cash deposited by sundry debtors

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pradeep agrawal (Querist)
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04 January 2011 Sir
At present various party( sundry debtors) wants to deposit cash into my bank account their location. If they deposit Rs. 25000/- into my account on account of payment of purchase of goods. Will it be any problem to both ? In my view i can receive cash but he can not pay cash more than 20000/- and attract 40A(3).

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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04 January 2011 Yes, you are right. If they are depositing cash in your bank account for making payment
for the purchases/services taken by them and such payment in a day exceeds Rs 20000/-,
the expenditure may be disallowed to them.
However, the payments are against bills of below Rs. 20000/- amount, then there is no problem for them.

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Balakrishnan

Balakrishnan (Expert)
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05 January 2011 Strictly speaking Sec 40a3 does'nt exempt direct deposit in bank. But adv. of tech. can not be ignored. Hence, it can not be objected to also, since after all the money is routed thr. bank which is the intention of law

pradeep agrawal

pradeep agrawal (Querist)
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05 January 2011 Sir, in case of builder/ realestate developer they purchase land (stock in trade) and making payment by cash only to the seller more than 20000/- & big amount each & every time. Is it also attract 40A(3)?. iF yes is there any provision to avoid this section. pls....

Balakrishnan

Balakrishnan (Expert)
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05 January 2011 Yes, surely it will apply since for them land is not asset but purchase of trading item as you have rightly said.

Till the amount covers upto the registration value atleast, they should not make cash payments to sellers.

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