05 July 2012 Disallowance u/s. 40A( 3) is applicable for each payment and not for the aggregate of the various payments made to same party during one day: The Assessee’s plea against the disallowance u/s. 40A(3) was that each payment was below, Rs.20,000/-, and, therefore, Sec. 40A(3) is not applicable. However, as per the A.O., since the payment of one day exceeded Rs. 20,000/-, therefore, Sec. 40A( 3) was applicable.

C.A Anshul Singhal

C.A Anshul Singhal (Expert)

05 July 2012 Example- TWO BILL RAISED ON 04/06/12
FIRST RS---------RS40000
SECOND------------RS25000
PAYMENT ON 06/06/12 RS 15000 AGAINST FIRST BILL
RS 18000 AGAINST SECOND BILL TO SAME PARTY.
BOTH ARE ALLOWED.

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CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

05 July 2012 Section 40A(3) reads as under:

"Where the assessee incurs any expenditure in respect of which a payment or AGGREGATE of payments made to a person in A DAY ........"

As is clear from the above wordings that if an assessee makes multiple payments to a person in ONE SINGLE DAY otherwise than by an account payee cheque AND the AGGREGATE of such payments exceeds Rs. 20,000 the expense shall be DISALLOWED.

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