Payment Allowable or Not

This query is : Resolved

Devanshi (Querist)
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28 May 2010 Dear Experts, an opinion is required on the following matter.

A businessmen involved in the business of arranging the transportation of cotton bales from the seller’s place of business to buyer’s place of business. He is being engaged by the buyer. His duty is to arrange the lorry and dispatch the goods to the buyer’s premises. He receives the cheques/drafts from the buyer and he disburses the payment to the transporter in cash. He also received the TDS Certificate from the buyer party u/s 194C i.e contract payment.

That means the amount received will be considered as his own receipts and the payment by him to the transport agency will be considered as his own expense.

Total amount received from the buyer by cheque or draft during the year exceeds Rs. 75 lakhs. He has made majority of the payments in cash and has not deducted any TDS on the motor lorry freight paid for the whole year (F.Y.2009-10). I think he’s liable for audit but as far as the payments in cash are concerned, are these payments to be allowed as being incurred in cash and in excess of Rs. 20,000/-? Will the auditor give any qualification regarding the payment in cash.? Will it create any other impact as he is liable for audit? What would have been the position if he would not have been subject to audit? Kindly suggest your views.

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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28 May 2010 Yes, He will be liable for Tax audit.
Payment made agianst single bill on same day exceeding Rs. 20000 will be disallowed.
Yes, Position will be differ if he would not have been subject to audit, then it will be depend on luck i.e If case came under scrunity then ITO may demand something or add it in income.

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Devanshi

Devanshi (Querist)
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28 May 2010 Thank you CA. Bansal Sir for your reply.

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