Disallowance of expenses in excess of 20000 in cash in a day
This query is : Resolved
Mohan Singh
(Querist)
17 May 2017
If an assessee make payment to bank in cash in excess of 20000 to make a DD in favour of creditors for an expense
Is there any consequences as per Section 40 A(3) i.e this expense is allowed or not ???
Is there any consequences as per Section 40 A(3) i.e this expense is allowed or not ???
CA Altamush Zafar
(Expert)
17 May 2017
Giving bank 20000 for DD of same is not an expense. Its conversion of one form of money to another. The payment to creditor of 20000 will be allowed in income tax. This limit has been reduced to 10000 by finance act 2017
Mohan Singh
(Querist)
17 May 2017
Dear Sir
If it is just conversion of money than why in Income tax act, the word Account payee demand draft is mention???
Why they not use the word Demand draft only??
If it is just conversion of money than why in Income tax act, the word Account payee demand draft is mention???
Why they not use the word Demand draft only??
CA Altamush Zafar
(Expert)
17 May 2017
Are there any demand drafts issued by bank which can be bearer instruments??
Mohan Singh
(Querist)
18 May 2017
It is possible,
If DD is not account payee or crossed than it means it is bearer
But as per RBI NotificationDD in excess of 20000 must be crossed
If DD is not account payee or crossed than it means it is bearer
But as per RBI NotificationDD in excess of 20000 must be crossed
CA Altamush Zafar
(Expert)
18 May 2017
Personally i have never seen bearer drafts as account payee is already printed on drafts and while applying fir DD you have to tell the name of the payee.
CA Altamush Zafar
(Expert)
18 May 2017
Anyway the purpose of the clause is to discourage large payments in cash therefore if you pay through bank your expense will be allowable.
Bearer instruments are rare practically.
Mohan Singh
(Querist)
18 May 2017
Thanks sir
For giving your valuable time and for your suggestion
For giving your valuable time and for your suggestion
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