Cash Payments exceeding Rs. 20,000 U/s. 40(A)(3)

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V S A PRASAD (Querist)

23 February 2008 M/s.XYZ of Vizag buys goods from M/s.ABC Ltd of Chennai.
Can M/s. XYZ deposit cash in the bank account of M/s. ABC directly ?
Will the above cash payment attracts the provsions of Section 40(A)(3) of the Income tax Act?
Plase clarify.

PRASAD

MANAS ROUT

MANAS ROUT (Expert)

23 February 2008 yes.

CA Saurabh Maheshwari

CA Saurabh Maheshwari (Expert)

23 February 2008 YES, ONLY PAYMENT THROUGH ACCOUNT PAYEE CHEQUE /ACCOUNT PAYEE DEMAND DRAFT SHALL BE ALLOWED FOR PAYMENT EXCEEDING RS.20000/-.DEPOSITING OF CASH DIRECTLY TO SUPPLIER ACCOUNT WILL ATTRACT THE PROVISIONS OF SEC 40(A)(3) AND TOTAL AMOUNT SHALL BE DISALLOWED

Late CA Sampat Jain

Late CA Sampat Jain (Expert)

24 February 2008 rule 6dd exempts following only:

(d) where the payment is made by—

(i) any letter of credit arrangements 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.

Explanation : For the purposes of this clause and clause (h), the term “bank” means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company54 as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India ;

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