Sec. 40A(3)

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Archit Jain (Querist)

08 February 2009 we all know that the given section was amended in the finance act 2008. Earlier a single payment in cash to a party cannot exceed Rs. 20000 in a day otherwise the same will be dissallowed to the extent of 20%. the act got this sec. amended as - the aggregate of payments made to a single party in a day against any exp. in excess of Rs. 20000 will be dissallowd. Now the problem is- a client of ours argue that this provision is just for a single bill . it means that if he recieves 2 bills from a party both of Rs. 20000 n he makes the payment of both on the same day in cash then it will be allowed n hence the provisions of the section will not be attracted. How could this be if the amendment is so clear.......???? plzz help n confirm that the client is wrong or either i am wrong....

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)

08 February 2009 Please see the ammendement . The wordings are as follows "Section 40A(3) has been substituted to provide that where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheq / draft exceeds 20000 the disallowance of such expenditure "

Please read the ammendment slowly and carefully. Insist your client to read it again.

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)

08 February 2009 Here person refers to assesee and not the bill. Therefore you are absolutely correct and your client is absolutely wrong.

Take the print out of the ammendement from the speech of finance minister and show it to him and ask him to explain to you on which basis he is arguing with you.

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