Applicability of 40A(3) on advance against salary

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Querist : Anonymous

Querist : Anonymous (Querist)

28 March 2011 My question related to 40A(3) of income tax act, 1961 --
rs. 30000/- given to an employee for Advance against salary during p.y. and rs. 2000/- p.m. deduct from his salary .
is 40A(3) attract on payment of rs.30000/-

CA. Lohith Jagadeesh

CA. Lohith Jagadeesh (Expert)
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30 March 2011 Hi,

IF the Amount is paid in Cash then surely Sec 40A(3) will be applicable calling for Disallowance of such amount.

Thank you,

Regards
CA. LOHITH.J
B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons

Querist : Anonymous

Querist : Anonymous (Querist)

30 March 2011 can you give some reference for supproting this like any example or any case study...

CA. Lohith Jagadeesh

CA. Lohith Jagadeesh (Expert)
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30 March 2011 Hi,

Section 40A(3) itself is the Reference as the Section is applicable wen there is any payment ( revenue in nature for your understanding )in excess of Rs.20000/- in cash.

there are 'n' no. of case laws, please log on to "www.ITATonline.com" or "www.Incometaxindia.gov.in"

Regards

CA. Lohith. J
B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons

Querist : Anonymous

Querist : Anonymous (Querist)

31 March 2011 My confusion is that sec says when any expenditure in excess of 20000/- then payment disallowed , but advance for salary is not a expeniture and assessee only shows in p&l only that portion which is deduct form salary .
so can u please refer a particular case for make my contetion strong.

CA. Lohith Jagadeesh

CA. Lohith Jagadeesh (Expert)
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31 March 2011 Hi,

Can you please clarify whether it is
"Advance Salary" or "Advance Against Salary"

Regards

CA. Lohith. J
B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons

Querist : Anonymous

Querist : Anonymous (Querist)

01 April 2011 it is advance against salary and company deduct some amount per month from their salary to cover this advance.

CA. Lohith Jagadeesh

CA. Lohith Jagadeesh (Expert)
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03 April 2011 Hi,

If it is Adv Against Salary, then there will no question of such amount being claimed as a dedcution or disallownace of the same as it will be showed as " Advances to Employees" under Current Asset.
It cannot be termed as payment & therefore Sec 40A(3) is not applicable.

Further what ever deductions regularly from the employees salary, it will be in " Advances to Employees A/c" & not in P&L A/c.

Hope i have replied your Querry.

Regards

CA. Lohith. J
B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons

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