Expense disallowed or not

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This discussion clarifies whether paying a large bill in smaller instalments is permissible under the Income Tax Act. It highlights that splitting a single bill into multiple smaller ones to avoid the Rs 10,000 daily payment limit for deductibility under Section 40A(3) is generally not allowed. The consensus is that genuine separate bills on different dates are acceptable, but artificially splitting a single bill for the same goods or services will likely result in the expense being disallowed.

RAKESH

RAKESH (Querist)
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28 October 2021 Suppose we have a bill of rs 90000/- from x ltd co . and we are making the payment to him in the installment of Rs 9000 each on different date , can we do so . or there is disallowed under income ta xact .

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 October 2021 It will be disallowed, being single bill.

RAKESH

RAKESH (Querist)
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28 October 2021 Sir if i am not wrong , i have read if any payment is made to single person on a single day exceeding Rs 10 k is disallowed u/s 40a(3) of iT act. pls correct Me sir iam iam wrong

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 October 2021 Yes, but partly true.
For that your bill amount has also to be below 10K. (corresponding to each particular day.)

RAKESH

RAKESH (Querist)
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28 October 2021 Sir can this rule will apply to capital expenditure also .

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 October 2021 Yes, u/s. 43(1) of IT act..

RAKESH

RAKESH (Querist)
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29 October 2021 suppose he split the bill of Rs 30000 /- in to three bill of Rs 10000 Each on dtd 01-01-2021. and make the payment of Rs 10000 on different date , in that case expenses is disallowed . Pls clarify.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 October 2021 It gets disallowed if for same goods or service, the bill is split in more than one bill. Secondly, different bills, different dates are preferable.

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