cash payments u/s 40(A)(3)

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Vivek

Vivek (Querist)

11 February 2008 Whether any advance payment exceeding Rs.20,000 against an expenditure attracts 40(A)(3) disallowance?

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

11 February 2008 Yes. If you mean whether the payment can be split into advance and balance, it does.

CA Hemant T Dewani

CA Hemant T Dewani (Expert)

11 February 2008 if payments are made in excess of rs.20000
or more at one time is disallowed if amount is spil up amount is less than 20000.no disallowed

Vivek

Vivek (Querist)

11 February 2008 If an advance for expense of Rs.22,000 is given in cash and subsequently Expense account is debited with Rs.23000 and advance (Rs.22000) and cash account (Rs.1000) is credited,whether 40(A)(3)attracts for the advance payment

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

11 February 2008 In my opinion if an expenditure item in a single incident is more than Rs 20000, it can not be split into smaller cash pyments to avoid payment by account payee cheques, as is clear from the following provision of the section.
Where the assessee incurs any expenditure in respect of which payment is made,in a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft twenty per cent of such expenditure shall not be allowed as a deduction: