public company
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
- No Compliences after incorporation
- USEFUL LIFE OF USED/SECOND HAND COMMERCIAL VEHICLES
- Claiming TDS deducted by builder on Hardship compensation and Corpus
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
