details of cash paid more u/s 40a(3)

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 April 2011 1.u/s 40a(3) cash>20000 will be disallow.
Whether it is only for revenue exp. or capital exp?

2.If capital expenditure is more than Rs.20000/- in cash allowable or not?

3.If cash paid more than Rs.20000/-, on the same amount whether any interest or penalty charged?

Ram Avtar Singh

Ram Avtar Singh (Expert)

23 April 2011 1- Section 40A(3) a It provides that any expenditure incurred as a payment in sum of exceeding Rs.20000/- otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS, shall not be allowed as a deduction. However if payment is being made for hiring or leasing, the limit is 35000.

2- Section 40A(3)(B) It also provides that the payment will be deemed as profits of the business if the expenditure incurred in the books but payment is made exceeding Rs. 20000 in cash, otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS.

3- Section 40A (3) It provides that the payment in a single day should not be exceeding Rs. 20000. It doesn’t mean the single payment shouldn’t 20000 but the aggregate amount should not exceed the limit. Some parties split high value payment into several cash payment for evasion of section 40A (3) a, so this rule is for evasion of payments.

4- There is also a rule that payment made to a person in a single day, otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS, exceeds the limit; the payment will be deemed as profits of the company according to proposed sub-section (3) of section 40(A).

Ram Avtar Singh

Ram Avtar Singh (Expert)

23 April 2011 in case of capital expenditure sec 40A(3) not Attract.
in case of Transporter you can pay up to 35000/=

Kumar Babu.G

Kumar Babu.G (Expert)

23 April 2011 Disallowance arises only in case of revenue ionexpenditure.Capital Expenditure will not come into picture.If you incur any expenditure in cash amounting to above Rs.20000 then that expenditure is disallowed no question of interest and penalty.