Sec.40 (A) (3)
This query is : Resolved
26 August 2008
21/8/2008 Purchase of Goods 51000/-
22/8 Cash Payment 32000/-
24/8 Cash Payment 19000/-
Whether 32000 will Be Disallowed or 51000/- ?
Plz Answer With Relevant Provisions Of Income Tax Act.
22/8 Cash Payment 32000/-
24/8 Cash Payment 19000/-
Whether 32000 will Be Disallowed or 51000/- ?
Plz Answer With Relevant Provisions Of Income Tax Act.
26 August 2008
Section 40A(3)
Business disallowance - Cash payments exceeding Prescribed limits:
All outgoings, including purchase of stock-in-trade are covered - Section 40A(3) refers to the expenditure incurred by the assessee in respect of which payment is made. It means all outgoings are brought under the word ‘expenditure’ for the purpose of the sub-section. The expenditure for purchasing the stock-in-trade is one of such outgoings. - Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 (SC).
Advance payments are also covered - Even if the payments were made by way of advances and were ultimately treated as discharging the liability to pay the price of the goods purchased, the payments so made must be considered to fall within the expression ‘expenditure’ incurred for payment of the price of the goods - Kejriwal Iron Stores v. CIT [1988] 169 ITR 12 (Raj.).
**DM
Business disallowance - Cash payments exceeding Prescribed limits:
All outgoings, including purchase of stock-in-trade are covered - Section 40A(3) refers to the expenditure incurred by the assessee in respect of which payment is made. It means all outgoings are brought under the word ‘expenditure’ for the purpose of the sub-section. The expenditure for purchasing the stock-in-trade is one of such outgoings. - Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 (SC).
Advance payments are also covered - Even if the payments were made by way of advances and were ultimately treated as discharging the liability to pay the price of the goods purchased, the payments so made must be considered to fall within the expression ‘expenditure’ incurred for payment of the price of the goods - Kejriwal Iron Stores v. CIT [1988] 169 ITR 12 (Raj.).
**DM
26 August 2008
U R Giving Me The Examples Of Expenditures Which I Very Well Know.
Plz Solve My Query As There is No Clear Provision in the Act Regd It.
Plz Solve My Query As There is No Clear Provision in the Act Regd It.
26 August 2008
Rs. 32000
26 August 2008
Plz Don't Answer In Haphazard Manner
Answer With Relevant Provisions Of Income Tax Act.
I Am Not Asking For An Opinion Or View.
Answer With Relevant Provisions Of Income Tax Act.
I Am Not Asking For An Opinion Or View.
26 August 2008
Rs 32000 will be disallowed ,now check what the section in this regard
"(3)(a) 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, no deduction shall be allowed in respect of such expenditure"
first Line of section says that out of total sum incurred as expense ,the payment made in cash in excess of 20000 are taxable
so to make the expenditure taxable or disallowed both expenditure and payment should be more than 20000,if either are less than the 20000 than exp will not be disallowed
further Now as per new provision in the budget ,aggregate of payment made on single day to a single party will be considered towards 20000/- and will be disallowed
"(3)(a) 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, no deduction shall be allowed in respect of such expenditure"
first Line of section says that out of total sum incurred as expense ,the payment made in cash in excess of 20000 are taxable
so to make the expenditure taxable or disallowed both expenditure and payment should be more than 20000,if either are less than the 20000 than exp will not be disallowed
further Now as per new provision in the budget ,aggregate of payment made on single day to a single party will be considered towards 20000/- and will be disallowed
26 August 2008
But My Expenditure Is 51000/- And Payment Of Expenditure is 32000/-?
27 August 2008
exp is disallowed if payment & exp both exceeds 20000.
in ur case only to the extent 32000 ,contravention exists.
therefore,exp upto 32000 is disallowed & rest will not be disallowed as payment is not made to that extent.
in ur case only to the extent 32000 ,contravention exists.
therefore,exp upto 32000 is disallowed & rest will not be disallowed as payment is not made to that extent.
27 August 2008
But the Assessing Officer Has Dissllowed the Entire 51000/-.
Can U Plz Provide Relevant Provision In Income Tax Act To This Effect?
Can U Plz Provide Relevant Provision In Income Tax Act To This Effect?
23 July 2025
**Section 40A(3) - Disallowance of Expenditure on Cash Payments**
Under **Section 40A(3)** of the **Income Tax Act, 1961**, any expenditure or payment made in **cash** in excess of **₹20,000** in a **single day** to a **person** in respect of any **business or profession** is **not allowable** as a deduction unless certain exceptions apply.
### **Relevant Provisions:**
1. **Section 40A(3) - General Rule:**
* If a payment exceeding ₹20,000 is made in **cash** to a **single person** in a **single day**, it will not be deductible for tax purposes unless the payment is made in accordance with one of the **exceptions** (like payments to certain specified persons or through approved methods such as a bank transfer, etc.).
2. **Key Points for Applicability:**
* The limit of **₹20,000** applies per **day** and **per person**. If the payment to a single person in one day exceeds ₹20,000 in cash, then **the excess payment is disallowed**.
* In your case, the **payment of ₹32,000** and **₹19,000** are both in cash, and they are made on **different days**. Hence, the **₹32,000** will be disallowed as it exceeds the ₹20,000 limit on a single day.
3. **Applicability of Section 40A(3) in Your Case:**
* **Purchase of Goods:** ₹51,000 is the total amount of the transaction.
* **Cash Payments:**
* ₹32,000 on **22nd August**.
* ₹19,000 on **24th August**.
* **On 22nd August (₹32,000)**: Since the payment is **above ₹20,000**, the cash payment **of ₹32,000** exceeds the threshold for that day and **will be disallowed**.
* **On 24th August (₹19,000)**: This amount is below ₹20,000, and hence, it **does not attract the disallowance** under **Section 40A(3)**.
### **Conclusion:**
* The **Assessing Officer**'s disallowance of the entire **₹51,000** may have been due to an interpretation that the **total payment** made for the goods exceeded the limit, but **Section 40A(3)** applies only to **individual cash payments** made in a **single day**.
* The **correct treatment** should be:
* **₹32,000** paid on **22nd August** will be disallowed (since it exceeds ₹20,000 in cash).
* **₹19,000** paid on **24th August** will **not be disallowed** as it is within the limit of ₹20,000.
Thus, only the **₹32,000** should be disallowed, not the entire ₹51,000.
If the Assessing Officer has **disallowed the entire ₹51,000**, you can appeal or file an objection citing that only the **excess ₹32,000** paid in cash on 22nd August should be disallowed as per **Section 40A(3)**.
Under **Section 40A(3)** of the **Income Tax Act, 1961**, any expenditure or payment made in **cash** in excess of **₹20,000** in a **single day** to a **person** in respect of any **business or profession** is **not allowable** as a deduction unless certain exceptions apply.
### **Relevant Provisions:**
1. **Section 40A(3) - General Rule:**
* If a payment exceeding ₹20,000 is made in **cash** to a **single person** in a **single day**, it will not be deductible for tax purposes unless the payment is made in accordance with one of the **exceptions** (like payments to certain specified persons or through approved methods such as a bank transfer, etc.).
2. **Key Points for Applicability:**
* The limit of **₹20,000** applies per **day** and **per person**. If the payment to a single person in one day exceeds ₹20,000 in cash, then **the excess payment is disallowed**.
* In your case, the **payment of ₹32,000** and **₹19,000** are both in cash, and they are made on **different days**. Hence, the **₹32,000** will be disallowed as it exceeds the ₹20,000 limit on a single day.
3. **Applicability of Section 40A(3) in Your Case:**
* **Purchase of Goods:** ₹51,000 is the total amount of the transaction.
* **Cash Payments:**
* ₹32,000 on **22nd August**.
* ₹19,000 on **24th August**.
* **On 22nd August (₹32,000)**: Since the payment is **above ₹20,000**, the cash payment **of ₹32,000** exceeds the threshold for that day and **will be disallowed**.
* **On 24th August (₹19,000)**: This amount is below ₹20,000, and hence, it **does not attract the disallowance** under **Section 40A(3)**.
### **Conclusion:**
* The **Assessing Officer**'s disallowance of the entire **₹51,000** may have been due to an interpretation that the **total payment** made for the goods exceeded the limit, but **Section 40A(3)** applies only to **individual cash payments** made in a **single day**.
* The **correct treatment** should be:
* **₹32,000** paid on **22nd August** will be disallowed (since it exceeds ₹20,000 in cash).
* **₹19,000** paid on **24th August** will **not be disallowed** as it is within the limit of ₹20,000.
Thus, only the **₹32,000** should be disallowed, not the entire ₹51,000.
If the Assessing Officer has **disallowed the entire ₹51,000**, you can appeal or file an objection citing that only the **excess ₹32,000** paid in cash on 22nd August should be disallowed as per **Section 40A(3)**.
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