Cash above 20000 deposited into suppliers bank account
This query is : Resolved
16 April 2013
Hi the company I am auditing is running construction business. For meeting expenditure sometimes they deposit money into the suppliers/ clients bank account directly (above Rs 20,000). Will such expenditure come under 40(A)(3) and get disallowed or is it ok to continue so? Kindly reply...
CA Vikas Acharya
(Expert)
16 April 2013
yes disallowed as there written any means other than account payee cheque drawn on a bank or account payee bank draft.
hence disallowed
hence disallowed
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16 April 2013
Yes, totally agree with CA Vikas Acharya.As section 40A(3) of Income tax act clearly mentions that the payment made above Rs.20000/- in respect any expense by any mode otherwise than by an account payee cheque drawn on bank or account payee bank draft shall be diasllowed.
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16 April 2013
Thanks experts. But I have also read in many places that internet fund transfer is also allowable(Not cash deposit).
CA Vikas Acharya
(Expert)
16 April 2013
Miss, internet fund transfer reflects in your bank account, therefore allowed.
but directly deposit to there account will not reflect in your bank account, and scope of manipulation increased therefore, not allowed.
but directly deposit to there account will not reflect in your bank account, and scope of manipulation increased therefore, not allowed.
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16 April 2013
Yes I just wanted to add that (fund transfer) to the list you have mentioned - account payee cheque drawn on a bank or account payee bank draft. Thanks
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16 April 2013
Hi,
Please refer CIT Vs. Venkatadhri Constructions 213 taxman 180(madras)(mag) where it was held that cash payment into payee's a/c is not as good as payment by account payee cheque as required u/d 40A(3).
Please refer CIT Vs. Venkatadhri Constructions 213 taxman 180(madras)(mag) where it was held that cash payment into payee's a/c is not as good as payment by account payee cheque as required u/d 40A(3).
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